In order to bring gold back into circulation, Congress in 1834 reduced the weight of the gold eagle to 232 grains pure gold; in 1837 the fineness was changed to 9/10 for both gold and silver coins, thus making the weight of the gold eagle 232.2 grains of fine gold, and establishing the mint ratio of 16 to 1 between gold and silver.1 The actual commercial ratio in 1834, however, was about 15.73 to 1, so that the new coinage ratio undervalued silver just as the old ratio of 15 to 1 had overvalued it. Silver was now worth more as bullion than in the form of coins and so disappeared from circulation. Under the new ratio it became profitable to turn gold bullion into coin and after the discovery of gold in California in 1847 and in Australia a few years later, large quantities of gold came into circulation.
The disappearance of silver coins left the country badly off for small change. To meet this difficulty, Congress passed the subsidiary coinage act in 1853, which abandoned the principle of free and unlimited coinage of the fractional silver coins and directed that they should be coined only from bullion bought by the Government at the market price. The new subsidiary coins were reduced about 7 per cent in weight so that it would not be profitable to melt them to be sold as bullion, and they were not to be legal tender for more than $5. By this device a fairly adequate supply of small silver came into circulation. The act of 1853 did not affect the silver dollar, but as it was worth from $1.01 to $1.05 as bullion, its coinage was not profitable. From 1834 down to the Civil War gold was the real standard of the country, and after the discovery of gold in California and Australia, gold coin came into circulation in large quantities. And though the silver dollar was not coined, the subsidiary coinage act of 1853 provided a fairly ample supply of small change. Thus for the first time the country possessed an adequate circulation of specie. During this period, however, the greater part of the circulating medium of the country was paper money issued by the state banks.
1 The exact ratio established was 15,988 + to 1,