Feliz Cuevas, standing among the hundreds of sterling silver drinking glasses and trays that line the walls of her shop on one corner of Taxco's picturesque central plaza, ought to be more than happy.

During the past two months, her inventory of silver objects, part of the attraction that has drawn millions of tourists to this mountain town, has more than doubled in value. Since June, when local artisans paid about $282 for a kilo of raw silver, the value of her inventory has jumped nearly 500 percent; the same kilo now costs almost $1,400.

But Cuevas, a short, plump, motherly woman whose appearance belies her ownership of a shop whose storeroom contains more precious metal than, it is claimed, Tiffany's in New York, does not sound like a happy woman.

"It's finished," she said, waving her arms at the walls of her shop, stacked to the ceiling with trays, glasses, cups, Azetc calendars and goblets, none of which are less than 92.5 silver and most of which are hand-made by local artisans. "My shop, the craftsmen, the town. It's all finished. There's nothing we can do."

In the middle of the most spectacular rise in metal prices ever, with silver price hikes outdistancing the better-publicized gold increases by hundreds of percentage points, Cuevas' lament seems out of place. But it is repeated daily in this city by chamber of commerce officials, bankers, craftsmen, taxi drivers and even waitresses in the seemingly empty restaurants.

Taxco, long considered mexico's -- if not the world's -- premier silver market, is in crisis. After 50 years of prosperity catering to tourists' lusts for silver, the skyrocketing price has pushed silver beyond the grasp of its traditional customers.

The result may be not only the end of profitable silver shops like Cuevas', but the end of a way of life that has been the hallmark of this storybook, 450-year-old city. Already more than 80 percent of the estimated 8,000 family-operated silver-working shops are closed, officials estimate, and sales in the 300 or more stores that sell silver products have dropped more than 50 percent. Some shop keepers say sales have been practically zero since early December.

Bank officials say deposits have dropped by 25 percent in recent months and silver sales to local craftmen, which had been averaging about 100 kilos per month per bank, had declined to only four or five kilos since "before December."

Worse yet, the tourists, who are the primary market for Taxco's silver products, have quit coming. Hotel owners and restaurant workers talk of rooms unoccupied and meals unserved during a month that traditionally is among the best of Mexican tourism. Most blame silver's high price for the slump.

And while Mexico's government proudly talks of this country's role as the world's largest silver producer (55 million ounces during 1979, 18 percent of the world's total) and silver mines, including those near Taxco, plan even greater production next year, hundreds -- if not thousands -- of Taxquenans have fled in despair to search for work in other cities.

(According to an official at the Mexican Embassy in Washington, his government has been considering imposition of a "40 to 45 percent export tax on silver to curb the windfall profits of mining companies." Such a tax, the official said, would tend to reduce international speculation in Mexican silver while encouraging the mining firms to allot more silver for craftsmen in the local market at lower prices.)

Many who have not left Taxco have quit their metal-working jobs rather than work in less expensive metals, metals that many say are too demeaning for their skills. Some here even predict that if something drastic doesn't happen in the next few months, more than a quarter of the city's 80,000 residents will leave to look for work elsewhere. "If something isn't done," said Alejandro Garcia Maldonado, director of Taxaco's chamber of commerce, "this place will be a ghost town in less than a year."

Taxco's prosperity, which has glinted like sunlight off a sterling goblet in the otherwise uninviting mountains of northern Guerrero State, between Acapulco and Mexico City, has been tied to one thing -- cheap silver. As a result, Taxco has been a traditional stop on nearly all tours between Mexico City and Acapulco.

Literally hundreds of thousands of American homes have some silver memento of Taxco, a sterling Aztec calendar or a belt buckle in the shape of the city's Santa Prisca Cathedral or, perhaps, a more elegant solid silver set of teaspoons, purchased for as little as $15 or $20. In 1978 alone, Taxco silver workers sold more than $66 million worth of silver products.

But that was before silver prices began their skyrocket ride. Shop owners first noticed a drop in sales last summer, when silver passed $8 an ounce. Sales continued to drop as silver hit $10 an ounce in September. But the real blow came during December, when silver started the month at $18 an ounce, but shot up every day. By the start of January, silver was selling at almost $40 an ounce and shopkeepers were chalking up "nothing but losses."

Hardest hit by the price increase, however, were Taxco's plateros, the independent artisans who work in their homes on Taxco's winding streets and sell their products to shop owners. Although Taxco has long been known as a silver center (its ornate cathedral was built with silver money 240 years ago), the plateros are a relatively recent phenomenon.

In 1929, an American romantic named Walter Spratling came here to write a book, went broke and turned to silver to make ends meet. He hired gold workers from nearby Iguala to work silver from Taxco's mines. They, in turn, trained local residents, and in the ensuing 50 years nearly 80 percent of Taxco's work force became silver workers.

"There is no place on Earth with this much metal-working talent," said Dinu Suresuc, a Romanian-born American whose silver workshop here supplies a number of stores in the United States. "Only in Taxco could you come in with a design and have a finished piece the next day."

For most of the plateros, 90 percent of whom, Garcia Maldonado estimates, cannot read or write, silver working is a simple business. Once or twice a month they buy a kilo or two from the bank, craft solid silver objects and sell them to the shops. But as the slump began, fewer and fewer pieces were selling and the shops were buying fewer and fewer. Some silver workers, like 57-year-old Genero Jaimes, who has worked silver since he was 13 years old, haven't sold a piece in six months. "I finally got a job in a hotel," he said.

Others, like Juan Quinto, who estimates his age at about 40," have worked only sporadically. Most of Quinto's work the last two months has been making small pendants for a shop owner in Mexico City who sold him the silver at $15 an ounce and agreed to buy the pendants back at $26 an ounce.

But that, Quinto points out, isn't even enough profit to allow him to buy more silver, and his work in alpaca, a silvery metal used as an inexpensive substitute, doesn't bring in enough to support his wife and seven children.

The crisis in Taxco has prompted a series of meetings with government officials, but few are optimistic that the silver industry here has much of a future. While some shop owners would like the government to subsidize the price of silver, the government has been less than receptive to the idea. A government troubleshooter told a group of silver workers that they will have to find other metals to work in. "There are other places in Mexico that have problems, too," he said.

Taxco's mayor, Gustavo Martinez Martinez, has echoed that thought, telling silver workers that they must accept the fact that silver can no longer be their sole source of livelihood. "You must work in copper, or tin or alpaca," he said.

Most of Taxco's residents have yet to recover from the shock that a vague thing like the world silver market has probably brought an end to their way of life. Cuevas, for example, scoffed at the idea of melting down the tons of silver in her shop and selling it at world prices, even though the income from such a liquidation would be in the millions.

"I'll just wait calmly," she said. "It is over here, I know, and there is no solution. But I don't know anything else."