![]() It was in late March 1980 that we had “Silver Thursday”, a day where the price of silver went from roughly $20/oz to $10/oz, a loss of over 50%. On March 25, 1980, the Hunt brothers couldn’t meet their $135 million margin call, forcing the Hunt brothers to ‘shut it down.’ In August of 1988, the Hunts were convicted of conspiring to manipulate the market. At their peak, the Hunt brothers had held over $4.5 billion in silver on their $1 billon investment. By the mid-80s, the Hunt brothers had more than a billion dollars in liabilities they could not meet. The precipitous drop in prices meant huge losses for many speculators and ultimately forced the Hunt brothers into bankruptcy. Not surprisingly prices came down significantly quickly and were trading near $10 by the end of March 1980. The CBOT set limits on the amount of silver any one entity could hold and raised margins. Things had gotten so out of whack that COMEX only accepted liquidation orders, effectively halting silver from going higher. Couple that with changes in trading rules at the CBOT and COMEX, prices soon plummeted. Volker was determined to get inflation under control by raising interest rates. Things began to change once Paul Volker was named Chairman of the Federal Reserve. As the Hunts owned 77% of the world’s silver, either in physical form or futures contracts, the market had been cornered. As prices went higher and new buyers got into the market, the exchanges became increasingly fearful of defaulting. During this rise in prices, the COMEX and Chicago Board of Trade (CBOT) only had about 120 million ounces of silver between them. By late 1979/early 1980 prices had increased tenfold and were trading near $55/oz. When they started, the price of silver was below $5 ounce. Before too long, they had amassed over 200 million ounces of silver which was about half of the world’s supply. As cash was continually losing value due to inflation, the Hunts decided to settle their long silver futures contracts with delivery of silver, instead of cash settlement. The Hunt brothers used their positions in silver futures to acquire more of the physical metal. In 1979, the Hunt brothers, along with a group of wealthy Arabs, formed a pool buying silver and silver futures. Since gold could not be held by private citizens back then, the Hunt brothers focused on silver. As a way to hedge themselves from the rampart printing of dollars the US government was doing, the Hunts decided to accumulate large amounts of hard asset investments. In the early seventies, amidst political upheaval, inflationary pressures and stagnant economic growth, the richest family in America (at the time), the Hunt family of Texas, tried to corner the market on precious metals. □ Check out the new, user-friendly app from our partner Interactive Brokers ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
March 2023
Categories |