When Whales Go Too Far: The Hunt Brothers’ Legendary ‘Silver Thursday’ – PART I
The crypto market knows that big tycoons, whom they call ‘whales,’ can easily manipulate the market flow. But the real question is, for how long?. This is the story of two market tycoons who tried to manipulate the silver market and failed miserably. In the late 1970s, the Hunt brothers, famous for their Texas oil company, bought an enormous silver supply and tried to profit from it, but ended up in misery.
When Billionaire Confidence Turns Into Catastrophe
In the 1970s, the U.S. economy was roaring with inflation, and the U.S. dollar was no longer backed by gold. So, the currency’s value was decreasing, and gold was off-limits to ordinary citizens. Despite all these situations, the two brothers, Nelson Bunker Hunt and William Herbert Hunt, had an idea to make more money and protect their family fortune.
Their idea was to bet on silver, squeeze the market a bit, and profit. They did not buy a few silver coins; they purchased a massive amount of silver, acquiring most of the world’s supply. Nelson was so sure that the price of silver would go up tenfold that they started executing their plan. They chartered many Boeing 707 aircraft to move their silver to the Swiss vault. After buying silver with their own money, they also began borrowing from banks and entering into futures contracts to buy more silver.
Doubts may arise, why silver?? Silver was considered the ‘gold of the poor’ or ‘white gold,’ and they firmly believed that the U.S. dollar was dying and the value of silver would go up. After the U.S. left the gold standard in 1971, inflation soared, oil prices skyrocketed, and the economy looked shaky. Most people turned to gold as a haven. But the Hunts? They were convinced the real hidden gem was silver, undervalued, underappreciated, and ready to explode.
By early 1980, the brothers had gained control of nearly one-third of the world’s deliverable silver supply. This massive movement sent silver prices skyrocketing from $2 an ounce to almost $50, a 700% increase. The implications of this single trade were immense, surpassing the GDP of several small nations. Fueled by their success, the brothers believed they were on the brink of transforming American financial history and creating a legacy that would redefine wealth and power in the commodities market. Their ambition and daring actions had positioned them as central figures in economic history.
“To be successful, you must decide exactly what you want to accomplish, then resolve to pay the price to get it.” – Nelson Buker Hunt
Liquidity, Leverage, and Illusion of Control
Banks eagerly offered them loans; their names became golden tickets on Wall Street. Each new loan brought in more silver, and every contract they secured pushed prices higher. The Hunts met wealthy investors in Europe and the Middle East to join forces and become the allies of the future skyrocketing silver market. With each advancement they made, pressure mounted on short sellers, who found themselves squeezed ever more. Then one day, the market began to push back.
By January 1980, the Hunt brothers had earned billions of dollars by just acquiring silver. The short squeeze they planned was in full force. They strained the entire global silver supply chain. At this point, the U.S regulators and exchanges had to step in. First, the Commodities Exchange (COMEX) introduced Silver Rule 7, restricting leveraged silver purchases. You could sell, but you couldn’t buy more on credit. Overnight, the silver market collapsed at the speed of light.
The Federal Reserve quietly applied pressure on banks, urging them to stop lending for silver speculation. This created a significant hurdle for the Hunt brothers, as the banks could no longer approve their borrowing requests. Due to the lack of available loans and the absence of leverage, the Hunts found themselves in a problematic situation.
As a result, silver prices began to decline steadily, ultimately crashing to an unprecedented low. This dramatic downturn on March 27, 1980, is famously known as “Silver Thursday.” This day became a critical turning point in the silver market, vividly illustrating its volatility and the unintended consequences of speculative trading practices. The events of Silver Thursday have far-reaching implications for investors, underscoring the risks of market speculation and the unpredictable nature of commodity trading. It served as a stark reminder of how swiftly fortunes can change in the world of finance, reshaping perceptions of market stability and investor behavior.
That’s not all. There’s more to the story. Stay updated for PART 2 and learn more about ‘Silver Thursday”
