Today is the thirty-fifth anniversary of Silver Thursday, the day when the Hunt Brothers, Herbert and Nelson, went bust. The Hunt Brothers missed a margin call that day and the price of silver collapsed.
The Hunt Brothers Accumulate Silver
The Hunt Brothers began accumulating silver* in the mid 1970’s in order to protect their inherited oil fortune against the ravages of inflation. They had been buying silver mining shares, silver in physical form and silver via futures contracts on COMEX. They bought on margin under which they would take delivery. All was working according to the Hunt Brothers’ plan as the price of silver rose steadily from 1975 through 1979 and the Hunt Brother controlled an increasing amount of the world’s physical silver and more via silver futures contracts.
The Price of Silver 1975-1979
In 1979, the price of silver went vertical rising from the mid single digits to over $25 per ounce by the end of the year. For more on inflation and the price of silver in 1979-80 click here.
Enter COMEX
The price of silver continued its ascent in early January, 1980, pushing past $40 an ounce.
On January 7, 1980, COMEX increased margin requirements on the purchase of commodities futures, including silver. A week later the price of silver was nearing $50 an ounce.
On January 21, 1980 COMEX limited trading in silver to liquidation orders only! With only sell orders being filled, the price of silver started to fall. As the price of silver fell, the Hunt Brothers’ massive margin position became tenuous.
By mid March 1980, the price of silver was about $20 an ounce.
On March 25, the Hunt Brothers sold about $100 million worth of silver to raise cash to help raise their margin balance. This liquidation caused the price of silver to drop further.
March 27, 1980 – Silver Thurday
Finally, on Thursday March 27, 1980, the price of silver fell further and the Hunt Brothers were hit with a margin call over $100 million they could not not meet. The price of silver plunged from about $16 an ounce down to $10 an ounce.
The Hunt Brothers went bust that day. The price of silver didn’t approach $50 an ounce until thirty one years later in 2011.
The Price of Silver in 1980
On March 27, 1980 silver took the finally plunge that did in the Hunt Brothers.
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*The Hunt Brothers chose silver as their inflation hedge rather than gold in part because gold was made illegal to own in the United States by President Franklin Delano Roosevelt’s Executive Order 6260 of August 28, 1933. and was not legal to own until President Gerald Ford revoked that order on December 31, 1974.
The above originally appeared at Smaulgld.
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