Silver Thursday

Silver Thursday, dramatic fall in the price of silver on March 27, 1980, following an attempt to corner the market on the precious metal.

Apart from a handful of reigning monarchs and despots, Nelson Bunker Hunt (1926–2014) was the richest man in the world at the start of the 1960s, having inherited a fortune from his father, the legendary oilman H. L. Hunt, and earned another fortune through investments and speculation. By 1970 he foresaw a volatile economic future marked by rampant inflation. Prevented by Franklin Roosevelt’s 1933 prohibition on U.S. citizens owning gold, Bunker and his younger brother William Herbert (1929–2024) chose silver, then standing at $1.50 per ounce, as their speculative hedge. Their initial caution vanished after Colonel Muammar al-Qaddafi nationalized the Hunts’ Libyan oil fields in 1973. Concerned that paper money would soon be worthless, the Hunt brothers then bought futures contracts on 55 million ounces of silver, eventually accumulating an estimated 100 million ounces of the precious metal. Instead of selling the contracts on the commodity market, they took delivery of the bullion and chartered three Boeing 707s to air-freight it to Switzerland.

By 1979, they had engineered a genuine shortage of the metal. The Hunts owned $4.5 billion worth of silver, representing about 70 percent of the world supply. The price climbed until, on January 17, 1980, an ounce of silver cost $49.45. Such rampant speculation and profits triggered new government oversight, prompting the Federal Reserve to suspend trading in silver. The boom was suddenly over, but the Hunts still had to honor margin-call contracts to buy at prices over $50. The day the market plunged—Thursday, March 27—silver fell to $10.80, the metal’s biggest single collapse. Upon losing some $1.7 billion, the Hunts had become the (then) greatest debtors in financial history. Although New York banks, with the approval of the Reserve, allowed them $1.1 billion credit toward clearing their obligations, they were personally bankrupted and later convicted of illegally trying to corner the market on the precious metal; the brothers were fined $10 million each, in addition to the millions they owed to the IRS, and were banned from future trading on the commodities market. In the wake of Silver Thursday, many of the banks and trading firms that had loaned the Hunts money also found themselves in financial trouble, resulting in a secondary wave of bankruptcies and mergers.

New federal regulations on the commodities market followed, especially with respect to margin trading. Silver Thursday has also afforded investors an object lesson in the importance of portfolio diversification and risk management.