SILVER THURSDAY – 45 Years Since the Largest Market Manipulation in the Metals Industry

Spring 1980. Traders at the Chicago Mercantile Exchange anxiously watch silver prices. The price of the metal, which had exceeded $50 per ounce just a few months earlier, is now plummeting. Panic grips the market. The reason? The collapse of a large-scale investment strategy by the Hunt brothers — Texas oil magnates who attempted to monopolize the global silver market.

In today’s Strifor review, we will examine an event that took place exactly 45 years ago, which went down in history as “Silver Thursday.” It not only triggered the largest crash in precious metal prices but also served as a lesson for the entire financial world.

How It All Began: A Bet on Silver

Brothers Nelson Bunker Hunt and William Herbert Hunt were born into the family of oil billionaire Haroldson Hunt. After their father’s death, they inherited a substantial fortune but chose not to limit themselves to the oil industry. In the 1970s, fearing inflation and the devaluation of the dollar after the abandonment of the gold standard, they bet on silver, convinced that its price would only rise.

They began by purchasing physical silver and later moved into futures contracts. By 1979, they controlled about one-third of the entire global silver market, excluding government reserves. This led to a sharp increase in prices: in 1973, an ounce of silver was worth around $2, but by early 1980, the price had skyrocketed above $50.

The Peak and the Crisis: What Went Wrong?

The rapid rise in silver prices alarmed the U.S. government and regulators. The Commodity Futures Trading Commission (CFTC) and the Federal Reserve began implementing measures to counter market manipulation.

In January 1980, the COMEX exchange imposed restrictions on margin trading in silver, significantly reducing speculators’ ability to leverage their positions. Buyers were now required to provide more cash instead of relying on borrowed capital.

This was catastrophic for the Hunt brothers: most of their assets had been acquired on credit. They were forced to sell off silver quickly, causing prices to crash. On March 27, 1980 — Thursday — silver plunged from $21 to $10.80 per ounce. Overnight, the Hunt brothers’ fortune shrank by billions of dollars.

This day became known as Silver Thursday. The Hunt brothers defaulted on their obligations to brokers and banks. The panic spread to the stock market, with the Dow Jones Index dropping by 16.45 points — the largest decline since 1978.

Consequences: A Crisis of Confidence and New Regulations

The collapse of the silver market triggered a chain reaction: dozens of brokerage firms were on the verge of bankruptcy. Only emergency actions by the Federal Reserve, which provided urgent loans to banks, helped prevent a global financial crisis.

Following this, regulators tightened control over commodity markets:

• Limits were imposed on futures contract holdings for individual commodities.
• Oversight of speculative transactions was strengthened.
• Banks began conducting stricter due diligence on borrowers before issuing margin loans.

The Hunt brothers declared bankruptcy in 1988 and disappeared from the world of high finance.

The Echo of Silver Thursday in Today’s World

The events of 1980 still serve as a lesson for investors. They vividly demonstrate the dangers of excessive leverage and speculative bubbles.

In 2021, during the “meme stock” movement led by WallStreetBets, Reddit traders attempted a similar silver squeeze. However, due to strict market regulations, the plan failed.

Silver Thursday became a prototype for many financial crises, including the collapse of Long-Term Capital Management in 1998 and the liquidity crisis of 2008.

Conclusion

Attempting to monopolize a market is a risky endeavor, especially when facing opposition from the government and the entire financial system. The story of Silver Thursday is not just a lesson from the past — it is a warning for modern traders and investors: the market is always stronger, and excessive greed leads to downfall.

Such events emphasize Strifor’s core value — responsible trading in financial markets, which involves regular market analysis, diversification, risk assessment, and selecting optimal instruments for your trading strategy. Join Strifor — we always pay 🤝.

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