If the history of commodities markets were made into a movie there would be plenty of interesting characters to cast. With all choices considered, the lead characters would definitely have to be the Hunt Brothers: Nelson and William. The story of how they cornered the silver market, among others, is very interesting in the sense that it lead to one of the most historic silver price rallies in the metal’s history and also changed the way futures markets were regulated. Not many can make that claim.
The Hunt Brothers were born into one of the richest families in America. The family wealth was derived from another commodity: oil. In 1973, the Hunt’s started buying up silver to hedge their dollar interests. They had a lot of dollars to hedge and at the time gold was not allowed to be held by private interests. Partnering with Arabic wealth, the Hunt’s silver holdings surpassed 200 million ounces in 1979. Over the six year period, silver moved from just under $2/oz to $5/oz. Within the next two years, the price of silver increased by over 1,000% and topped out at $54/oz. The Hunt’s and their Arabian partners had officially cornered the market resulting in historic silver prices.
It’s estimated that in 1979 the Hunt Brothers made approximately $2 billion on their silver holdings. The Federal Reserve, COMEX, and CFTC were forced to step in. Their intervention forced the liquidation of the Hunt’s position. Just as fast as the silver market went up, it collapsed back down. Just two months after touching $54/oz, silver fell to a mere $11/oz. The greatest single day move in the price of silver took place on what’s known as Silver Thursday when prices experienced a one day decline of 50%. Want to know why the next big decline may be just around the corner? Find out in this free report published by Futures Press – its free instant access is a click away by clicking FREE SILVER FORECAST.
The Hunt Brothers weren’t just involved in the silver market. They had also grossly exceeded the position limit in soybean futures. As a result of the historic silver market collapse, the Hunt Brother’s were forced to declare Chapter 11 bankruptcy in 1988. At the time of the declaration, their liabilities had grown to $2.5 billion compared to assets totaling $1.5 billion. That’s one heck of a margin call. In 1989, the Hunt Brothers were slapped with fines of over $10 million in addition to taxes plus interest owed. They were then banned for life from trading any commodity markets. A hefty fine to pay is what they received for being to blame for one of the most historic silver periods of price action in any commodity.
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