What is 'Hoarding'

Hoarding is the purchase of large quantities of a commodity by a speculator with the intent of pushing up the price. A speculator hoping to increase the price of a commodity can do so by leveraging demand for it by buying physical inventory as well as purchasing futures contracts for that commodity. Hoarding can also take place in financial instruments like bonds.

BREAKING DOWN 'Hoarding'

Hoarding is basically no different than buying and keeping a commodity. However, if the speculator's intent is to corner or otherwise monopolize a commodity, then it may be considered an illegal act. In 1933, owning more than $100 worth of gold became a criminal act called hoarding, but holding/hoarding as much gold as you can afford to buy was legalized again in 1974. Unfortunately for traders and regulators, it is not always easy to distinguish hoarding from a deliberate intent to manipulate the market.

Famous Examples of Hoarding

Silver Hoarding

One of the most famous cases of hoarding occurred in the silver market in the early 1980's when three brothers, known as the Hunt Brothers, tried to hoard silver to corner the market. There are several narratives available about their efforts, but the abridged version tells us that they started small in the early 1970's when silver was trading for around $1.50 per ounce.

Over the next 10 years they purchased most of the physical silver inventory that was available on the market and were hoarding it in various central banks around the world. By the mid-1970's they had moved into futures contracts that gave them the right to buy 55 million ounces of silver. In early 1980, silver reached a high of $49 per ounce, but the Hunt Brothers were no longer able to borrow the money they needed to keep buying silver and pushing up the price.

Eventually they had to start selling, which created a market panic and crushed the silver price. By the time it was over, the Hunts narrowly avoided bankruptcy and financial ruin.

Copper Hoarding

Yasuo Hamanaka, infamously known as Mr. Copper, was the chief copper trader at Sumitomo Corporation. He spent eight years in jail after more than 10 years of off-the-book copper deals in the 1990's that led to more than $2.6bn in losses. At one point he held/hoarded so much of the metal — as much as 5% of world supplies — that traders dubbed him Mr. Copper and The Copper King.

RELATED TERMS
  1. Cash Hoard

    A large amount of available money held by a company in anticipation ...
  2. Silver

    Silver is an element commonly used in jewelry, coins, electronics ...
  3. Mr. Copper

    Otherwise known as Yasuo Hamanaka, Mr. Copper was a trader in ...
  4. Mint Ratio

    1. The price of an ounce of gold divided by the price of an ounce ...
  5. Commodity ETF

    A commodity ETF is an exchange-traded fund that invests in physical ...
  6. Commodity Market

    The commodity market is a physical or virtual marketplace for ...
Related Articles
  1. Investing

    Silver Thursday: How Two Wealthy Traders Cornered The Market

    Find out how the largest speculative attempt to corner the market went awry.
  2. Investing

    An Introduction To Trading Silver Futures

    Silver Futures are becoming popular trading instruments. Here is a primer on how to trade them.
  3. Investing

    SLV: iShares Silver Trust ETF

    Learn about the iShares Silver Trust, an exchange-traded fund that invests primarily in silver and is affected by risks unique to commodities.
  4. Trading

    Negative Interest Rates: 4 Unintended Consequences

    If negative interest rates do, in fact, persist and become commonplace for both firms and individuals alike, there are a number of unintended consequences that might follow.
  5. Investing

    Four Ways To Trade Silver Near Support

    Four ways to trade silver using ETFs or stocks as it approaches a major support region.
  6. Investing

    A Beginner's Guide to Precious Metals

    Since the dawn of time, gold and silver have been recognized as valuable. And even today, precious metals have their place in a savvy investor's portfolio.
  7. Investing

    Will Silver Recover in 2016? (SLV, GLD, JJC)

    The end of the silver downtrend is likely to coincide with similar recoveries in gold, iron and copper.
  8. Investing

    (BK, SIVR, AGQ) 3 Bond ETFs in the Silver Sector

    Find out about the top ETFs that track the silver sector, such as the iShares Silver Trust ETF, ETFS Physical Silver Shares ETF and ProShares Ultra Silver ETF.
  9. Investing

    Why Gold and Silver Prices are Diverging (GLD, SLV)

    Gold and silver prices are seeing a big performance divergence in 2016. Here's why.
  10. Trading

    How to Trade the Breakout in Silver (SLV, EXK)

    Many traders are turning to the silver market given the strong surge in momentum. While all eyes are on the underlying commodity or large-cap miners, strategic traders are turning to small and ...
RELATED FAQS
  1. Who is Mr. Copper?

    A sense of mystery still surrounds Yasuo Hamanaka, a.k.a. Mr. Copper, and the magnitude of his losses. From his perch at ... Read Answer >>
  2. What does "squeezing the shorts" mean?

    "Squeezing the shorts" refers to a questionable practice in which a trader takes advantage of a stock that has been short ... Read Answer >>
  3. What are the most common ETFs that track the metals and mining sector?

    Discover investment opportunities with ETFs that invest in physical precious and base metals and miners such as gold, silver, ... Read Answer >>
  4. How are futures used to hedge a position?

    Learn how futures contracts can be used to limit risk exposure. Read Answer >>
Hot Definitions
  1. Receivables Turnover Ratio

    Receivables turnover ratio is an accounting measure used to quantify a firm's effectiveness in extending credit and in collecting ...
  2. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  3. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  4. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
Trading Center