What Is Silver Thursday?
In finance, the term "Silver Thursday" refers to March 27, 1980, an infamous trading day in which the price of silver collapsed.
The collapse was precipitated by the failed attempt of three brothers—Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt—to corner the market in silver.
- Silver Thursday was a dramatic trading day in which the price of silver declined precipitously.
- It was triggered by the unraveling and highly leveraged position of three brothers who were the heirs to a large oil fortune.
- At their peak, these brothers had accumulated roughly 33% of the entire world's supply of privately-held silver.
Understanding Silver Thursday
The Hunt brothers inherited a large fortune from their father, Haroldson Lafayette Hunt Jr., a billionaire who made his fortune in the oil market. The three brothers were convinced that the value of fiat currencies would be severely eroded in the future, and they were eager to protect their purchasing power by buying large amounts of silver. Due in part to their aggressive purchases, the price of silver rose dramatically between 1979 and 1980, from just over $6 per ounce to over $50.
In Jan. 1980, however, the price of silver declined by over 50% within less than a week, partly due to new restrictions placed on speculative margin traders. The Hunt brothers, who despite their own fortunes had relied heavily on margin loans to fund their silver purchases, were faced with severe losses on their position. Soon, word began to spread that the brothers were starting to face margin calls from their brokers.
As often happens in periods of financial crisis, rumor mixed with reality to cause investor sentiment to turn. Silver, which had only recently risen almost ten-fold in the previous years, now seemed to be in freefall.
At their peak, the Hunt brothers had accumulated a staggering one-third of the entire global supply of privately-owned silver. With its value rapidly declining, they soon became unable to honor the margin calls that they had been issued by their brokerage lenders. With bankruptcy seemingly imminent, the brothers received a bailout package of $1.1 billion, which was soon followed by a formal investigation by the U.S. Securities and Exchange Commission (SEC).
Real World Example of Silver Thursday
Ultimately, the Hunt brothers declared bankruptcy after being fined $134 million in relation to their attempts to corner the silver market. They were also banned from any future participation in the commodities markets.
In the broader silver market, prices remained in the range of $4 to $6 per ounce for most of the 1990s, before rising to a recent high of nearly $50 per ounce in 2011. Over the past five years, however, it has hovered around $15 per ounce.