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The Epic Crash on Silver Thursday: Part 1

Precious metal prices are constantly changing, and not just twice per day from the London Fix. Market shifts can sometimes change the spot price of gold multiple times per day. But even though these prices are always changing, it’s not usually so much as to make or break an investor overnight. But occasionally, things go crazy. The rapid uptick of precious metal prices through 2008 is still fresh in our memories, but it’s nothing compared to March 27, 1980. Investors still shudder at the thought of Silver Thursday.

The mid-seventies were a hectic time for US financial markets. Inflation kept increasing – lowering the value of US currency. Oil tycoon H.L Hunt passed away and left his fortune to his sons, Nelson Bunker and William Herbert. To protect their family dynasty from the uncertainties plaguing the market, the two brothers hatched a plan to corner the silver market.

By using their family fortune, the Hunt brothers bought up as much silver as they could, including silver futures. Instead of closing out the futures with cash settlements (a standard move for normal investors) the brothers opted for delivery of the hard silver backing those futures.

The Hunt family name was worth a lot. Banks and other financiers basically considered a loan to the Hunts as a no, to low, risk investment. By pooling these funds, the Hunts bought more and more silver and silver futures. It wasn’t long before the Hunts owned a whopping one-third of the world’s silver (not counting silver held by the world’s governments).

But, all empires fall. And the Hunts fell hard. Find out how in our next blog post.

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