How The Hunt Brothers Cornered The Silver Market

How The Hunt Brothers Cornered The Silver Market

How the Hunt Brothers Cornered the Silver Market

Jaime Hernandez – December 6, 2011

It all started with two extremely wealthy brothers named Nelson Bunker Hunt and William Herbert Bunker Hunt – also known as “The Hunt Brothers.”

The two brothers were the sons of Haroldson Lafayette Hunt, Jr. who happened to be the wealthiest man in the world from the 1940s until the 1960s, thanks to his extremely successful oil drilling ventures in Texas.

Nelson Bunker, the second oldest son, became wealthy by overseeing his father’s oil empire. Nelson, like his father, enjoyed gambling and he too began drilling for oil with his own money in the early 1960s in Pakistan. Unfortunately, he ended up losing $11 million on one of his first ventures. He continued to gamble and bid against some of the world’s largest oil companies for some oil drilling leases in Libya. He acquired tracts #2 and #65 in Libya; however, due to his previous $11 million loss, he had to sell half of his investment in tract #65 to BP. Low and behold, in 1961 the largest oil field in Africa was discovered on tract #65, making the tract worth about $14 billion at the time. Thanks to tract #65, it made Nelson Bunker the single wealthiest individual in the entire world at the tender age of 35.

In the late 1960s, oil was selling as low as $3 a barrel and Nelson Bunkers’ oil reserves in Libya were generating about $30 million a year. That was not enough for Nelson, so he decided to invest in silver. He felt it was extremely undervalued and had no faith in the U.S. Dollar. He convinced his brother, William Herbert, to join in his silver-buying venture. By 1970, the two Hunt Brothers began acquiring silver at $1.50 an ounce. In the following years, they continued to secretly amass large quantities of the precious metal.

By 1979, the two largest silver commodity exchanges in the world, COMEX and CBOT, suddenly experienced significant silver shortages and the world witnessed a sudden skyrocket of the price of silver. What the world didn’t realize was the Hunt Brothers had singlehandedly cornered the entire silver market!

The price of silver skyrocketed from $8 to $22 an ounce within months. At the time, COMEX and CBOT both held a total of 120 million ounces of silver, which was considerably much less than of the Hunt Brothers.

To everyone’s surprise, the Hunt Brothers did not cash in on their enormous profits. Instead, they borrowed money from their Middle Eastern acquaintances and confidently purchased future silver contracts, showing the world their faith in silver. This caused the price of silver to skyrocket even more and by January 17, 1980, it hit an all-time high of $50.35 an ounce. By that time, the Hunt Brothers owned $4.5 billion of silver (approximately 200,000,000 ounces). That was more than half of the world’s entire supply!

After realizing that the Hunt Brothers cornered the silver market, COMEX immediately suspended silver trading and only accepted silver liquidation orders. COMEX then set selling restrictions that had a major impact on the Hunt Brothers’ ability to purchase silver. Finally, on March 27, 1980, also known as “Silver Thursday,” the Hunt Brothers did not have enough money to pay $135 million for their future silver contracts or even have enough money to sustain the price of silver. That same year, silver plummeted to $11 an ounce. The U.S. government intervened and forced the Hunt Brothers to declare bankruptcy and suspended them indefinitely from commodities trading.

The good news today is that most large buyers of silver do not have to be concerned (unless they are buying millions of dollars worth of silver). One thing that could have prevented the financial collapse of the Hunt Brothers would have been buying silver in physical coinage like Morgan dollars, Walking Liberty halves, Standing Liberty quarters, etc. If they had amassed silver in coinage, they would still probably be the wealthiest men in the world.

– PCGS

Posted in Buying and Selling Bullion, Numismatic Coins

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