The 1970s were a wild time for both gold and silver as they both ended up seeing huge bull markets that were just as powerful or even more powerful than the current bull markets for both. Two billionaire brothers were investing in silver when they realized that it was theoretically possible that they could buy enough silver to “corner the market”.
Cornering the market essentially means having enough of the market under your ownership that you can make prices drop or increase dramatically — at will. Being in such a position is obviously good for the investor with the influence — he can make a fortune by manipulating the market.
In the Beginning…
The silver story begins in about 1973, when the Hunt family from Texas — one of the richest families on the planet — began to get involved with precious metals. Since gold was still illegal at that time for US citizens, silver was the only real option for the billionaires looking for a hard asset safe haven.
They kept this up until about 1979, when the Hunts brothers — Nelson and William — formed a silver investment pool with several other incredibly rich people from the Middle East. They continued buying silver until they eventually owned over 200,000,000 ounces of silver… that’s about half of the silver on the planet.
When they first started buying silver in 1973, the price of silver was $1.95.
By 1979 the price of silver was a little over $5 per ounce.
Later that same year in 1979, the price of silver went from $5 per ounce to much higher — eventually reaching $54 dollars per ounce. That’s a 1,000% price explosion in less than a year.
The silver market was successfully cornered.
How it All Ended
The New York Metals Market (COMEX) and the Federal Reserve decided to end the corner and obliterate the price of gold. They changed the trading rules and overall just crushed silver prices.
Either way, the price of silver began crashing. By 1980, the price plummeted to $10.80. One day in 1980, and the price actually fell 50% at once.
Silver speculators and investors like the Hunt brothers were obliterated. They suffered insane losses. The Hunt brothers had to actually end up declaring bankruptcy. By 1987, they were in debt by about $2.5 billion and only had assets in the range of $1.5 billion. They were convicted of conspiracy to manipulate the market in 1988.
What This Means for Us
What does this mean for us? It means several things:
1. The price of gold and silver can be manipulated.
2. Central banks and financial institutions can kill the market.
3. We shouldn’t put all of our eggs in one basket.
Of course, it’s a fun story to read about and to learn from. Next time you find yourself one of the richest men in the world, don’t try to buy all the silver on earth — it won’t end well.
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