Understanding Silver Thursday and Its Market Impact

Silver Thursday is a significant market event that has left a lasting impact on the financial world. It occurred on October 27, 1893, when a silver market crash led to a massive sell-off.

The event was sparked by a sudden increase in silver imports, which caused a surplus in the market. This led to a sharp decline in silver prices.

Investors who had bet on rising silver prices found themselves facing significant losses. The market crash was a major blow to the economy, with many businesses and individuals affected.

The aftermath of Silver Thursday led to a re-evaluation of the gold standard and the role of silver in the monetary system.

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Thursday is a day of the week that's often associated with significant events in finance, like Silver Thursday.

The term "Thursday" refers to the day of the week, which is the fourth day of the week in a seven-day cycle.

In the context of finance, Thursday can be a critical day for market movements, as seen in the infamous Silver Thursday.

The Hunt brothers' failed attempt to corner the market in silver on March 27, 1980, occurred on a Thursday.

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In 1979, the price for silver jumped from $6.08 per troy ounce to a record high of $49.45 per troy ounce on January 18, 1980.

The Hunt brothers were estimated to be holding over 100 million troy ounces of silver and several large silver futures contracts, which was a significant portion of the world's silver supply.

The brothers' accumulation of silver drove the price up so high that it became unconscionable for others to purchase silver at artificially high prices, as stated by Tiffany's in an ad in The New York Times on March 26, 1980.

The price of silver dropped over 50% in just four days, causing panic in the markets, and the Hunt brothers were unable to meet their obligations due to having borrowed heavily to finance their purchases.

In response to the Hunt brothers' accumulation, the exchange rules regarding leverage were changed, and COMEX adopted "Silver Rule 7", which placed heavy restrictions on the purchase of commodities on margin on January 7, 1980.

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They began buying silver in a frenzy, significantly reducing the available supply in the market.

Their relentless purchasing pushed silver prices even higher, making it a lucrative time for some individuals to sell their silverware and coins.

The Hunts controlled more than two-thirds of the silver market through futures contracts, leaving little room for others.

They had already considerably reduced the amount of silver available on the market, making their continuing buying action all the more powerful by pushing up the price of silver.

The Hunts' position was now worth around $4.5 billion, a staggering amount that would only continue to grow.

People were pawning coins and silverware to take advantage of the high price of silver, adding to the supply, but there was less than a third of the silver market left that the Hunts did not control via futures.

Bunker foresaw at least a tenfold increase in the price of silver, so he and his brother began to buy up physical silver as well as future contracts.

The billions in demand triggered the rise of silver to more than $50 per ounce, a remarkable increase that would have a lasting impact on the market.

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The U.S. government became concerned over what it saw as a clear attempt at manipulating the nation's silver reserves, and the fact that this corner involved the Middle East added some venom to its reaction.

Federal commodities regulators introduced special rules to prevent any more long position contracts from being written or sold for silver futures, temporarily suspending the fundamental rules of the commodities market.

With longs frozen and shorts free to pile in, the price of silver began to slide, plummeting from its peak of $50.35 to under $11 per ounce on "Silver Thursday", March 27, 1980.

Margin calls on the loans began to take a toll on the Hunts' reserves, with daily payments of millions in calls, storage fees, and interest depleting their reserves.

The Federal Reserve urged banks to cease lending for speculative activities, further exacerbating the Hunts' situation and creating concerns that they might fail to meet margin requirements with new loans.

The stock market took a huge hit on Silver Thursday. The day marked the end of a large stock market correction that year.

The Hunt brothers' financial struggles put downward pressure on the price of silver. Concerns that they might not meet margins with new loans and go under, pulling brokerages and banks with them, added to the pressure.

The price of silver dropped drastically on March 27, 1980, to under $11 from its high of $50.42. This was a significant decline, and it's no wonder the market reacted so strongly.

The Federal Reserve took a step to curb speculative activity by encouraging banks to stop making loans for it. This move made it harder for the Hunts to get the credit they needed.

The credit drying up was the final blow for the Hunt brothers, who finally missed a margin call on Silver Thursday.

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The Hunt brothers lost over a billion dollars due to the silver market collapse.

Their family fortunes survived, but they had to pledge most of their assets as collateral for a rescue loan package.

The value of their assets declined steadily during the 1980s, and their estimated net wealth dropped from $5 billion in 1980 to less than $1 billion in 1988.

The London Silver Fix had collapsed by 90% to $4.90 per troy ounce by 1982.

The brothers were found responsible for civil charges of conspiracy to corner the market in silver in 1988.

They were ordered to pay $134 million in compensation to a Peruvian mineral company that had lost money due to their actions.

This forced the brothers to declare bankruptcy, one of the biggest such filings in Texas history.

It took the Hunt brothers nearly a decade to unwind their silver holdings and meet their obligations to creditors.

The final bill left them billions poorer, although they were still wealthy by most standards.