The Silver Squeeze: Lessons from the Hunt Brothers and Market Cycles

By Andrew Pancholi, FSC Board Member

The Silver Squeeze: Lessons from the Hunt Brothers and Market Cycles

By Andrew Pancholi, FSC Board Member
FSC Board Member and Creator of Market Timing Report

In financial history, few events illustrate the power of market cycles as vividly as the Hunt brothers’ attempt to corner the silver market in the late 1970s. As we approach the 45th anniversary of this dramatic episode, it serves as a compelling study of how financial patterns repeat with remarkable precision – particularly the importance of the 45-year time cycle. This cycle is not just a historical curiosity; it is a crucial tool for anticipating future market behavior.

Are we about to see some major moves in precious metals?

A Hedge Against Uncertainty

The Hunt brothers – Nelson Bunker, William Herbert, and Lamar—were Texas oil heirs who viewed silver as a hedge against inflation and monetary instability. Following President Nixon’s abandonment of the gold standard in 1971, they distrusted paper currency and saw silver as a tangible store of wealth. With private gold ownership restricted in the U.S., they began accumulating vast amounts of silver, not just as a speculative asset but as a safeguard against economic turmoil.

Cornering the Market

Starting in 1973, the Hunts strategically acquired physical silver while also purchasing enormous futures contracts. Unlike most traders who settled contracts in cash, they demanded physical delivery, reducing available supply. They further leveraged their holdings as collateral, forming alliances with Middle Eastern investors to extend their reach. By 1979, silver prices had surged from $6 to nearly $50 per ounce, a meteoric 700% increase. The Hunt brothers controlled roughly 100 million ounces of physical silver and another 90 million ounces in futures, effectively commanding one-third to two-thirds of the global supply.

Regulatory Intervention and Collapse

The sheer scale of their holdings alarmed regulators. On January 7, 1980, COMEX introduced “Silver Rule 7,” restricting leveraged silver purchases, while the Federal Reserve pressured banks to curb speculative lending. With liquidity drying up, silver prices began to fall. The Hunts struggled to meet margin calls, culminating in the infamous “Silver Thursday” on March 27, 1980, when silver prices plummeted from nearly $50 to $10.80 per ounce. Unable to cover their obligations, the Hunts defaulted on a $100 million margin call, triggering a market-wide collapse.

The Aftermath and Market Cycles

The fallout was catastrophic. The Hunt brothers lost over $1 billion, eventually declaring bankruptcy. In 1988, they were found guilty of attempting to corner the market and ordered to pay $134 million in damages. Their trading privileges were revoked, and regulatory changes were implemented to prevent similar market manipulations in the future. Silver remained depressed for years, underscoring the dangers of excessive leverage and unchecked speculation.

This episode highlights the cyclical nature of financial markets, particularly the 45-year cycle that continues to reveal repeating themes in market behavior. The dramatic boom-and-bust cycle of silver in 1980 mirrors similar events occurring at regular intervals. Recognizing the significance of these cycles allows investors to anticipate potential inflection points with greater accuracy. As we revisit the Hunt brothers' story exactly 45 years later, the resonance is unmistakable. It is a powerful reminder that markets may evolve, but human behavior – and the cycles it produces – remains consistent. Understanding and aligning with these time-tested cycles offers a strategic advantage to modern investors navigating today’s complex markets.

Andrew Pancholi
FSC Board Member

Andrew Pancholi is the creator of the Market Timing Report and is co-author of the bestseller Zero Hour and The Lost Coffee Courses of W.D. Gann. In addition to being a regular contributor to FXStreet and Traders World, he has appeared on numerous media stations, including Real Vision. His published works forewarned people of the forthcoming 2020 crash and precisely timed the recent market top. He foretold of the 2000 equity highs, the 2007-08 global financial crisis, and the commodity booms of 2008 and 2010. He has extensive knowledge of the works of W.D. Gann, R.N. Elliott, J.M. Hurst, and numerous other forecasting techniques. Pancholi also specializes in geopolitical forecasting, the long-range forecasting of space weather, solar flares, and CMEs, as well as earthquake prediction. He consults with some of the largest banks and institutions in the world and advises government bodies. Pancholi is based in the U.K.

NOTE: This article is intended exclusively to provide information and education to help individuals better understand cycles and the markets. However, this information is not to be construed as professional advice as to the buying and selling of securities or other investment instruments. In no event does the host express any opinion with respect to, or make recommendations regarding, the purchase or sale of any particular security or other investment instrument. There is a very high degree of risk involved in trading securities, and buying or selling decisions are solely within the personal discretion of each individual.