Goddess Minerva on a Roman silver plate, 1st century BCE
Silver has been considered a precious material since antiquity. It is mentioned in the book of Genesis, and indications from old mining refuse indicates that silver was being separated from lead at least 4000 BC.Today, the main uses of silver include jewelry, household items like flatware, and industrial needs. Unlike gold, silver is not linked to a currency; it is considered a commodity, and its price reflects supply and demand.
Or does it? In the 1970s, a group of wealthy Texans decided to attempt to corner the world silver market as insurance against rising inflation. The Hunt brothers, Nelson Bunker, Herbert, and Lamar were heirs to a multi-billion dollar oil fortune created by their father, wildcatter H.L. Hunt. When the Hunt brothers began buying up silver in 1973, it was only valued at $1.95 per ounce. By 1979, it was trading at $5 per ounce, so it would seem that they had made a good investment. The Hunts, however, were no ordinary investors.
Much of the Hunts' wheeling and dealing was done on the commodities futures markets. The futures markets work a little differently than the regular stock market. Instead of buying stock at today's price, in the futures market investors agree to buy or sell positions on a commodity, wheat or gold for instance, at a set date in the future. For industrial investors who actually make something with the commodity, it is a hedge against rising prices. The futures market also attracts speculators, because it only requires that a small percentage of the price of the contract be paid up front (the rest is not due until the date when the contract is filled).
There is a catch, however: if the price of the commodity drops in the meantime, investors have to pay maintenance margins. This is where the Hunt brothers eventually got into big trouble. By January of 1980 federal regulators took note of the huge portion of the world's silver controlled by the Hunts and their associates - at least 50%. Not to mention that the Hunts' market manipulations had caused the price of silver to spike to over $50 an ounce, up from $9 per ounce only six months earlier.
In an effort to prevent the Hunts from gaining complete control over the world's supply of silver, the Commodities Futures Trading Commission took action to shut them down. The first step was to increase the margin requirements, which actually caused great financial difficulties for all sorts of silver investors. Finally, regulators simply forbade the Hunts from buying any more silver. The right to purchase silver was limited to legitimate industrial users and a few others.
The government had finally forced the Hunts Brothers' hand. They could no longer buy silver, and they could not sell what they already held, because there were not enough buyers. The Hunts were forced to sit tight as the price of silver dropped, and margin calls came in that they struggled to meet. By March of 1980, the billionaire Hunts were running out of money.
On March 14, 1980, the other shoe dropped when the Federal Reserve instructed banks to cease lending money to speculators. (It was technically a voluntary policy, but no bank wants to cross the Fed.) It was widely assumed that this policy was in fact directed at the Hunts. The Fed achieved their goal; short on assets, the Hunts were no longer able to meet their margin calls.
Hunt Brothers Market Spike & Silver Thursday.
Silver Thursday Crash
March 27, 1980 is known as "Silver Thursday". This is the day that the whole situation came to a head. Silver prices fell by half, from $21.62 to $10.80 per ounce. In addition, the stock market took a big hit, as firms connected to the Hunts dumped the stock the brothers had provided as collateral. In short, the Hunt brothers were ruined. They were forced into bankruptcy, and in 1988, they were convicted of conspiring to manipulate the silver market.
Today's Silver Price
The price for silver today is nowhere near the artificial high created by the Hunts' scheme to corner the market. However, the price of silver, like all precious metals, has been on the rise in recent years. From less than $5 an ounce in 2000, the price of silver has risen to over $43.84 per ounce as of July 20011. You can find current silver prices here. The prevailing thought in the metals marketplace is that the price of silver will continue to rise, because in uncertain economic times, precious metals are an appealing investment (the Hunt brothers did have that much right). An interesting recent development in the Hunt saga is the June 2008 sale of Hunt Petroleum. The multi-billion dollar sale has fueled speculation that the Hunts might decide to invest their new bundle of cash in - you guessed it - silver.
- Silver as an investment
There are many ways to invest in silver
- Hunt Brothers Corner Silver Market
The story of what would become known as Silver Thursday began in the early 1970s.
- The Hunt Brothers and the Silver Bubble
Once the silver market was cornered, outsiders joined the chase but a combination of changed trading rules on the New York Metals Market (COMEX) and the intervention of the Federal Reserve put an end to the game.
Silver Uses Today
Industry consumes most of the silver used today. In 2007, various industries used 455.5 million ounces of silver in everything from mirrors to electrical circuits. By comparison, 163.4 million ounces of silver were used to create jewelry in that same period. Silver is also a critical component in the photography sector, which used 128 million ounces last year. The incredible range of uses of silver contributes to its enduring value throughout history.
One use of silver that never goes out of style is silver bridal jewelry in which silver is often combined with pearls or crystals to make beautiful, elegant and affordable jewelry.
In the last few years, demand for silver has been greater than the supply, which has helped to increase the price of the precious metal. Industrial applications, in particular, have required more silver than is being mined each year, meaning that stockpiles are becoming depleted. In case you were wondering, the greatest percentage of silver is mined in Peru, followed by Mexico, China, and Chile.
While the experts are not predicting that the price of silver will reach the high of over $50 per ounce created by the Hunt brothers' attempt to corner the market, there is some reason to believe that it may hold its market value. The combination of lower supply than demand, a soft economy, and concerns about the weak dollar have all conspired to push the price of silver higher than it has been since the Hunts' adventures in silver futures in the late 1970s - early 1980.
Carl Hopkinson on February 08, 2011:
Seems to me the federal government did more to manipulate the silver market (down) than the Hunt Bros. did or ever could. I am afraid of the crooks with the most power.
Who that is in this story is left as an exercise for the reader.
Carolyn Blacknall from Houston, Texas on April 09, 2010:
I think silver prices will go up. Great information on the historical prices. Thanks!
Seabastian (author) from Raleigh on December 04, 2009:
I don't buy silver for investment purposes so I have not looked at sites to purchase.My main interest has been buying silver jewelry for my online website so I am constantly aware of it's fluctuations.While prices are high today and seem to be only going up,don't forget the lesson of the hunt brothers. I also remember when in 1979 the "gold bugs" talked of the relentless upward price of gold. It only took 29 years for gold to get back to it's 1979 price.
Tom on November 22, 2009:
Where con you buy "safely" silver in the US. There are so many websites that I don´t trust. Thanks...
pauljorg on March 15, 2009:
Very interesting hub. I have a few silver bars (and some coins). Have a look at one of my bars here http://www.youtube.com/watch?v=telPe0_h2hQ . Industrial metals are all down right now, but the low prices have actually made mining operations really slow to a halt, which is going to reduce supply as soon as the effects are felt. We're going to see the price bounce back soon I'm sure. Especially since silver is mined as a by-product of copper.
Seabastian (author) from Raleigh on November 21, 2008:
With more and more recyling of all materials,there is an increase in available supplies. Also photography was once a major consumption of silver but the massive shift to digital photography has decreased the demand for silver drastically.
Shalini Kagal from India on November 16, 2008:
Fascinating hub, thank you. It's incredible how prices can be manipulated. I've always thought silver would appreciate much more than gold did - percentage rise year on year simply because the silver reserves seemed to be running out - didn't quite do that somehow!!