Why silver prices are the highest they’ve been since 1980
The price of gold is in the headlines, but it’s not the only precious metal breaking records. Silver was trading at an all-time high of more than $50 an ounce on the London market Thursday, surpassing a record set 45 years ago — under dramatic circumstances to say the least.
The last time silver prices surged this high, brothers Nelson and William Hurt were at the center of the story.
Heirs to the fortune of a wildcat oil speculator, they were “the poster children for the old joke, ‘If you want to make a small fortune in commodities, start with a big fortune,’” said Craig Pirrong, who researches market manipulation at the University of Houston.
He said that what started as an attempt to hedge against raging inflation in the late ‘70s ended in a scheme by the Hunt brothers to corner the silver market.
“Why silver and why so much silver and how they thought they were going to get out of this, those are all sort of difficult questions,” Pirrong said.
They accumulated one-third of the world’s privately-held silver supply — mostly with borrowed money — and bid up the price from $9 an ounce to nearly $50, he said.
“The problem with trying to prop up the price of anything is you have to keep buying it,” said Pirrong.
When worried regulators set new trading limits, silver prices collapsed. The brothers lost over a billion dollars and couldn’t pay their debts. “And that sparked a mini financial crisis,” Pirrong said — on what came to be known as Silver Thursday in March of 1980.
On this Silver Thursday, 45 years later, it’s not market manipulation that’s driving up the price of silver, however.
“There’s no master puppeteer pulling on the strings,” said John C. Coffee, a professor of law at Columbia University. But he does see parallels in the fear and uncertainty driving speculative bets.
“I think this is a broad ship by people who fear major economic problems, major stock market declines,” he said. And those investors may see silver as the next best haven as they get priced out of gold.
“It’s really chaotic,” said Stefan Gleason, CEO of Money Metals Exchange.
He’s bracing for another price swing in either direction. “Because there’s just so much psychological, you know, noise around this $50 level.”
But at least today, Gleason is seeing a lot more investors buying silver than offloading it.
