Ya don't think the Silver market is manipulated. Learn how the Boyz led to the Hunt Silver Collapse. The Boyz couldn't deliver or cover on their short contracts. So COMEX changed the rules in favor of the shorts.
The Hunt brothers' silver squeeze in 1980 worked by buying massive amounts of physical and paper silver with borrowed money, creating a short squeeze as prices soared, but COMEXcounteracted them by introducing Silver Rule 7, restricting margin buying and forcing massive margin calls, which led to a price collapse and the famous " Silver Thursday," ultimately ending their corner attempt as they couldn't meet obligations.
How the Hunt Brothers Created the Squeeze:
- Leveraged Buying: The Hunts used significant borrowed funds (leverage) to buy vast quantities of silver futures and physical bullion throughout the late 1970s.
- Price Surge: This massive demand drove silver prices dramatically higher, from around $6 to nearly $50 an ounce.
- Short Squeeze: Investors who had bet against silver (short sellers) were forced to buy silver to cover their positions, adding even more buying pressure and fueling the price rise.
How COMEX Intervened (The "Circumnet"):
- Silver Rule 7 (Jan 1980): In response to the escalating situation, COMEXimplemented this rule, which placed heavy restrictions on buying commodities on margin (using borrowed money).
- Stricter Margin Requirements: Other exchanges followed, making it much harder and more expensive for the Hunts to continue borrowing and buying.
- Liquidity Drying Up: As interest rates rose and banks became wary, the ability to finance these huge leveraged positions dwindled.
The Collapse:
- Silver Thursday (March 27, 1980): The Hunts couldn't meet enormous margin calls, triggering panic selling and a price crash (dropping 50% in one day).
- Market Rescue: Banks provided the Hunts with a massive loan to prevent total financial collapse, but the scheme ultimately failed, leading to huge losses for the brothers.
|
