Why was silver so high in 1979?

By 1979, investors and other market participants had come to the firm conviction that the silver market was facing an acute shortage of metals and that prices were likely to rise sharply at some point. The market had been living on investor sales for seven years. Sarnoff then pointed out that, despite the supply of recycled silver, the country was still short of about 100 million ounces a year and that this gap would widen. In recently studying the Gold and Silver Price Today, with a view to capturing next year's price trend, Mr. Sarnoff first analyzed the supply side.

Unlike the United States, the Soviet Union depends almost entirely on the secondary recovery of silver found in base metal mining. The fact that silver was a small market amidst a large upward movement in all commodities, together with the rise of the dollar as investors considered it a safe haven, suggests that the Hunts were only involved in the upward movement of silver, something they had anticipated and clearly helped. Silver Thursday was an event that took place in the silver commodity markets of the United States on Thursday, March 27, 1980, following the attempt of brothers Nelson Bunker Hunt, William Herbert Hunt and Lamar Hunt (also known as the Hunt brothers) to take over the silver market. And, to protect themselves in the event that the price of silver bars falls between buying the coins and selling the ingots, brokers sell equivalent quantities of ingots for future delivery in commodity bags.

They then sold the silver coin, which they had bought well below the merger value, at prices well above the merger value. Moscow buys its silver through Swiss banks, through which it sells gold, platinum and other metals. At the height of the bull market, given that silver rose 715 percent above its price in early 1979, U.S. silver coins are bought at discounts of up to 25 percent below their merger value.

When precious metals start the next bull market in earnest, there won't be a lot of cash coming into the silver market to push the price up. They must be conspiring to buy at a discount when bullion prices are high and investors seek to sell their silver coins, and they conspire to sell only at a higher price when bullion prices have fallen and investors want to buy coins. At their peak, they controlled about 250 million ounces of silver: 100 million in physical contracts and 150 million in futures contracts. But then the price of silver plummets and, as a result, silver coins come to have a premium of more than 70 percent over their fusion value.

The silver market is very vulnerable to this possibility because it is very small compared to the size of other asset classes and the number of currencies moving around the world. However, that figure excludes rare coins and all silver used in jewelry, silverware, decorative items, etc.