The Day the Hunt Brothers Capped the Price of Gold

The 1970s witnessed a phenomenal bull rally in precious metals, fueled by a number of historic events: President Nixon's abandonment of the gold standard, the transformative Coinage Act of 1965, and rampant inflation for much of the decade.

But the Hunt Brothers may have had more impact on the price of silver, and gold, than anyone else. Today, we’re sharing some little-known facts about the two brothers who attempted to corner the silver market from our very own Mike Maloney.  

However, the Hunt Brothers' effect on the silver and gold markets arguably had a bigger impact than any other individual in history. Today, we delve into the intriguing saga of these two brothers who audaciously tried to monopolize the silver market. Join us as Mike Maloney shares his research, revealing some fascinating, lesser-known details about their daring venture.

It began with a shoot-out at the Circle K Ranch. The 12 best marksmen would ride shotgun as the world’s largest, privately owned stockpile of silver was secretly transferred into secure vaults.

No, this wasn’t a shipment from Nevada’s Comstock Lode to San Francisco in the Wild West of the 1870s. This was the 1970s, and the precious metal was being moved from New York to Switzerland.

Shining silver under a moonlit sky, three unmarked 707s waited at LaGuardia Airport. The Circle K cowboys stood vigilant, shotguns in hand, guarding 40 million ounces of bullion...

This is the story of two Texas brothers, Bunker and Herbert Hunt, who were sacrificial lambs, used by the Federal Reserve, in collusion with two of the world’s largest and oldest commodities exchanges, COMEX and Chicago Board of Trade (CBOT), to cap the price of gold.

The Hunt Family Fortune  

Bunker and Herbert Hunt were sons of H.L. Hunt, a self-made billionaire who got his grubstake playing poker, then made his fortune in Florida real estate, becoming at the time of his death in 1974 the richest man in America.  

H.L. sired 15 children by three different wives, many of his heirs becoming wealthy in their own rights.  

Bunker’s quest to find his fortune in the oil business got off to a rocky start, as he lost millions from unproductive drilling in Pakistan. But one of his Libyan holdings turned out to be the largest oil field in Africa at that time. Coupled with successful business ventures in real estate, cattle, sugar and pizza parlors, by 1961, Bunker’s wealth had surpassed that of his father.

The Rise of Silver  

The period leading up to silver’s price spike was characterized by inflation, stagnant economic growth and political upheaval in the United States. In 1965 President Lyndon Johnson increased deficit spending to finance his Great Society social welfare programs, tax cuts, and an unpopular Vietnam War. Johnson’s increased government spending was intended to boost employment and allow steady, mild inflation that would spur economic growth.  

But inflation quickly snowballed out of control. In 1971, faced with the reality that the U.S. Treasury did not have enough gold to redeem all the dollars held by foreign governments and investors, President Richard Nixon pulled the United States off the Bretton Woods monetary system. Under the international Bretton Woods currency agreement established in 1944, all world currencies were keyed to the U.S. dollar, which was to be backed by gold. Nixon’s action effectively created a worldwide fiat currency system that continues today.  

Oil shortages, created by an embargo inflicted on the United States by the OPEC cartel of oil­-producing nations, and real food shortages fueled the public’s fears that the American economy was in crisis. By the late 1970s, prices on consumer goods were spiking upward, and inflation had become public enemy number one.

Enter oil tycoon Bunker Hunt and Bunker’s brother Herbert, who ran the family business, Hunt Oil, and invested in real estate. Lamar, the third Hunt brother, was busy organizing the American Football League and the Kansas City Chiefs at the time.

The Hunt Brothers were inveterate anti­communists and considered themselves defenders of the American Way. But Bunker, the unofficial honcho of the Hunt cowboys, believed he was fighting a losing battle against the entrenched global governmental and financial establishment.  

In 1973, Bunker suffered the nationalization of his rich Libyan oil field by the dictator Moammar Ghadafi, leaving him suspicious of government intervention and embittered that the U.S. government didn’t do more to help him.  

Now the Hunts watched as their financial assets were threatened by expanding inflation and the declining value of the dollar, trends they blamed on the U.S. government’s lack of fiscal restraint. With the family’s wealth being steadily eroded by skyrocketing inflation, Bunker needed an asset to which he could safely anchor his family oil fortune. At first, he thought of gold, history’s safe haven investment of choice. But in 1973, U.S. citizens were not allowed to own gold, and Bunker thought the gold market was too easily manipulated for government purposes.

The Hunts did not advocate a return to a gold­-backed currency system. But they knew that physical assets like commodities would hold their value better than paper financial assets, which would inevitably lose value over time. Their holdings of soybeans and oil had performed extremely well in the early 1970s. After researching commodity markets, Bunker chose silver as the anchor to which he would hitch his family’s fortune.  

During the early 1970s, silver was selling for $2 an ounce. With total world silver production dropping and industrial silver consumption exploding, government and private silver sales were the only thing filling the widening gap between supply and demand. Once those hoards of government­ owned and privately held silver ran out, the shortfall between silver production and demand was certain to drive the price of silver skyward.  

But Bunker and Herbert were not looking for mere short-term speculative profits. They were more concerned about long-term survival and preservation of their family’s wealth than they were with adding a few more paper dollars to their vast sums of rapidly depreciating currency. Bunker Hunt was well versed in Germany’s disastrous hyperinflation of the early 1920s, and he was genuinely concerned about going broke holding paper assets. What good would his estimated net worth of $3 billion to $4 billion be if those billions of paper dollars fell to their intrinsic value—zero?  

The Hunts decided to invest in silver futures, a type of investment that is both convenient and allows leveraging.  

In leveraged investments, the investor deposits funds, or margin, with a broker. The investor can then purchase (or sell) futures contracts worth as much as 15 times the margin value. In that case, an investor’s returns would be magnified by 15 times. In other words, an investment of $1,000 (the margin) would allow the investor to purchase a $15,000 futures contract. If the contract made a 10% gain (now $15,000 x 1.1 = $16,500) the investor would have made $1,500–a 150% return!  

But leverage is a double-edged sword: A 10% loss in the $15,000 futures contract would wipe out the investor’s $1,000 margin and put her $500 underwater. Even billionaire investors like the Hunts were susceptible to the downside of leveraged investing when the silver market went south.  

Futures contracts can be settled in two ways, either with cash or by taking physical delivery of the commodity. Although the vast majority of futures contracts are settled in cash, the Hunt brothers—aware that cash was continually losing value due to inflation—insisted upon physical delivery of their silver as a hedge against the government currency monopoly and global turmoil.  

At the time Bunker Hunt began buying silver, the price stood at about $1.50 per ounce. By early 1974, the Hunt brothers had purchased futures contracts for approximately fifty-five million ounces of silver.  

Circle K Cowboys Deliver the Goods  

At this point, the Hunts were sitting on a mountain of silver, roughly 9% of the world’s entire supply, with no place to store it. Obsessed with survival and salvation, they needed a place so secure that it would be immune to political strife, war, and social upheaval. Switzerland, with its legendary secret banking system, was the only place to store their silver mountain. The Hunts chartered three Boeing 707 airplanes, each 150 feet long, to fly their silver to Europe.  

With the secrecy necessary for the operation, it was no surprise that the Hunts wanted security as well. It began with a shoot­out at the Circle K ranch, the Hunt’s 2500­acre spread located east of Dallas. As straw boss for the operation, Randy Kreiling, brother­-in­-law to Bunker, recruited a dozen cowboys from the Circle K by holding a shooting match to see who was the best shot. The winners would receive a special assignment: riding shotgun on the Hunts’ hoard of silver to Switzerland.  
One by one the huge airplanes took off from Dallas, shining, appropriately, bright and silver in the moonlight. Broad swaths of tape covered the name of the charter company on the side of the planes. In the darkness of the night the 707s landed at LaGuardia in New York City. As Kreiling’s cowboys stood guard, shotguns in hand, armored trucks drove out to the airport from the New York Commodity Exchange warehouse in Manhattan, and security guards started to load some 40 million ounces of silver into the planes. The remaining 15 million ounces still sat in vaults across the Hudson River in New Jersey and out in Chicago. Randy had miscalculated when he chartered the 707s. He had rented three planes and recruited a dozen cowboys before realizing that this was clearly a four­-plane, sixteen cowboy job.  

When Randy and the cowboys arrived in Zurich, armored trucks again greeted them, taking the Hunt silver to five different banks. But real estate in Swiss banks was a scarce commodity. Switzerland, after all, is a small country. Space is limited–every underworld chief, dictator, and nervous multimillionaire on earth is hiding a hoard there–and the only space available is in the high-­rent category.

The Hunt silver was stashed in the bullion vaults of Credit Suisse, Banque Populaire Suisse, UBS, the Swiss Bank Corporation, and Freidlager’s, a Swiss warehouse that, lucky for the Hunts, could handle the overflow.  

The costs of moving the Hunt silver were astronomical. Chartering the three 707s cost nearly $200,000— $9 million in today’s dollars, according to the ShadowStats inflation calculator — and the fees for anonymous Swiss storage for the silver ran 0.5% of the value of the stored silver monthly. Storing their 15 million ounces in the United States and their 40 million ounces in Europe would cost the Hunt brothers $3 million per year—and this was when silver was below $5 an ounce. But Bunker preferred paying Swiss storage costs to paying excise and franchise taxes in the United States. Even more importantly, he could sleep more soundly knowing that his silver was out of the reach of the liberal/communist/Rockefeller/CIA conspiracy that, he was convinced, permeated the United States.  

In 1974, the silver price had been ticking steadily upward. But when word started flying through the trading floors that a mysterious Texan had taken delivery of the largest single silver shipment in history, the price started convulsing. Traders believed that silver was susceptible to manipulation. With industrial use exploding and only a thin buffer between supply and demand, a few very large traders could easily induce a price spike. Whispers began floating that the Hunt brothers were attempting to corner the market.  

As remarkable as the Hunt brothers’ silver adventures were at the time, the Texan billionaires were just getting started. Before it was all over, their ravenous appetite for physical silver would rock the economy of the world’s largest Superpower and attract the baleful gaze of government fiscal regulators...

The Hunt Brothers Make Their Move...

In April of 1974, oil tycoon and silver trader extraordinaire Bunker Hunt stopped in New York to visit the COMEX (Commodities Exchange) trading floor for the first time in his life. When he walked onto the floor, the normal frenzy of activity came to a crashing halt, the traders staring in amazement at the fat Texan in thick plastic glasses and a cheap blue suit. In an interview that day with Barron’s financial magazine, Bunker did not reveal the size of his silver lode, but he did reveal some of his long-term intent: ‘‘Just about anything you buy, rather than paper, is better. You’re bound to come out ahead, in the long pull. If you don’t like gold, use silver, or diamonds or copper, but something. Any damn fool can run a printing press.”

By 1976, the Hunt brothers, Bunker and Herbert, had added another 20 million ounces of silver to the 55 million they had stored in Switzerland and the United States.  

By the summer of 1979, silver had risen to $8 per ounce—up from $2 an ounce when Bunker started buying in the early 1970s—and by that fall prices had doubled again to $16. With inflation and global turmoil on the rise, other buyers also were chasing silver, and on October 3, 1979, the price of silver hit $17.88.

The two major U.S. exchanges, COMEX and Chicago Board of Trade (CBOT), started to panic: the two exchanges held a measly 120 million ounces of silver between them, an amount typically delivered in a busy month. With silver prices pushing to new heights as new buyers rushed in, the exchanges became fearful that a default was imminent.  

The silver rush continued to accelerate, led by the Hunts and some wealthy Saudi business partners. By this time, the Commodity Futures Trading Commission (CFTC), the government’s futures watchdog, had become seriously alarmed at the prospects of a shortage on the exchanges and tried persuading Bunker to sell some of his silver.  

Bunker resisted, believing that silver was a long-term play and that it would play an integral role in the future global economy. The CBOT, backed by the CFTC, finally decided to put a stop to the Hunts’ buying, by changing its rules. Under the new rules, margin requirements were raised, and traders could hold no more than 3 million ounces of silver futures; traders holding more than that amount would be placed in forced liquidation.  

Bunker Hunt cried foul, accusing the exchange board members of having a financial interest in the markets. He stubbornly continued buying silver. The U.S. Federal Reserve and its chairman, Paul Volcker, stepped into the fray, strongly encouraging banks to stop making loans for speculative activity — a clear shot at the Hunt brothers.  

But why would the Fed take such an extreme step as to dictate who banks could loan money to? Because the Hunts’ silver trading was pushing the price of both silver and gold upward. Silver and gold, as the age-old, safe havens people turned to in times of economic crisis, were the canaries in the coal mine, their spiking prices reflecting the public’s loss of confidence in fiat currencies—including the U.S. dollar. Thus, the Fed had a vested interest in the trading of gold and silver and in keeping gold and silver prices from exploding. That’s why it stepped in to put a damper on Bunker and Herbert’s silver spree.  

The Fed controls the currency supply of the United States. In 1933, in an effort to pull the United States out of the Great Depression, then-­President Franklin D. Roosevelt signed an Executive Order making it illegal for U.S. citizens to own gold. The idea was that private citizens and investors would stop hoarding gold as a hedge against inflation and a secure store of wealth, and would sell their gold back to the U.S. government.. When then­-President Richard Nixon took the United States off the Bretton Woods monetary system in 1971, as explained in Part I, he in effect pulled the dollar and all currencies world­wide off the Gold Exchange Standard.  

After Nixon’s impeachment in the aftermath of the Watergate scandal, successor President Gerald Ford signed a bill at the end of 1974 legalizing private ownership of gold bars, coins or certificates.  

By 1980, gold and silver were freely traded currencies, in competition with the U.S. dollar. The United States had been suffering through a period of stagflation, or prolonged high inflation and high unemployment throughout the 1970s. The U.S. dollar, already under siege from oil embargoes, spiking inflation, and global turmoil, was suffering heavily.  

The Fed needed a way to stem the collapse of confidence in the U.S. dollar and in the U.S. economy. The billionaire Hunt brothers made a fat target.  

By December 31, 1979, the price of silver was at $34.45 per ounce. The combined holdings and contracts held by Herbert and Bunker Hunt and their Saudi business partners totaled 235 million ounces. On January 7, 1980, the second major U.S. exchange, COMEX, changed its rules, limiting investors to no more than 10 million ounces in futures contracts each and requiring that any amount above that be liquidated by February 18. Publicly, the Hunts chastised the CFTC for changing the rules in the middle of the game. In private they saw the move as just another example of the U.S. government conspiracy against their family. On January 21, silver reached a record high of $50 an ounce.  

On that day, the Hunt’s silver hoard was worth a mind­boggling $4.5 billion.

The Gold Connection  

On the same day silver topped out at $50, gold hit a new record of $873 per ounce, as fears of inflation contagion spread like wildfire through the COMEX trading pits. That day, the COMEX, terrified that it would be forced into default, announced, with the backing of the CFTC, that trading in silver would be limited to liquidation orders only, eliminating any buyers.  

Silver prices began to plummet, but when silver sneezed, gold caught the cold. Gold traders knew that if the exchanges could change the rules on silver, with the blessing of the U.S. government, they could just as easily change the rules on gold. The message was loud and clear: the U.S. government would take whatever steps were necessary to ensure that a boom in silver and gold would not threaten the credibility of the U.S. dollar.

In addition to discouraging lending to investors such as the Hunts, the Fed pulled out other weapons in its economic policy arsenal. In an attempt to curb inflation, credit expansion, and rising commodity prices, the Fed raised the Fed funds rate, their most watched interest rate, to an unbelievable 20%, further tamping down easy credit and leveraged investing.  

After each successive Fed funds rate hike, the price of silver and gold continued to fall.

Even with the price of silver plummeting, Bunker Hunt remained convinced he could drive the price back up if he could only promote more buying. The Hunts continued buying. But each down day for silver was accompanied by a margin call from the Hunts’ commodities broker, asking for millions in payment to bring their accounts back up to the minimum margin. Eventually, unable to find lenders willing to buck the U.S. government and back their investments, even the billionaire Hunts ran out of cash, and their broker was forced to sell off hundreds of millions of dollars worth of Hunt silver futures.  

On March 27, 1980 (Silver Thursday), silver dropped from $15.80 to $10.80 an ounce, resulting in a stock market crash fueled by rumors that the Hunts would liquidate stocks in order to cover their silver losses. Because most of their silver bullion had been purchased at under $10 an ounce, the Hunts were still ahead of the game on their physical silver. But in the futures market, where their average purchase price was near $35 an ounce, the Hunts had suffered massive losses.  
When all was said and done, the Hunts were left some $1.5 billion in the hole.

The Fed, concerned with the Hunts’ massive losses and the endangerment of a major brokerage house, organized a consortium of bankers to make loans to the Hunts.  

Fed Chair Volcker oversaw arrangements as the New York banking establishment, the Hunts’ hated nemesis, issued $1.1 billion in credit, allowing the Hunts to make good on their debts.  

With the Hunts’ mired in bankruptcy court, it became easy for the government to label them market manipulators, both in the court of law and in the court of public opinion. Bunker Hunt filed for personal bankruptcy and was charged with trying to corner the silver market. He settled with the IRS for $90 million and was fined an additional $10 million by the CFTC. Thanks to trusts established for him by his father, he remained a wealthy man and became a breeder of thoroughbred racehorses.

In reality, the Hunts broke no laws. The CFTC, COMEX and CBOT simply changed the rules in the middle of the game. Later investigations revealed that several members of those boards held short positions in silver, an obvious conflict of interest. But the U.S. government, eager to stop the rush to gold and silver that threatened the credibility of its own fiat currency, the dollar, had no problem choosing sides.  

The lessons of this story are two­fold. First, it speaks to the importance of financial education—that quality of knowing just a little bit more than the next guy. Had the Hunts gotten out of silver futures before the tide had turned against them, they would have left the table with enormous gains. Wrongly believing they could still control the game and apparently underestimating the degree to which the deck was stacked against them, they stayed too long at the table. Awareness and understanding of wealth cycles is crucial to any investor; when the tide turns, it often turns suddenly and with crushing force, and he who tarries will be swept away.  

The second lesson to take away from the Hunt brothers’ story is that most investors will do better by buying real, physical metals—not futures or other types of “paper” metals. Remember that it was the Hunts’ investments in silver futures, not the real, physical metal they had stored in their vaults, that caused their downfall. 

As the Hunt brothers’ story confirms for us, the rules of the game are made by the financial establishment, and the rules can be changed by that establishment at any time. If even such powerful billionaires as the Hunts were unable to overcome that reality, the ordinary investor will certainly be in over his or her head. There simply is no substitute for physical ownership of your own gold and silver.