The silver market collapsed yesterday, costing speculators hundreds of millions of dollars and forcing federal authorities to take emergency actions.

The cash price of silver in New York plunged from $16.25 an ounce to $10.85, down 33 percent in 24 hours. Less than three months ago, silver was selling for $50 an ounce.

The biggest losers were two Texas billionaires, Nelson Bunker Hunt and his brother Herbert, who bought tons of silver last year, forcing prices to record highs.

Forced to come up with $100 million yesterday to cover their losses in the last two days, the Hunts began selling not only their silver but also their government bonds and their stock in several companies.

The Hunts' massive losses -- on paper close to $4 billion since January -- caused a financial crisis for their brokers, The Bache Group.

The Securities and Exchange Commission halted trading in Bache stock shortly after noon and quickly began investigating the silver-trading activities of the firm, the nation's fifth-largest broker.

Silent most of the day, Bache officials late in the afternoon issued a statement saying the company was financially sound and expected only negiligible impact from the silver crisis.

Anxiety about the financial strength of Bache carried over onto other stockbrokers. Trading was also halted in the stock of publicly owned brokers Dean Witter Reynolds Inc. and Shearson Loeb Rhoades Inc. Both companies said they have little direct involvement in the silver market.

The stunning crash in silver prices caused veteran analyst Newton Zinder called "a classic panic" in the stock market.

The Dow Jones industrial average plunged 25 points during heavy trading at mid-afternoon, then pulled back to within three points of its morning opening. Market analysts said the roller-coaster ride was due in part to heavy selling of stocks that the Hunt brothers are known to own.

The price of gold also fell sharply. It closed down $33.50 an ounce in New York at $463. On European exchanges, which close earlier, gold fell to $505.50 in London and $504.50 in Zurich. Prices of most commodities also fell sharply on U.S. futures markets.

But the value of the dollar increased dramatically, apparently because foreign investors believed the collapse of the silver market might ultimately be good for the American economy.

The dollar closed at 1.7905 Swiss francs, its highest in 20 months, and grained sharply against the West German mark and the Japanese yen.

At the end of the day, massive confusion still prevailed on Wall Street about what was happening in silver. There was general agreement, however, that silver's problems could affect both the stock market and the entire economy.

"From an economic standpoint, one of the last inflationary bubbles has been burst," said Michael Metz, vice president of Oppenheimer and Co. and a respected market analayst.

"All the speculative fluff is out of the stock market," added Metz. "Next comes real estate."

Calling the collaspe of the silver speculation "profoundly disinflationary," he said, "almost every speculative game in town has proven fatal of late. Maybe people will go back to old-fashioned savings accounts, which would be a tonic for the economy."

Lessons learned from the silver market, other economists said, could cool the speculative fever in the economy that has fueled the fires of inflation.

Speculation based on the premise that inflation will continue indefinitely has drained away investments that otherwise would have built homes and factories that contribute to economic growth.

The fall of silver prices from their unprecedented highs finally shows that the forces of supply and demand are ruling the market, again, said Walter Frankland, head of the Washington-based Silver Users Federation.

Since last August, when silver was selling for $9 an ounce -- only a little less than it is now -- prices have had nothing to do with the normal silver trade, he said.

"As to what has gone on today," Frankland said, prices came down for two reasons:

An unprecedented amount of silver was produced by "secondary sources," refiners who melt down old coins, trophies, even teeth to get the metal. There's now a six-month backing of unmelted scrap silver, several times as much as normal.

Other investments became more attractive than silver speculation when the price began falling, after hitting the $50 mark on Jan. 21. A 13 or 14 percent return on money market investments was safer than the potential profits of silver hoarding.

Cash prices for silver have come down so fast that they have dropped below prices in the futures market, which usually sets the pattern for cash sales, Futures contracts are agreements to buy or sell 5,000 ounces of silver at some future date.

Under commodity exchange regulations futures prices can go up or down only $1 a day. When the markets opened yesterday, the first bid was down the limit and the same thing is expected to continue until futures prices come close to cash levels.

The Commodity Futures Trading Commission, which polices those markets, held two emergency sessions yesterday and called another for this morning.

The commission unanimously agreed to keep the silver market open and to take no immediate action to curtail trading.

The CFTC refused to disclose what other actions it was taking. Industry sources said federal regulators are looking into the silver dealings of two other large firms, Conti Commodities, a subsidiary of the giant Continental Grain Co., and ACLI Iinternational, a commodity firm headed by Adrian C. Isreal, the chairman of the board of People's Drug Stores of Washington.

CFTC officials said the government has no obligation to step in to protect silver speculators from losses, but might act if brokerage firms appear to be having troubles that endanger their customers.

CFTC Chairman James Stone met this week with Federal Reserve Board Chairman Paul Volcker, who has repeatedly expressed concern about excessive speculation and its damaging effect on the economy.

The Federal Reserve's efforts to control inflation by raising interest rates and discouraging banks from making speculative loans also may have helped burst the silver bubble. The high cost of borrowing money to play the silver market has discouraged many speculators, and even the fabulously wealthy Hunts have had trouble borrowing money.

Two days ago Nelson Bunker Hunt announced in Paris that he and other silver speculators planned to sell bonds backed by silver.

That apparently was a last-ditch effort to raise money to finance their silver holdings.

The New York Stock Exchange called an emergency meeting to assess the financial strength of its members. None of the brokers appears to be in trouble, said a person who attended the session.

Under market rules, the broker is liable for a customer's losses and must settle up for all losses every day.

To ease the pressure for cash, the New York Commodity Exchange, the primary silver market, reduced on Wednesday night the amount of money required to hold a futures contract for silver.

Comex acted after discoverning that ContiCommodities customers were down $180 million for the day, Bache was short $100 million for the Hunts alone, and other brokers, including Merrill Lynch, Pierce Fenner and Smith, had to come up with multimillion-dollar amount to cover losses in silver.

When the price drops $1 a day, on a 5,000-ounce contract, the speculator must come up with an extra $5,000. The Hunts reportedly held more than 20,000 contracts, producing losses of $100 million a day.

Bache officials confirmed that the Hunts were told Tuesday night that they needed another $100 million by yesterday. For the first time, the Hunts refused to pay, and Bache proceeded to sell their silver contracts and other investments pledged as collateral.

The sales apparently produced enough money to cover the Hunts' $100 million loss and also to protect Bache, which has a net worth of $130 million. m