Over the last year, the precious metal markets have seen historic increases and then decreases in price. This, of course, is the result of the workings of supply and demand, but there have also been cries of market manipulation.
I have laid out the supply and demand conditions both in the pure free market and under current conditions in the real world on this podcast and in several interviews reproduced here.
Several forms of manipulation, such as changing margin requirements are expected, and other forms of manipulation, such as mysterious shutdowns and slowdowns can be anticipated. Above all else, organized markets and political actors will act to save themselves first.
As a result, I have declared several times over the last year that when prices began to reach record levels—particularly when silver approached $50 per ounce—that precious metal markets are going to experience “growing pains.”
Of course, all market activities manipulate the market in terms of changing prices and quantities exchanged, but in this case, commentators are often pointing to alleged illicit activities.
Our primary understanding of these markets is that—in a total free market model, where gold is literally money—it has a remarkable stability of purchasing power over the long haul, and that major alterations of price or purchasing power are the result of government interventions, and that deviations of price from long-run trends in inflation are the result of real world short-run adjustments in supply and demand, such as changing expectations, the outbreak of war, and developments in the business cycle.
Prior to the bull market in gold and silver, some commentators, myself included, have pointed out several reasons to suspect that gold might experience an increase in demand and that the realities of precious metal supply in terms of mine output would amplify price adjustment to those increases in demand. Those commentators turned out to be correct.
Prior to the recent, sharply-lower prices, some commentators pointed out that any decrease in demand could also have sharp negative effects on prices. Those commentators were also correct. However, it is important to list some examples of those who decreased their demand, becoming suppliers, how that worked for them, and establish that these markets work. Will everyone decrease their demand to hold precious metal entirely and the prices fall to zero?
Precious metals have 24/7 global markets but let us start in the US. Among all the various reasons why precious metals have been sold domestically—shifting demanders into suppliers—are the following:
- Speculators and traders: They rode the markets up and then decided to take profits and switch to other markets, notably oil even before the outbreak of hostilities. This type of trading is dependent on valuation of relative performance and speculation of future conditions, including inside information. Meanwhile, “manipulators” were also helping to push the markets up in anticipation of taking advantage of shorting the markets.
- Liquidity crunches: We know that certain investments—notably private equity and private credit—are experiencing so-called liquidity issues because the Fed started an emergency program in December and redemptions of this “sequestered” capital category (not openly traded in markets) have been blocked by the gatekeepers. This means that these assets are not generating enough revenues to cover expenses and debt obligations and can’t be readily redeemed for cash. The Fed’s $40 billion a month program of Reserve Management Purchases (RMPs) seems to have been sufficient in December of 2025. Maybe not, more recently. If this is a significant ongoing problem, then expect this program to be expanded.
In both of these cases, precious metal markets performed as expected. People shifted currency into precious metals as a risk-off monetary asset and then shifted back out to address liquidity problems and to address changing market conditions.
Outside of the US, the primary event has been the Israelis’ attack on Iran with the notable support of the US. Without going into the details, so far, this war has destroyed a great deal of capital and business activity.
It is important to note that this has harmed the global population in terms of the consumption of petrochemicals, all the derivative products, and the decrease in supply of just about everything consumed because it drives up costs of production generally. The disruption of trade has put hundreds of millions of people at particular risk and of course, the situation could get much worse.
However, if we focus our attention on those in the conflict zone itself, the states surrounding the Persian Gulf and the Levant: Syria, Lebanon, Judea/Palestine, Jordan, Cyprus—the original land of the rising Son. We would note that the Persian Gulf states have been large liquidators of gold due to the destruction and idling of their oil related assets/their primary income stream and the desire to exit the region.
This selling of gold is indicated by the discount price it is selling at in Persian Gulf markets and gold has undoubtedly served its primary role as a monetary asset for deeply troubling times just as it would for others during hyperinflation.
It is important to remember that crises, crashes, and war have negative effects that can be contagious, but they nonetheless impact groups of people differently inside the global context.
As liquidity conditions in world asset markets are still very uncertain and war conditions in the Middle East are ongoing, precious metal markets will continue to experience a decrease in demand and increase in supply until those balances approach exhaustion or relief. At that point, markets may shift their attention to issues such as credit crises, asset overvaluation in the face of rising interest rates, and increasing costs of maintaining government spending and debt obligations, specifically inflation and interest rates. Most critically, what will central banks do next?
