Is the Precious Metals Rally Truly Over or is This Just a Strategy to Manipulate Prices?

The recent sharp drop in gold and silver prices caught many investors by surprise. After months of a strong rally, precious metals suddenly sold off late this week, especially on Friday.

This sudden move sparked questions: Is the rally over? Or is something else at play? The answer may lie in understanding the difference between paper contracts traded in New York and the physical metal markets in China and India. This post explores whether the selloff reflects a genuine market shift or a deliberate attempt by banks to manipulate prices and shake out investors.

Understanding the Recent Selloff in Precious Metals

Gold and silver prices surged over recent months, driven by inflation fears, geopolitical tensions, economic uncertainty, and fundamental demand. Investors, and mostly banks, flocked to these metals as safe havens along with complying with Basel III requirements. Then, late this week, prices plunged sharply. The timing and scale of this drop raised eyebrows.

The key detail is that this selloff mainly happened in New York, where paper contracts for precious metals are traded on exchanges like the COMEX. These contracts represent promises to deliver metal but do not necessarily involve physical delivery. The quotes on the COMEX do not distinguish between the price of the paper promises from the price of the actual metal. Meanwhile, in China and India, where actual physical gold and silver are bought and sold, prices remained steady or even rose.

This divergence suggests the selloff may not reflect real demand or supply changes but rather a shift in paper trading dynamics. This IS the mechanism by which banks, and those specializing in the bullion markets, manipulate prices!

Paper Contracts vs. Physical Metal Markets

Paper contracts allow traders to speculate on precious metals prices without handling the physical metal. These contracts can be bought and sold rapidly, often in huge volumes. This creates liquidity but also opens the door to price manipulation.

For instance, let's suppose silver is trading at $100/oz right now. I can write a futures contract to you promising to deliver 5000 ounces in 6 months at $90/oz. I don't have to own even one ounce of silver to make that promise.

Now lets suppose you write a similar promise to me, where you commit to delivering me 5000 ounces in 6 months at $90/oz. You also do not own any silver. Our promises are of equal value and we can exchange those.

If we are to make good on those contracts, then we are both hoping when we have to buy the silver that we can buy it for less than $90. But we don't have to deal with that problem for six months!

Now if we were to officially record those contracts on the COMEX exchange, even though physical silver is trading at $100/oz, the exchange sees our contracts trading silver at $90.

The COMEX makes no distinction between the real metal and the paper promises for metal! And now it looks like the price of silver is $90/oz, not $100/oz! Voila! The market just crashed $10 because two banks, you and I, just created promises from thin air!

Furthermore, we never actually have to deliver real metal on those promises, even in six months! In six months, we just simply create new promises to cover our old promises and extend out for another 6 months! This is what I am talking about when I call these markets a fraud! It should be illegal to promise something you don't have and never intend to have! The banks can keep creating these promises, depressing the markets, until eventually the silver price does fall because enough holders of the real metal get tired of holding the asset going down in price.

In contrast, physical markets involve actual delivery of gold or silver bars and coins. These markets tend to reflect real supply and demand more accurately. For example:

• China is the world’s largest gold consumer, with strong demand from investors and jewelers.

• India has a deep cultural affinity for gold, especially during festivals and weddings, supporting steady physical demand.

  
  

When paper markets sell off but physical markets hold firm, it suggests the price drop may be a tactic to create fear and push investors to sell their holdings.

Because the fraudulent COMEX exchange has competition in China with real metal markets, the paper manipulation fraud becomes very apparent.

How Banks Could Influence Prices Through Paper Contracts

Large banks and financial institutions often hold significant positions in paper contracts. By dumping massive quantities of these contracts on the COMEX, contracts they create from thin air with no backing, they can create the appearance of a selloff. This can trigger stop-loss orders and panic selling among smaller investors.

This strategy can:

• Lower prices temporarily

• Shake out weak hands

• Allow big players to accumulate physical metal at lower prices

  
  

Such tactics have been suspected, and even proven, in precious metals markets for years. The recent selloff fits this pattern, where the paper market moves sharply while physical demand remains strong.

Signs That the Rally May Not Be Over

Several factors suggest the precious metals rally could continue despite the recent dip:

• Strong physical demand in Asia remains intact.

• Central banks continue to buy gold as a reserve asset.

• Inflation concerns and geopolitical risks persist globally.

• Technical analysis shows key support levels holding in physical markets.

  
  

Investors who sold during the paper market dip may have missed the bigger picture of ongoing physical demand and long-term value.

What Investors Should Consider Now

If you own or plan to buy precious metals, keep these points in mind:

• Focus on physical metal holdings rather than paper contracts to avoid manipulation risks.

• Watch demand trends in China and India as indicators of real market strength.

• Be cautious about reacting to sharp price moves driven by paper trading.

• Consider precious metals as part of a diversified portfolio for protection against inflation and uncertainty.

  
  

Final Thoughts on the Precious Metals Market

The recent selloff in gold and silver prices mainly reflects activity in paper contract markets, not a collapse in physical demand. Banks may be using paper contracts to manipulate prices and shake out investors. Meanwhile, real metal markets in Asia, Russia, and elsewhere continue to show strong demand.

Precious metals are naturally volatile markets, and sharp swings, upward or downward are not uncommon. What remains certain is that there are still far more paper contracts in existence claiming ownership to the same gold and silver ounces, and only one person can physically own one ounce at one time. The owners no longer want paper, mainly because of the Basel III rules. They want the real money.

We may see a few more days of volatility, but I believe the markets will renew the rally. The fact that precious metals vaults are still draining while the "official price" is crashing screams of short-term paper manipulation.

Time will tell!

And finally a word of caution I repeat whenever discussing volatile assets like precious metals. They are good to own. They are real money. But they are only one form of wealth, and while it's good to own them, it is wise to not attempt to time the market or to bet everything on them, whether I believe they are going higher or not.

A good plan that fits most people is to accumulate them gradually over time, buying them on dips like we saw this week. And to also limit the exposure to a reasonable level. It is not unreasonable to hold 5% to 10% of your investable assets in gold and silver. In times of extreme economic stress such as the 2008 financial crisis or the 2020 pandemic, increasing the allocation to 15% to 20% may be reasonable. Conservative and gradual moves are better than sudden knee-jerk reactions. During today's selloff, I neither bought nor sold precious metals. I am just watching. I do own them however!