The best way to discourage bullion buying in a bull market, and contain gold and silver prices, is to increase volatility. The greater the instability, the greater the unpredictability of price moves, both up and down.
Volatility was the name of the game in the precious metals market in recent days. Gold and silver prices exploded to repeated new highs on four consecutive days last week, rising to $4,300 and $54 an ounce, respectively, by this past Thursday, only to be smashed steeply lower last Friday.
Monday ended with another up day, but the metals were driven deeply lower again on Tuesday, with gold falling to nearly $4,000 and silver dropping below $48. Yesterday’s price plunges were unprecedented for their size since both metals have posted all-time records this year.
Large and erratic price swings are an effective way to curb investment and dissuade speculative margin traders. Volatile prices are particularly important—and potentially costly—to naked short-sellers in a bullish precious metals market since ardent buyers view physical gold and silver as financial safe havens during turbulent times. The metals are also considered money and competitors to depreciating fiat currencies
Market-making bankers and profit-driven speculators have known about and used psychological tactics to influence buyers, sellers, traders, and prices for decades, if not since the dawn of financial exchanges. Inducing price volatility is a proven manipulative trading tool.
Rising and falling prices can prompt people to either buy or sell gold and silver, depending on their economic goals and situation, emotional state, and personal temperament, which can range and meander between fear and greed.
Price volatility also separates weak-handed traders from strong-handed accumulators of the monetary metals..
The Fix Is In
Three weeks before gold trading opened on the COMEX in New York on Dec. 31, 1974, London gold dealers predicted price volatility in the paper-trading futures market would reduce demand for physical metal.
“Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be miniscule by comparison,” reads a telegram sent to the U.S. Secretary of State from the U.S. Embassy in London, England, and presumably written by the U.S. Embassy’s Deputy Chief Ronald Spiers.
“Also expressed was the expectation that large volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holdings and most likely negate long-term hoarding by U.S. citizens,” continues the cable released by WikiLeaks in 2011.
Translation: Financial markets can be used to reduce gold demand and price fluctuations discourage people from buying or holding the metal.
Bullion bankers and brokers began “fixing” the gold price in London in 1919. Known as the London Gold Fix, its purpose was to establish an international benchmark price for gold and other precious metals during twice-daily meetings. The London Bullion Market Association (LBMA) assumed the price-setting duty in 2015 with the launch of its electronic auctions.
Runaway Prices Pose Problems
Not only can volatility be used to subdue precious metal purchases and investment, surging gold and silver prices also can disrupt financial markets, undermine fiat currencies and create major headaches for central bankers.
After the U.S. gold price spiked to a record $850 an ounce in 1980, then Federal Reserve Chairman Paul Volcker pushed interest rates to 20 percent to battle double-digit price inflation.
“Gold was the enemy to me because that was a speculative vehicle while I was trying to hold the system together. [The speculators] were on the other side,” Volcker remarked during a meeting of the Committee for Monetary Research and Education at the University Club in New York on March 25, 2015.
Runaway gold and silver prices today could pose a similar or even larger problem for the financial system and economy, particularly with onerous and rising U.S. and global debt levels, the declining value of the U.S. dollar and other currencies, and the Federal Reserve in interest-rate cutting mode.
If supplies of physical silver—and possibly gold—in London’s vaults are as low as market analysts suggest, the smashes witnessed on Friday and Tuesday likely are desperate measures to crush soaring prices in an attempt to reduce demand and speculation.
For if demand and prices of the monetary metals keep rising, and conditions in London are as dire as reported by Bloomberg and other media outlets, delivery failures and defaults are bound to follow. Naked short-sellers will lose their shorts if market exuberance isn’t quelled—at least temporarily—through gold and silver price volatility.
Meanwhile, buy-and-hold stackers can grab the popcorn, sit back and relax, and watch the financial firework as the green candlesticks rise and red candlesticks fall on the colorful and turbulent price charts.
© 2025 Stuart Englert. All rights reserved.
About the author
