Are the Markets Manipulated?

After several years of pandemic-induced midyear volatility, it seems that we are returning to the typical cycle of summer as a time of precious metals market weakness. For the warmest months of the year, gold and silver prices tend to trade in a narrow range… the summer doldrums.

It makes total sense that everyone’s focus is pulled towards their summer vacations instead of their portfolio. It doesn’t help that for the year, gold is only up 4.6% and silver down 5.1%, while equities seem to be firming back up with DJIA up 2.35%, S&P 500 up 14.04%, Nasdaq up 29.52%...

But the economy isn’t showing signs of strength right now… credit card debt surging, more major corporations announcing largescale layoffs, bankruptcies on the rise, and widespread commercial real estate loan defaults all indicate that things are about to get a whole lot worse for the American economy. And there are more interest rate increases coming down the pike despite the pause in June.

Everyone should be adding hard assets to their portfolio RIGHT NOW to protect it against what is to come.

So other than summer market softness, why aren’t more investors getting off the fence and taking advantage of the current lower spot prices and lowering premiums?

In talking with clients, we’ve had more than a handful express concerns over manipulation of the gold and silver prices. But is this something worth being concerned about?

Are Precious Metals Prices Being Artificially Manipulated?
It’s enough to make any investor nervous… the fear of market manipulation.

Contrary to the popular narrative – there is no conclusive evidence of systematic suppression of the spot prices of precious metals. Various theories of manipulation are planting seeds of doubt in the mind of bullion investors, and the proliferators of those theories are profiting off investor fear.

Conspiracies tend to thrive on anonymity, the lack of real proof, and the confirmation bias that comes from blowing up these anecdotal anomalies. Many want to believe that institutions are out to get them.

It would be unfair to say that silver prices have never been manipulated. It’s pretty common knowledge that the U.S. government kept the price of silver frozen at $1.29 per ounce through the 1960’s.

In 1979-80, the infamous Hunt brothers, with the help of some Middle Eastern Sheiks, amassed billions of dollars’ worth of the precious metals, pushing prices to record levels before regulators stepped in and the market collapsed. Because of the Hunt brothers, federal commodities regulators introduced special rules to prevent any more long-position contracts from being written or sold for silver futures. To this day, their actions cause many to doubt the transparency of the commodities market, even if it wasn't their intention.

The truth is that an influx of sufficiently large capital can move almost any market in the short-term, and the silver market is small enough to feel the effects of a coordinated market play pretty easily. But that’s different from long-term manipulation.

There is a popular belief that Wall Street has massive naked short positions and is trying to manipulate the silver market. Many entities have large short positions in the U.S. silver market, but these shorts are often counterbalanced by long positions in the London market. The rise in silver prices over the last year contradicts the story about systematic price suppression. We are in the early stages of a bull market cycle for silver, which involves periods of consolidation over the course of steady long-term growth.

Silver is a more thinly traded market than gold, and as a result, price fluctuations in the short term tend to be volatile. In the long term, silver tends to follow the path of gold, although it will often lag longer and climb more explosively when it does move, making market timing extremely unpredictable.

Don’t let short term volatility convince you to walk away from a burgeoning bull market.

Don’t Let Fear Manipulate You

In the end, every market is manipulated in some form or fashion. In fact, the biggest market manipulators are the members of the Federal Reserve as their rate decisions and narratives directly move financial markets worldwide.

Right now, they’ve decided that things haven’t gotten bad enough when it comes to unemployment, that the economy still can be pushed further, despite the impact to individual consumers, so they’re preparing to increase rates again before year end.

And when they do, you’ll wish your portfolio had diversity with hard assets to weather the resulting economic storm.

With a recession still on the horizon, the long-term trend for gold and silver prices is up, and market forces always prevail in the end.

So, don’t allow negative sentiment surrounding gold and silver spot prices to persuade you to tread water even longer. Buying some now while spot prices have dropped and premiums are coming down is the savviest thing you can do for the moment.

Soon, economic pressure will build and demand for safe haven assets will soar higher.

The fundamentals for long term growth in silver and gold are there, but only investors who don’t let fear or greed control them will be able to take the bull by the horns, so to speak. Practice patience and don’t panic.