MARKETS & INVESTING
The Gold and Silver Markets Are Starting to Break — What Comes Next
A major shift in precious metals could reshape investment strategies.
Sumit K.10 min read·Just now--
Traditionally, financial markets have followed a predictable pattern. When investors feel confident, they buy stocks.
And when investors feel afraid, they buy protection, insurance. And for thousands of years, that protection has come in the form of gold and silver.
These aren’t assets that people buy to get rich. They’re assets people buy when they’re afraid of losing everything.
But recently, something strange has happened. Over the past year, as the stock market has surged to record highs, gold and silver have risen alongside it.
The assets that were supposed to protect investors from chaos are suddenly behaving like part of the boom itself. And when a risk-off asset starts behaving like a casino, it raises a very important question. Are these assets still hedges at all?
With gold and silver prices recently falling by as much as 15% and 34%, respectively, over just a matter of weeks, have they too become just another volatile asset class in an ever-widening bubble? Gold and silver are interesting assets because, while they are used as a commodity for things like electronics, a big part of their role in our world is simply to exist as a financial asset.
In 2025, just 6.5% of the world’s gold demand was taken up by technology, the other 93.5% going towards jewelry, investment, or central bank stores. Silver is slightly different from gold, with around 61% of the 2025 demand going towards either industrial uses or photography.
But that still leaves 39% being used in some capacity as a financial asset, whether it be through jewelry, silverware, or investment purposes.
Though, as opposed to copper or nickel or oil, which all have exceptionally high utility, gold and silver act very much more like a store of wealth and protection against the erosion of the dollar.
And because of this, their prices tend to fluctuate with economic cycles. When confidence in the financial system is high and investors feel optimistic about the future, you know, gold and silver tend to chill out.
Money flows into productive assets like stocks, you know, businesses, and real estate.
But when that confidence begins to crack, when markets fall, currencies weaken, or the economic outlook becomes less certain, investors begin shifting their money back into insurance, aka gold and silver. We saw this very clearly during the global financial crisis in 2008. As major banks collapsed and the stock market fell by more than 50%, investors rushed to gold.
Between late 2008 and 2011, the price of gold rose from around $700 per ounce to over $1,900 per ounce, an increase of nearly $170%, while stock markets were still recovering from the damage.
The same pattern appeared again in 2020 when co triggered one of the fastest stock market crashes in history.
Investors once again sought safety. Gold surged to new all-time highs as trillions of dollars were printed and uncertainty spread across the global economy.
And if you go back even further, the relationship becomes even clearer. During the inflation crisis of the 1970s, as the US dollar rapidly lost purchasing power, gold rose from just $35 per ounce in 1971 to over $800 by 1980.
Investors weren’t buying gold because the economy was strong. They were buying gold because the dollar was getting eroded.
Because fundamentally, gold and silver aren’t designed to outperform during periods of optimism.
They’re treated as a way to preserve wealth during periods of uncertainty, which is why what’s happening today is so unusual.
Over the past year, gold and silver prices have surged dramatically, but it’s at a time when the stock market is booming. And there are some very real reasons for this.
One of the biggest drivers in the case of gold has been central banks. Central banks around the world have been buying gold at the fastest pace in modern history.
So, not retail investors, not hedge funds, governments. In 2025 alone, central banks added hundreds of tons of gold to their reserves, which continues the trend that began after Russia saw its foreign exchange reserves frozen in 2022.
And because of that, countries like China, India, Russia, and Turkey have all steadily been increasing their gold reserves, diversifying away from currencies.
Now, at the same time, silver has been experiencing a surge in structural demand. While it might not be the same financial asset as gold, imbalances in the supply-demand equation have caused it to skyrocket.
Silver is predominantly used in solar panels, electric vehicles, semiconductors, and advanced electronics. And as demand for these technologies rises, so too does demand for silver.
But supply hasn’t kept up. You know, mining production has remained relatively flat, while geopolitical tensions have made access to key resources less certain.
Countries like China have begun restricting exports of strategic materials, prioritizing their own domestic industries over global supply.
And don’t you know it, they recently did that with silver. So, all of these forces help explain why gold and silver have risen. All of it is logical, but it doesn’t explain what happened next.
Because after rising for months, silver and gold didn’t stabilize. They both fell hard, a move that is not super common for assets that are supposed to be stable stores of wealth.
In the case of silver, it’s fallen around 35% in just weeks, wiping out a good chunk of its big rally. An asset that had quietly been climbing based on long-term structural demand suddenly began behaving like something else entirely.
And this is where investors really started to question whether these metals are still behaving like stable sources of wealth or whether these markets have now been overrun with market gamblers.
According to Steve Eisman, the reason wasn’t fundamentals; it was pure speculation.
On Tuesday and Wednesday, silver rallied, climbing to $88. However, on Thursday, silver declined sharply again, down 16% and closed at $73.50, thereby giving up almost all its gains for 2026.
Too many levered speculators piled into silver at the peak, and when it started to go down, they got margin calls and were forced to liquidate.
Yes, even in silver, the speculators had made big bets and got caught out as the price tanked. And to understand what Steve is talking about here, a margin call happens when you borrow money to invest, but the thing that you’re invested in starts falling in value.
For example, say someone invests $10,000 of their own money. Now, the broker or bank may allow them to borrow an additional $10,000 to invest using margin lending, giving them a total position of $20,000. So, that is a 50% loan to value ratio.
But if silver falls by say 20%, their $20,000 position drops to 16K. Now, they still owe the broker 10 grand, which means their equity has fallen from 10 to 6,000. Aka, they’ve lost 40% of their money from just a 20% downward move in silver.
And if silver keeps falling, the broker begins to worry that they could take a loss here, too. So, they issue a margin call. So, the investor is forced to either deposit more money immediately or sell their silver to repay the loan.
So, in this example, the loan-to-value ratio has skyrocketed to 62.5%. So, to get it back to 50%, they will be forced to add another $4,000 into their account. But here’s the thing: if they can’t do that, the broker closes the position, selling the silver.
And if thousands of speculators are all using leverage at the same time, these forced liquidations begin to cascade.
Prices fall further, which triggers more margin calls, which force more selling, which causes prices to fall even further.
That’s how speculation has turned these metals from long-term stores of wealth into volatile speculative assets.
But this is not how insurance is supposed to behave. Insurance is supposed to provide stability during periods of uncertainty. And this is starting to mirror the same trend we’ve been seeing in another non-productive asset, that of course being Bitcoin.
Bitcoin was also originally designed to be like gold, a digital gold. How many times have you heard that from a crypto bro at a party? A fixed supply asset that couldn’t be printed, a hedge against inflation, a hedge against currency debasement, a hedge against the financial system itself. That was always the idea of Bitcoin.
If governments printed too much money and weakened their currencies, investors could escape into Bitcoin, an asset that governments can’t manipulate. It was set to be the new age gold. But in practice, Bitcoin has not behaved like gold, not even in the slightest.
The truth is, it’s behaved much more like a speculative asset, as we’re seeing right now. In fact, since its high in October last year, Bitcoin has nearly halved. This is what Steve has to say about it.
The people who have been advocating investing in cryptocurrencies have long argued that Bitcoin and other cryptocurrencies are versions of digital gold. In other words, they are hedges against the debasement of fiat currencies or government currencies.
Now, gold and silver have acted as such hedges, but crypto has, in my view, completely failed to show that it is a hedge.
As gold and silver climbed in January, cryptocurrencies declined, which just leads me to conclude that cryptocurrencies are just a way for investors to speculate about speculating.
What you’ve seen is that over the last few years, Bitcoin, instead of moving in line with an asset like gold or silver, has trended much more closely with more speculative areas of the market like the tech stocks.
When liquidity floods the system and tech stocks surge, Bitcoin surges. When liquidity dries up and tech stocks fall, Bitcoin falls.
We saw this during the tech selloff in 2022, where Bitcoin fell more than 50% alongside the decline in growth stocks. And more recently, Bitcoin has once again been decimated, with investors losing 45% plus of their wealth.
Cryptocurrencies seem to act in lock step with tech stocks rather than as hedges against fiat currencies.
Because of the decline in cryptocurrencies, companies like Strategy, symbol MSTR, that invest their balance sheets in cryptocurrencies have seen their stock prices get crushed.
Strategy reached a peak of 450 last summer. It closed Thursday at 106.
That’s always the risk with non-productive assets. So, what’s the takeaway here for long-term investors? Are these blips in gold and silver buying opportunities? Is the 46% reduction in Bitcoin a generational wealth-building opportunity?
Well, I hope this story has explained that the future of these assets is not predictable. So, the truth is nobody knows. And that’s why Warren Buffett has never looked to own any non-productive asset, not gold, not silver, not Bitcoin, nothing.
At the end of the day, these assets unfortunately don’t have intrinsic value. And that’s not me poo-pooing them, it’s just the truth.
Intrinsic value is found by financial modeling and determining the present value of expected future cash flows.
For Apple, we can estimate the value of Apple shares because we can model out how much cash the business is likely to produce over time.
Same for buying an apartment, you can model out what the likely rental income will be over time to help justify your offer.
But for assets like gold and Bitcoin, you know, they just sit there. Their future value is just based on the greater fool theory.
The only way you make returns in those assets is by selling them to someone else who agrees to pay more.
But there’s no underlying reason why someone should want to pay more for them.
So that’s why Buffett and so many of these value investors just leave these assets alone. They stick to profitable cash-producing companies and leave it at that.
When you’re out there reading articles about gold, silver, or Bitcoin, you hear some say something like, “Gold is set to recover 15%, or Bitcoin is now offering a generational buying opportunity.”
Ask them to prove why that’s the case, because ultimately they won’t be able to, because you just can’t.
Thanks for reading:)
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