(Kitco News) - Silver’s wild 10.5% plunge this week sent prices tumbling to a low just shy of $75 before clawing back some ground, and the move has traders arguing once again over whether this was a case of coordinated pressure or a sign of something deeper shifting in the precious metals rally. Gold wasn’t spared either, dropping nearly $150 in the same session and briefly testing the $4,880 level before bouncing back.
According to Robert Gottlieb, who once ran the bullion desk at JP Morgan, this latest drop wasn’t about some shadowy intervention, but rather the result of structural pressures inside the risk systems of big institutions. As prices and volatility increased, banks and funds were forced to reduce risk, with exposure reductions triggered automatically once the momentum shifted.
“You never catch a falling knife, right?” Gottlieb said, describing attempts to buy into a cascading selloff.
Rising Prices Shrink Risk Capacity
Gold’s run from $2,600 to $5,000 over the past year, and silver’s explosive 150% surge from $28 to around $72, have left the market far more sensitive to every jolt of volatility.
As prices rose sharply, Gottlieb pointed out, the amount of risk banks could take on shrank rapidly. With VAR limits set in dollar terms, a doubling in price means institutions can hold only half as many contracts before reaching their risk ceiling.
Volatility only made things worse. Gottlieb noted that implied volatility in silver was approaching 100% before the selloff, thereby compressing risk limits further. With banks retreating and unable to warehouse risk, no one remained to absorb the pressure, and price swings began to spiral out of control.
Gottlieb warned that once you’re trading at these higher price levels, the game changes. The ranges get wider, and $5,000 gold is a very different animal than $2,600 gold.
Liquidity, Leverage, and Timing
The liquidation unfolded ahead of the Lunar New Year period, when liquidity can thin, and positioning becomes more fragile. In that environment, concentrated exposure can unwind rapidly. “Selling begets selling in a, in a market like this, when it’s nervous,” Gottlieb said.
He characterized the rally as increasingly crowded and amplified by leverage across futures and derivative products. “Bull markets don’t die from corrections,” he said. “However, excess leverage and blind consensus create these violent corrections.” As volatility climbed, exposure reductions became mechanical rather than discretionary, accelerating the decline.
Rejecting Manipulation Claims
The selloff prompted renewed allegations of coordinated suppression by large banks, a claim Gottlieb dismissed. “The banks are not short,” he said.
He emphasized that bullion banking primarily functions as an arbitrage and financing business. Futures positions that appear short are typically offset by over-the-counter exposures and client hedging activity. “Compliance departments are all over the trading,” he added, arguing that institutional positioning is constrained by risk oversight rather than coordinated intent.
Policy-Driven Demand
Despite the volatility, Gottlieb said central bank demand remains anchored in reserve policy rather than price sensitivity. “A central bank never makes a decision based on price,” he said. “They make a decision based on policy.”
He cited survey data from the World Gold Council indicating that 75% of central banks expect to continue buying gold over the next five years.
For Gottlieb, it’s important to separate a leverage unwind from a real breakdown in demand. Sharp dislocations can happen when leverage gets flushed out, but so far, he doesn’t see any sign that underlying demand is falling apart.
Watch the full video on the Kitco Mining and Kitco News YouTube channel.