Silver’s 10.5% Decline Indicates Structural Selloff Rather Than Market Manipulation, According to Ex-Bullion Bank Executive

Silver’s Steep Drop Sparks Debate Among Traders

This week, silver experienced a dramatic 10.5% decline, briefly dipping just below $75 before partially recovering. The sharp move reignited discussions among market participants about whether the drop was the result of orchestrated selling or a deeper shift in the precious metals rally. Gold also faced significant pressure, falling nearly $150 in the same session and momentarily touching $4,880 before rebounding.

Institutional Risk Management Behind the Selloff

Robert Gottlieb, a former head of JP Morgan’s bullion desk, attributes the recent downturn not to covert manipulation, but to the internal risk controls of major financial institutions. As both prices and volatility surged, banks and investment funds were compelled to cut back on risk. Automated systems triggered these reductions as soon as market momentum reversed.

“Trying to buy during a rapid selloff is like catching a falling knife,” Gottlieb remarked, highlighting the dangers of entering a declining market.

How Soaring Prices Limit Risk Appetite

Over the past year, gold has climbed from $2,600 to $5,000, while silver has surged by 150%, rising from $28 to around $72. These rapid gains have made the market far more sensitive to volatility.

Gottlieb explained that as prices increase, the dollar-based risk limits set by banks shrink their capacity to hold positions. When prices double, institutions can only maintain half as many contracts before reaching their risk thresholds.

Volatility exacerbated the situation. Gottlieb noted that implied volatility in silver approached 100% ahead of the selloff, further tightening risk limits. With banks stepping back and unable to absorb risk, price swings intensified.

He cautioned that trading at these elevated price levels changes the landscape entirely. The range of price movement widens, and $5,000 gold behaves very differently from $2,600 gold.

Liquidity, Leverage, and Market Timing

The wave of selling occurred just before the Lunar New Year, a period when market liquidity typically thins and positions become more vulnerable. In such an environment, concentrated positions can unwind rapidly. “In a nervous market like this, selling often triggers more selling,” Gottlieb observed.

He described the rally as increasingly crowded, with leverage amplifying moves across futures and derivatives. “Bull markets don’t end because of corrections,” he said. “But excessive leverage and herd mentality can cause sharp, violent pullbacks.” As volatility rose, risk reductions became automatic, accelerating the downturn.

Addressing Manipulation Theories

The recent selloff led to renewed claims of coordinated action by major banks to suppress prices, but Gottlieb dismissed these allegations. “Banks aren’t holding large short positions,” he stated.

He clarified that bullion banks mainly engage in arbitrage and financing, with apparent short futures positions typically balanced by over-the-counter trades and client hedges. “Compliance teams closely monitor trading activity,” he added, emphasizing that institutional risk management, not collusion, drives positioning.

Central Banks Remain Focused on Policy

Despite recent turbulence, Gottlieb said that central bank demand for gold is guided by policy objectives rather than price movements. “Central banks make decisions based on policy, not on price,” he explained.

He referenced World Gold Council data showing that 75% of central banks plan to continue purchasing gold over the next five years.

Gottlieb stressed the importance of distinguishing between a reduction in leverage and a true decline in demand. While sharp corrections can occur as leverage is unwound, he sees no evidence that fundamental demand is weakening.