“Gold is money. Everything else is credit,” J.P. Morgan is often quoted as saying to the US Congress in 1912. He was arguably the greatest financier on the planet, and one must lend some credence to his words.
We have to go back to 1978 to understand how important metals are to the functioning of the American and the global monetary system. In Dallas, Texas, two brothers, Nelson and William Hunt, wanted to prove something to their deceased father. Their father, H. L. Hunt, was a self-made oil tycoon, one of the richest men in the world at times. His rich heirs wanted to go against the whole financial system and show their father’s spirit that they could make a fortune too.
They picked silver. They dove into futures contracts with reckless abandon, buying like madmen and driving the price of silver from just $6 an ounce to an astonishing $50 an ounce. That was an 800% increase. They ended up buying a third of the world’s silver supply, 100 million ounces, and needed three massive Boeing aircraft to fly this haul to Switzerland.
There was a frenzy in the US as a result: a silver mania, if you may. People started selling their silverware, anything with silver they could get their hands on. It wasn’t to last for long, though. Regulators stepped in right away. COMEX, the Commodity Exchange, introduced Rule 7. It put strict limits on buying silver contracts with borrowed money.
Even the Federal Reserve came into the fray. It told banks to stop lending to the Hunt brothers so they could no longer defend their massive positions. The party was over. Silver crashed. Overnight, the Hunts lost billions. Their father was probably turning in his grave.
That was the old guard striking back with ruthless force to protect the paper empire. Some speculators allege that the same thing happened on January 30 this year, when the price of silver crashed by more than 30%, and they blame J.P. Morgan for it.
Why did this happen in the 1970s, and why is this happening again after Trump 2.0? To understand this, we have to go back a little further in time. In 1945, after the Second World War, the global economy was in shambles. Nations got together in Bretton Woods to create a new trading and monetary system. The key element of this whole system was that the dollar would be pegged to gold at $35 an ounce.
Every other central bank in the world would be able to exchange its dollars for gold. The dollar was as good as gold. This gave much-needed stability to global commerce and, for the next 25 years, it created enormous economic prosperity in the US and around the world.
There was a problem by 1970, though. The world economy had grown humongously. Everyone wanted dollars to trade, so the Federal Reserve was printing lots of dollars. There were four times as many dollars in circulation as there was gold in reserve. The US could no longer defend its peg.
Gold is not tied to the US dollar anymore, but it moves inversely to interest rates, propping up bonds and providing the illusion of stability
The rate of $35 for an ounce of gold was good in 1945, but it hadn’t changed, so by 1971, the dollar was really overvalued. That meant imports were very cheap and exports were very expensive. The US experienced its first trade deficit since the nineteenth century, and the country was experiencing employment problems. You may notice something familiar. Trump has been talking about the same phenomenon.
The President at that time, Richard Nixon, had to take action. On 15 August 1971, from the comfort of Camp David, he announced that the Federal Reserve would no longer honour its pledge to convert US dollars into gold.
This, along with the 1973 oil crisis, meant that the whole decade of the 1970s saw stagflation: high inflation, high unemployment, and slow growth. Inflation was in double digits, which meant that the dollar was shrinking fast.
Investors, like the Hunt brothers, wanted something tangible to hold on to a real asset. Through 5,000 years of human history, gold and, by extension, silver had been the only asset that had consistently functioned as real money, outlasting empires, wars, and countless fiat experiments.
The Hunt brothers targeted silver, though, because unlike gold, silver is not really mined directly. Seventy per cent of its production is a by-product of the mining of other metals, such as gold or copper. That means its supply is inelastic, and its industrial use means that demand is insatiable.
This is even more true in this day and age, when silver is used in solar panels, in electric vehicles, in electronics, and also for missiles and satellites. Some commentators allege that, because of this, the military–industrial complex can never let silver do true price discovery. Its price will always be suppressed, and it was especially so in the five years from 2020 to 2025.
In 2025, when Trump assumed power, his detachment from the rules-based world order and his desire to weaken the US dollar to propel manufacturing in the US, along with tariffs on every country he did not take a liking to, instilled a fear of devaluation in the hearts and minds of investors.
It is because of this that, in 2025, gold surged more than 70%, and silver exploded over 140%. At the beginning of 2026, though, much of that rally was reversed in just a couple of hours. On Friday, 30 January, gold plummeted 11% and silver a devastating 31% in mere hours, just because Trump nominated Kevin Warsh as Fed Chair, signalling to the markets that he would not let the dollar weaken.
Gold is not tied to the US dollar anymore, but it moves inversely to interest rates, propping up bonds and providing the illusion of stability. At the risk of sounding like a conspiracy theorist, I will venture to say that the powers that be can never allow the prices of gold and silver to rise beyond a certain level.
We may see the Chinese yuan replace the US dollar as a reserve currency, but that would only happen when, and if, China can significantly outpace the US in total economic size and also assert its military superiority
Look at the past few days. COMEX delivery and position reports show that J.P. Morgan closed significant short positions in silver precisely at or near the bottom and stood for significant COMEX deliveries, allowing them to exit shorts profitably while the market was in freefall. On the same day, the Chicago Mercantile Exchange raised the margin rate to 16.5%. Simultaneously, the London Metal Exchange went offline due to some technical glitches.
The US dollar may not be backed by gold anymore, but it is backed by something more tangible: hard military assets, which we witnessed in Venezuela and now surrounding Iran. One of the main reasons Trump nabbed Maduro was that he was thinking of selling oil in yuan.
China can buy Russian oil in yuan, of course. Brazil may trade soybeans without ever touching greenbacks. The US may run a budget deficit of $2 trillion. But the US will fight to the death to preserve the status of the dollar as a reserve currency. Because if reserve status slips away, the US faces a hyperinflation nightmare beyond your imagination. It will pale in comparison to Argentina. It will probably be as bad as Zimbabwe’s, if not Germany’s, after the First World War.
The price of precious metals and commodities, especially gold and silver, will continue to rise, but they cannot replace the US dollar. There is no way of going back to even pegging any currencies to gold, because the total supply of gold ever currently and in recorded history for thousands of years adds up to $30 to $34 trillion. In comparison, current annual global trade stands at $25 to $35 trillion, so going back to the gold standard would be akin to curtailing trade and clipping the wings of the global economy.
We may see the Chinese yuan replace the US dollar as a reserve currency, but that would only happen when, and if, China can significantly outpace the US in total economic size and also assert its military superiority. Despite the world moving towards multipolarity, I do not see this happening any time soon.
In a nutshell, you can buy all the metals you want, but the US dollar is here to stay!