Gold has fallen below $4,000, while silver is approaching $50. For traders holding short positions, these levels could present an opportunity to trigger another wave of selling. If breaking through them activates other traders’ stop-loss orders, prices could fall further without the original sellers having to commit the same amount of additional capital.
That is precisely why we suspect some market participants may be deliberately testing these price levels. We do not rule out the possibility of manipulation or coordinated selling pressure.
October’s selloff has hit both precious metals, although silver has suffered more. Friday’s trading on October 30 brought further weakness, with gold falling below $4,000. We examine why round numbers can become attractive targets, who stands to profit from breaking them, and what the available data actually tells us.
Bets Against Silver Were Growing Before the Selloff
According to the CFTC, Managed Money funds increased their short positions in silver by 5,753 contracts, or approximately 83%, between July 21 and October 20. During the most recent reporting week alone, they added another 2,492 short contracts, while increasing their long positions only slightly.
Net long positioning fell from 13,309 contracts on September 22 to just 3,505 contracts on October 20.
We consider this significant. It was not simply a matter of investors closing bullish positions. Funds were actively increasing positions that could profit from further declines in silver prices.
In gold, the reduction in long positions outweighed the closing of shorts. Net long positioning also weakened, while open interest increased in both metals during the latest reporting week.
Our COT Positioning Tracker therefore shows increasingly bearish bets against silver and fading optimism toward gold. However, the data ends on October 20, meaning it does not capture the subsequent selloff.
Why Psychological Price Levels May Become Targets
The $4,000 level for gold and $50 for silver do not represent any special intrinsic value of either metal. Yet in financial markets, they can carry enormous significance.
Stop-loss orders, technical trading strategies, and automated systems may cluster around these levels. When prices break through major support, some of these orders can trigger additional selling.
That creates a chain reaction. The initial selling pressure generates more selling, potentially accelerating the decline.
For traders holding short positions, this environment can be particularly advantageous. They do not necessarily have to finance the entire subsequent price movement themselves.
Research from the Federal Reserve Bank of New York has previously documented the clustering of stop-loss orders around round-number price levels in foreign exchange markets.
The difference between silver trading at $50.10 and $49.90 represents $1,000 on a standard 5,000-ounce futures contract, before costs.
Crossing the $50 threshold does not, by itself, create any special financial reward. What matters far more is the additional price movement that such a breakout might trigger.
Call Options and the Importance of Month-End Prices
Options positions provide another possible financial incentive.
Call option writers receive a premium in exchange for taking on the obligations associated with selling the option. If the option expires without intrinsic value, that outcome can benefit the writer, although the final result also depends on hedging and other positions.
Now imagine a substantial concentration of call options with strike prices of $50 for silver or $4,000 for gold.
A silver call option representing 5,000 ounces would have an intrinsic value of $500 if the underlying price were $50.10 at expiration. At $49.90, its intrinsic value would be zero.
Writers of certain option positions could therefore have a financial interest in lower prices at expiration.
Similarly, a lower month-end closing price could improve the reported performance of portfolios betting on falling prices. However, futures are marked to market daily, so the end of the month does not itself generate an additional profit.
What matters is the specific expiration date, strike price, and actual distribution of options positions. Not all options expire at month-end. For options on futures, the relevant futures contract determines the outcome, rather than the spot quotation itself.
Without verified options positioning data, we cannot conclude that this mechanism is responsible for October’s selloff.
Precious Metals Manipulation Has Historical Precedent
Our suspicions are not based entirely on theoretical possibilities.
In 2020, the U.S. Department of Justice announced that JPMorgan had agreed to pay more than $920 million in connection with fraudulent trading practices in precious metals and U.S. Treasury markets.
The investigation described extensive use of deceptive orders, a practice known as spoofing. It also documented trading activity intended to trigger or defend barrier options.
In other words, deliberately influencing precious metals prices for financial gain is not merely a hypothetical scenario.
Our assessment is this: the sharp increase in short positions, the subsequent selloff, and the proximity of psychologically important price levels provide reasons to investigate the possibility of deliberate selling pressure.
The Physical Market Offers a Counterbalance
Interestingly, physical inventory data tells a less straightforward story than speculative positioning.
According to the CME inventory report published on October 29, registered silver inventories increased by 4.84 million ounces. However, this was largely a transfer from the eligible category rather than an inflow of new metal into warehouses.
Total inventories actually declined by approximately 666,000 ounces.
That is why our Gold & Silver Inventory Tracker distinguishes between actual physical metal movements and administrative changes in inventory classification.
The iShares Silver Trust (SLV) also deserves attention. As of October 29, its silver holdings were approximately 190 metric tons higher than at the beginning of the month.
This challenges the idea that all investors are abandoning silver during the decline. It does not, however, mean that prices have already found a bottom.
Macroeconomic Conditions Are Also Helping Sellers
The current macroeconomic environment provides considerable support for bearish traders.
On October 28, the Federal Reserve held interest rates at 3.75%–4.00%, with two policymakers voting in favor of a rate increase.
Subsequently released U.S. economic data showed that the PCE price index increased 0.5% month over month in September, while real GDP expanded at an annualized rate of 3.4% in the third quarter.
A resilient economy and persistent inflation could encourage the Fed to maintain restrictive monetary policy longer than investors had anticipated.
Higher real yields increase the opportunity cost of holding gold and can also weigh on silver.
Deliberate selling pressure and genuine macroeconomic reasons for declining prices are not mutually exclusive. Both forces can operate at the same time.
What Happens Next?
The coming trading days could provide answers to several important questions:
- COT report, October 30 at 3:30 p.m. EDT: Will reveal positions as of October 27, before the Fed’s latest decision.
- Month-end closing prices: Will indicate whether sellers can maintain pressure around these psychologically important levels.
- U.S. employment report, November 6 at 8:30 a.m. EST: Could significantly alter expectations for future interest rates.
- ETF holdings and physical inventories: Will help distinguish speculative selling from broader deterioration in investment demand.
Gold: Cautious outlook. A sustained recovery above $4,000, particularly alongside declining real yields, would be an encouraging signal.
Silver: Cautious to bearish near-term outlook. Growing short positions and weaker price performance currently dominate the picture. A convincing recovery supported by genuine investment demand could change that assessment.
There is one final point we consider particularly important.
If someone is deliberately trying to push gold below $4,000 and silver below $50, the real objective may not be simply reaching those prices. The greatest opportunity could lie in what happens after those levels are breached.
That is the mechanism we believe deserves closer attention. For now, however, it remains a hypothesis rather than a proven explanation for the current selloff.
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