$38 Billion Stuck and Waiting for You

Imagine having the opportunity to corner an entire market. 

In the late 1970s, that’s precisely what two brothers named Hunt decided to do to the global silver market. 

But Nelson Bunker Hunt and William Herbert Hunt didn’t just buy silver. They bought it on leverage by borrowing cash, then stacking on more and more, betting the price would climb forever.

For a while, it worked as silver prices launched vertical.

Then a day later known as “Silver Thursday” struck, and everything came crashing down. 

Suddenly margin calls all hit at once, and the Hunt brothers simply couldn’t cover them. 

Prices collapsed, and a fortune that had looked unstoppable a few weeks earlier evaporated almost overnight.

And you can bet there’s a lesson in this story for us…

Leveraged conviction and real conviction look absolutely identical on the way up.

Unfortunately, only one of those survives the fall. 

What’s really interesting is that something similar just happened. 

So what happened?

For that, let’s take a stroll through the gold market in 2026 and things may start to feel eerily familiar. 

Between October of last year through January, the veteran members of our investment community here remember how gold prices exploded higher, surging as high as $5,595 per ounce. 

Of course, this one was almost entirely driven by one type of buyer. You know them well, the Western ETF investors that were fed expectations. 

That was the momentum money that showed up and kept gold prices moving. 

Then a few months ago, Operation Epic Fury caused a little hiccup for that momentum as rate-cut expectations evaporated overnight. 

You see, the same buyers who’d piled in for four straight months reversed just as fast, and those record inflows flipping into record outflows in a matter of weeks.

However, even more alarming were reports that roughly 298 tonnes of ETF-held gold (worth north of $38 billion!) was sitting underwater. By that, I mean that those ounces were bought high and held by investors with every incentive to sell the second they claw back to even.

Folks, we’re past normal rounding errors and into a mountain of trapped money eagerly looking for escape. 

And yet throughout all that selling, notably absent from that stampede were central banks. 

Think about that for a moment…

Despite the run-up, crash, and everything in-between, sovereign buyers stuck to their guns and kept adding to their reserves, month after month, like they have been doing for years. 

In fact, central banks picked up a net 244 tonnes in the first quarter of this year alone, extending their buying streak for well over a year — and they did it during the same window that wiped out the ETF crowd. 

We’re looking at the same asset during the same period of time, but with two completely different outcomes. 

So what does this split look like in practice? Well, on one side we have portfolio managers diligently checking their screens every morning as their positions bled, desperately trying to figure out how far the price could bounce before they can get out without a loss. 

On the other side, we saw reserve managers in Warsaw, Beijing, and a dozen other capitals, placing the same order they placed last month, and the month before that, seemingly uninterested in what the chart did on any given Tuesday.

That makes sense, doesn’t it? 

After all, a central bank that’s targeting a certain amount of gold for their vaults rather than a particular dollar figure ends up better off when prices fall, because executing the same buying strategy means they’re picking up those ounces at a cheaper price. 

But unlike momentum investors who lose conviction the moment the chart turns against them, working off a tonnage goal has a built-in reason to lean in harder while everyone else scrambles for the exit. 

In other words, central banks today don’t fear a gold correction — they take advantage of it!

To bring this back full circle, consider the Hunt brothers for a second. 

The contrast here is almost clear. The brothers needed silver prices to keep climbing forever just to survive the leverage they’d piled on top of their own bet. 

Granted, any pause in the rally threatened to collapse everything they’d built.

Yet central banks have no care for that kind of fragility, and there’s no margin call coming for a sovereign reserve manager; their positions won’t unravel at the drop of a hat. 

History already showed us what happens to the leveraged version of this trade, and Silver Thursday wasn’t necessarily really about silver. It just happened to be in the room. 

Now it’s gold’s turn.