The ‘Hidden Hand’ Buying Gold & Silver: Why Governments Are Using Banks to Accumulate | Josh Phair

Key Concepts

• Metals War: A geopolitical competition for access to critical metals driven by national security and future technological needs.
• Decoupling: The potential separation of precious metal prices from traditional influences like interest rate policy, driven by physical supply shortages.
• Fair Sinclair Ratio: A metric comparing US foreign debt to stated gold holdings, used to project potential gold price targets.
• Mercantile Banking: Governments utilizing banks as intermediaries to acquire strategic resources, obscuring direct government involvement.
• Critical Minerals: Designation of silver by the US government, potentially leading to export controls and domestic supply prioritization.
• Bifurcation Trade: A shift towards distinct trading blocs and alliances, with nations prioritizing resource access within their respective groups.
• Raw vs. Finished Material: The distinction between unprocessed metals (concentrates, doré) and refined products (coins, bars), impacting tariff and supply chain dynamics.
• OTC (Over-the-Counter) Market: Trading occurring directly between parties, often obscuring the full extent of government or institutional activity.

The Fractured Fed & The Emerging Metals War: A Deep Dive with Josh Far of Scottsdale Mint

Introduction: A Shift in Precious Metals Dynamics

The recent Federal Reserve minutes reveal a significant internal disagreement regarding monetary policy, with a 9-3 split vote on interest rate decisions. Despite this uncertainty – traditionally a headwind for precious metals – silver, platinum, and gold are experiencing substantial gains. This divergence suggests a fundamental shift in market dynamics, where physical scarcity is increasingly outweighing the influence of central bank policy. Josh Far, CEO of Scottsdale Mint, argues that we’ve entered a “metals war” driven by geopolitical desperation, a trend he accurately predicted earlier in the year.

I. The Physical Shortage & The Disconnect from Paper Markets

The interview centers on the growing disconnect between the paper market (futures, derivatives) and the physical market for precious metals. While the bond market anticipates a pause in interest rate hikes, silver is surging, defying conventional expectations. Far attributes this to an acute physical shortage, particularly in silver, where demand from governments, banks, and increasingly, retail investors, is exceeding supply. He notes that the narrative of a retail-driven mania is factually incorrect, as the primary driver is government and institutional buying.

II. Government & Bank Activity: The "Hidden Hand"

Far reveals a significant shift in bank positioning, with US banks moving from net short to net long positions in precious metals, particularly following the COMEX issue in November. He emphasizes that much of this activity is obscured due to banks operating globally and engaging in complex trading strategies. He describes a new phenomenon of “mercantile banking,” where governments are utilizing banks to discreetly acquire metals on their behalf, preventing direct attribution and market manipulation. This explains the unusual quietness from major banks regarding precious metals commentary – they are operating under orders and cannot publicly disclose their activities. The US government’s designation of silver as a “critical mineral” foreshadows potential export controls to secure domestic supply.

III. The Bifurcation of Trade & Geopolitical Alignments

Far outlines a growing “bifurcation” of trade, with the emergence of distinct alliances centered around the BRICS nations (Brazil, Russia, India, China, South Africa). These nations are actively accumulating gold and establishing new vaulting infrastructure to create a gold-backed settlement layer, challenging the dominance of traditional financial centers. China has secured significant resource access in Africa and Latin America, while the US is attempting to counter this influence by strengthening ties with nations in the Western Hemisphere, offering economic and potentially military support in exchange for access to critical minerals. Venezuela is highlighted as a key focus for US engagement, not primarily for oil, but for its mineral wealth. This dynamic creates potential flashpoints, particularly in Brazil, which is closely aligned with China.

IV. Supply Chain Dynamics: Raw Material vs. Finished Products

A crucial distinction is made between raw materials (concentrates, doré) and finished products (coins, bars). The US primarily imports refined silver, while its refineries are less equipped to process low-grade concentrates. This creates a dependency on China for processing raw materials. Far anticipates potential export controls on raw materials, incentivizing domestic refining and fabrication. He notes that tariffs are likely to impact raw materials more significantly than finished products, encouraging a shift towards domestic processing. The interview highlights the importance of securing the entire supply chain, from mining to refining to manufacturing.

V. China’s Export Licensing & Market Signals

China’s new export licensing rules for certain metals are not a complete ban, but a mechanism to control the flow of materials and monitor their destination. Far believes this is a response to geopolitical pressures and a desire to secure resources for domestic industry. He suggests that the initial impact will be felt in raw materials, as China prioritizes supplying its own manufacturers. Key signals to watch for include widening regional price premiums, changes in delivery promises, and the disappearance of specific product types from the market. He notes that the traditional equal pricing between gold and silver is already showing signs of divergence.

VI. The COMEX Issue & Market Liquidity

Far confirms that the COMEX issue in November caused temporary liquidity concerns, with banks briefly pulling quotes due to extreme volatility. While he dismisses rumors of major bank failures, he acknowledges the possibility of smaller commodity houses experiencing difficulties. He emphasizes that the current market is characterized by high trading volumes, strained credit lines, and refinery backlogs, creating a more complex and potentially fragile environment. However, he believes the situation is currently “under control” due to strong demand and rising prices.

VII. The Fair Sinclair Ratio & Future Price Projections

Far reiterates his previously stated price target for gold, based on the “Fair Sinclair Ratio” – a comparison of US foreign debt to stated gold holdings. He maintains that a price of $30,000-$35,000 per ounce is achievable by the end of the decade, contingent on continued increases in US foreign debt. He suggests that silver could see a significant price increase as well, potentially reaching a ratio of 15:1 to gold, compared to the current 57:1.

VIII. Practical Advice for Buyers in 2026

For serious buyers, Far recommends a strategy of dollar-cost averaging, recognizing that dips may be shallow and short-lived due to ongoing government and institutional demand. He advises staying informed about market developments and understanding the geopolitical drivers behind the price increases. He also suggests paying attention to signals like margin hikes and unusual EFP (Exchange for Physical) behavior, which could indicate increasing stress in the market.

Conclusion:

The interview paints a picture of a rapidly evolving precious metals market, driven by geopolitical tensions, supply chain disruptions, and a fundamental shift in demand. The traditional influences of interest rate policy and economic indicators are becoming less relevant as physical scarcity takes center stage. Josh Far’s insights provide a valuable perspective on the “metals war” unfolding, highlighting the importance of understanding the hidden forces at play and preparing for a potentially volatile and transformative period in the precious metals market. The key takeaway is that the era of passively waiting for dips may be over; securing supply while it’s available is becoming increasingly crucial.