Blame Putin for the Gold and Silver Crash

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After recovering nicely for a few days, precious metals and miners suddenly dove today starting at 11:00 am ET.

As of noon, gold is down about 2.6% to $4,949 while silver fell almost 9% to $76.57.

The GDX gold miner ETF fell 5% while the SILJ silver miner ETF fell 6.5%.

It was a sudden and sharp move. Here’s the 1-day silver chart showing the 11:00 am mini-crash.

At the same time gold also made a sharp move downward. Miners quickly followed.

It’s clear that something happened right around 11:00 am.

That happens to be when a story broke saying that Russia has floated a plan to embrace the U.S. dollar. Presumably, it would be part of a deal to end the Ukraine war. Via Bloomberg:

The Kremlin has set out proposals that could see Russia embrace the dollar again as part of a wide-ranging economic partnership with the Trump administration, according to an internal Russian document reviewed by Bloomberg.

The high-level memo, which was drafted this year, details seven points where, in the Kremlin’s view, Russian and US economic interests could converge following a deal to end the war in Ukraine.

The article goes on to list areas of potential U.S.-Russia cooperation, including oil and gas, commerce, industry, metals, and nuclear.

The leaked proposal also outlined how American companies that had investments in Russia could recover their losses.

But the major surprise was Russia’s proposal to embrace the American dollar. It would mean that Russia would trade in U.S. dollars, rather than its own currency, Chinese yuan, Indian rupees, or euros.

For many decades the dollar was really the only option for international trade. But since 2014, countries have been increasingly using their own currencies to conduct trade.

This could provide a boost for the dollar compared to other fiat currencies. And a strong dollar is generally negative for precious metals.

The Connection to Gold and Silver

Why would Russia possibly embracing the dollar crash precious metals?

First of all, this deal would likely be part of a peace deal to end the Ukraine war. An end to the bloodshed there would be fantastic news. But war tends to drive people into precious metals as a safe haven.

Additionally, Russia was one of the ring leaders in the push to “de-dollarize” global trade. Ever since 2014, when pro-NATO forces took power in Ukraine, Russia has been under harsh sanctions and worked to reduce its dependence on the dollar.

And hypothetically, a deal with Putin could weaken one of the catalysts that kicked off the gold bull market. Back in 2022, when Russia invaded, the U.S. and allies seized $300 billion worth of Russian central bank assets.

This caused central banks all over the world to start buying gold instead of dollars and euros. Countries realized that their dollar-based assets could potentially be seized or frozen.

If Russia gets its seized assets back, you could make a case that this weakens the case for gold. I believe the reasoning here is faulty.

After all, we still have an approaching global debt crisis to worry about. We also may be approaching a top in tech stocks which have dominated global stock markets for more than a decade.

Just a Leaked Proposal

Assuming Russia’s proposal is what’s causing the precious metals selloff, it’s overdone. First of all, it’s just a proposal.

We’ve seen countless peace deals floated throughout the Ukraine war, and so far, nothing has stuck.

However, if Bloomberg’s reporting is accurate, it could be a sign that we’re getting closer to a deal.

Today’s steep drop in gold, silver, and miners is an overreaction. But we still may have more downside ahead. After all, even after today’s drop, we’ve had an incredibly bullish move over the past few years.

Does Trump Even Want a Strong Dollar?

If Russia does embrace the dollar, it could cause a slight rebound in the greenback. But the big question is: does Trump even want a stronger dollar?

Back on January 27th, President Trump was asked about the falling dollar. His reply was simple, “It’s great.”

And last summer, the President stated, “It doesn’t sound good, but you make a hell of a lot more money with a weaker dollar.”

One of Trump’s most important goals is to re-industrialize the country. And that is very hard to do with a strong dollar.

Having a strong currency makes it difficult for companies that export goods to compete in the global market.

So, no. I don’t think Trump wants a stronger dollar.

Hopeful for Peace

My hope is that we do see a peace deal between Russia and Ukraine. That war has already wasted far too many lives.

If Russia and the U.S. do strike a cooperation deal, it could have other interesting effects. For example, it would go a long way towards President Trump’s goal of weakening the China-Russia relationship.

And if Putin does embrace the dollar, my view is that any bullish move in U.S. currency will be short lived. And that’s if it even happens.

No matter how it plays out, the long-term bull case for precious metals remains strong. Debt is piling up at unsustainable rates, and there’s absolutely no plan to deal with it.

But in the near-term, we may get a substantial pullback. If you’re looking to buy, my advice is to spread your purchases out over time.

This market is too volatile to go all-in. And we might get a better entry point in the coming weeks.

Days like today are brutal, but they’re an inevitable part of investing in today’s chaotic landscape.

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