In recent months, gold and silver have exhibited incredible price volatility. Why? Because they’ve transformed from boring commodities traded by professionals into exciting gambling instruments traded by retail investors. Forget meme stocks, we’ve entered the age of meme metals.
Fear and greed usually fight with each other, but they work together when it comes to precious metals. Gold and silver combine the appeal of geopolitical catastrophism with gee-whiz “number go up” optimism. You can be simultaneously bearish on late-stage capitalism but bullish on bullion.
Do not attempt to rationalize the recent price convulsions of precious metals as logical responses to news about the Fed. That approach only works for non-meme assets such as nominal U.S. Treasuries, inflation-indexed bonds, and foreign currencies. Gold and silver are dancing frenetically to their own incomprehensible melody.
I use the word “transmogrify” to describe an asset departing the mundane world of logic and facts and moving into the upside-down realm of meme madness. For now, gold and silver have transmogrified into meme assets. Similarly, GameStop transmogrified from a normal stock into a meme stock in January 2021.[1] Such transmogrification is common in the Korean equity market, especially during exciting events such as elections, as normal stocks transmogrify into “theme stocks.” Sometimes Korean theme stocks revert back to normal after a few months (for example, once the election is over); sometimes they remain theme stocks for years. The prerequisites for transmogrification are narrative potential, retail traders, and limited supply.
Precious metals have the ultimate narrative: the world is descending into a new Dark Age, so why not buy what worked in the previous Dark Age? When I got my first finance job in 1988, Wall Street was still teeming with vast herds of gold bugs, largely elderly men wearing bow ties. Today’s gold bugs may have lost their bow ties, but they still enjoy telling blood-curdling tales about the imminent collapse of fiat money.[2] It’s not important whether these narratives are true; what’s important is that they are compelling.[3]
Thanks to ETFs, retail investors can easily trade gold and silver in the U.S. stock market. Precious metal ETFs have been heavily purchased in recent days by Korean retail investors. Use of leverage via options and levered ETFs has amplified the impact of retail sentiment.
When it comes to metals, Korean retail investors are overshadowed by a larger group: Chinese retail investors. Unlike individual U.S. stocks, gold and silver can be traded in mainland China, and Chinese retail demand played a role in recent price swings. Imagine how much worse the GameStop episode in 2021 would have been if mainland Chinese investors had been allowed to participate.
Perhaps the most important prerequisite is limited supply. The genius of Bitcoin is that it is scarce by design; in contrast, precious metals are scarce by nature. And both Bitcoin and metals are superior to equities in this regard, because the supply of equities is not fixed. In the case of GameStop, for example, the company issued more shares following the mania in January 2021.
We can see the importance of limited supply by comparing gold and silver. The total market value of all physical gold is much greater than the market value of all silver (5X to 10X higher). Consequently, it’s easier for retail investors to move the price of silver than the price of gold, resulting in much higher recent volatility for silver than for gold. We see this dynamic also in meme stocks: in the “quantum” mania of late 2024, only smaller cap stocks were impacted.
As the price of gold has risen, the price of Bitcoin has fallen. Why buy “digital gold” when you can buy real gold or at least an ETF for real gold? Gold has many advantages that Bitcoin lacks:
- Product placement: the King James Bible mentions gold 417 times, while the hit song from KPop Demon Hunters is “Golden.” Even the original Bitcoin white paper mentions gold.
- Market penetration: many Americans have physical gold with them at all times in the form of wedding rings or other jewelry. In 2024, Costco began selling gold bars.
- Diversification benefits: gold’s correlation with equities is typically around zero.
Gold and silver have always been prone to bursts of extreme price volatility, sometimes involving market manipulation. Gold plunged in September 1869 due to the unraveling of an attempt at market manipulation. And silver’s price gyrated violently in March 1980 due to a similar scheme by the Hunt brothers. Both incidents were later depicted in Hollywood films.[4]
The difference is that today’s volatility is being driven by retail investors, armed with the new technology of trading apps and social media. While some buyers of gold and silver are motivated by narratives about the demise of fiat money, others just want to buy whatever has gone up. These return-chasing investors are pursuing a wealth-destroying strategy of “buy high, sell low.”[5]
You’ve probably heard that “all that glitters is not gold.” Versions of this quote appear throughout history, but most relevant is its appearance as the last line of a 1747 poem entitled Ode on the Death of a Favourite Cat, Drowned in a Tub of Goldfishes. I fear that today, retail investors are risking a similar fate.
Endnotes
[1] References to this and other companies should not be interpreted as recommendations to buy or sell specific securities. Acadian and/or the author of this post may hold positions in one or more securities associated with these companies.
[2] For a depiction of this group, see Ritholtz, Barry. “12 Rules of Goldbuggery,” The Big Picture, April 16, 2013.
[3] For example, one narrative is that gold’s price is being driven up by central bank buying. Robin Brooks dismissed this narrative as “bogus” in “Debunking the myth of central bank gold buying,” October 2025.
[4] Cary Grant starred in 1937’s The Toast of New York about the gold market. 1983’s Trading Places (starring Eddie Murphy and Dan Akroyd) was inspired by the silver market, with the fictional Duke brothers instead of the real Hunt brothers.
[5] As argued by Erb and Harvey (2025) for the specific case of gold ETFs and by Ben-David, Franzoni, Kim, and Moussawi (2023) in the case of thematic ETFs generally.
References
Ben-David, Itzhak, Francesco Franzoni, Byungwook Kim, and Rabih Moussawi. "Competition for Attention in the ETF Space." The Review of Financial Studies 36, no. 3 (2023): 987-1042.
Erb, Claude B., and Campbell R. Harvey. "Understanding Gold." Available at SSRN (2025).
