‘Metals war’ drives historic decoupling as sovereigns corner supply - Mint CEO

NEW YORK (December 31) The global precious metals market is signaling a historic decoupling from traditional economic drivers, with prices surging despite a fractured Federal Reserve and a second emergency margin hike this week aimed at cooling volatility.

Josh Phair, CEO of Scottsdale Mint, said the disconnect between paper markets and physical reality has reached a breaking point. While bond traders price in an 80 percent chance of a Fed pause following a contentious 9-3 split vote, Phair argues central bank policy is no longer the primary price driver.

“The market is screaming a new message that the Fed doesn't matter anymore, scarcity does,” Phair said Tuesday. “We’ve entered a metals war where geopolitical desperation is the only price driver that matters at the moment.”

CME Doubles Down on Margin Hikes

The volatility comes amid aggressive measures by exchanges to stem the parabolic rally. According to CME Group Advisory No. 25-399, issued Tuesday, the exchange raised initial margin requirements for silver futures to $32,500 per contract - a 30 percent increase from the previous $25,000 level set just days ago.

This follows Advisory No. 25-393, which took effect Dec. 29. While the higher holding costs triggered a wave of liquidations - sending silver prices down to the $72 range Wednesday - Phair remains unfazed, predicting that physical demand will absorb the dip.

“There is going to be some very big volatile swings... and I think those are going to get bought up,” Phair said, anticipating the turbulence. “Welcome to the New World... If you have three entities all buying at the same time - banks, governments and retail all clamoring for the same material at the same time - you see moments like this right now.”

The Return of ‘Mercantile Banking’

According to Phair, the retail frenzy often blamed for price spikes is secondary to a much larger shift: the return of “mercantile banking” where sovereign nations quietly accumulate metal.

“We are in mercantile banking where government is hiring banks to buy on their behalf,” Phair said. “They basically have an open order to acquire a certain amount of metals, but they don’t want to move the market too fast. So they are basically these quiet buyers, like I have been calling it the hidden hand.”

China’s ‘Licensing’ Strategy: A Surgical Restriction

The physical tightness is further exacerbated by new export controls. While rumors of a total Chinese ban have circulated online, Phair clarified that Beijing’s move - effective Jan. 1, 2026 - is a calculated "licensing system" rather than a blanket embargo, designed to hoard raw inputs while keeping factories running.

“It is export restrictions. Not a ban... it is a licensing system,” Phair said, correcting online speculation. “They are monitoring things and they are also going to look at where that metal is going.”

According to Phair, the restrictions will likely bifurcate the market, penalizing raw material exports while allowing finished goods to flow. He noted that China distinguishes between "raw material," such as 1,000-ounce bars and grain, and "finished things" like retail products.

“They want that raw material to come in and be continually replenished,” Phair said. “I am going to guess China does want their manufacturing base to continue to ship goods all over the world... but they are basically going to say... they are going to restrict how much of their raw material can leave China.”

This surgical approach creates immediate bottlenecks for Western manufacturers who rely on Chinese refined silver grain and bars, reviving logistical hurdles not seen since the pandemic.

“It feels like China is reacting to its pressures that it has seen overseas and making sure that it has its resources to maintain its needs,” Phair said.

Industrial Flashpoints: The Samsung Factor

Beyond the monetary maneuvering, a new industrial front has opened in the metals war. According to recent reports, Samsung’s development of solid-state battery technology—which utilizes a silver-carbon composite layer—could radically alter demand curves.

“The United States, if it wants to be a leader for decades in the future... [needs] these minerals to fight a war,” Phair said. “It is going to be more AI and drones... and this is what rare earth minerals are all about. Silver is needed.”

Rumors and Resilience

The extreme volatility prompted rumors of bank failures and frozen liquidity lines. Phair dismissed reports of a major bank collapse but acknowledged that clearing houses are under immense strain.

“I personally don’t think that any large well-known banks did,” Phair said regarding rumors of a bank failure. “But is there a chance that maybe a clearing house, a small commodity house somewhere in the world blew up? I would say that is quite possible.”

Despite the chaos, Phair advised investors to view the turbulence through a long-term lens, citing the "Fair Sinclair Ratio" - a metric comparing foreign debt to gold holdings - which suggests gold could eventually reach $35,000 per ounce.

“Whoever owns the most gold in the world controls the future,” Phair said. “Watch the central banks. Don’t listen to what they say.”