A clear warning from Mahfi Eğilmez on gold and silver! 'The investor's most expensive mistake...'

Renowned economist Mahfi Eğilmez wrote that the sharp rises and falls in gold and silver over the past week were the result of the market buying into expectations regarding the Fed administration in the US.

Eğilmez emphasized that there was a rapid pullback in precious metals, especially as the "easy money" scenario weakened. Stating that markets are pricing in extreme possibilities rather than cautious analysis, Eğilmez expressed that examples in financial history show such movements can have heavy costs.

Giving a clear warning to investors at the end of his article, Eğilmez said, "Blindly tying oneself to a single asset or a single political scenario can be an investor's most expensive mistake." Eğilmez used the phrases, "The most reliable way to protect wealth is to lean on a balanced investment portfolio, not a single investment vehicle."

The full text of Eğilmez's article titled The Rise and Fall of Gold and Silver is as follows:

"Markets have been under a kind of hypnosis for some time. Everyone was pricing in that Donald Trump would appoint a dovish name to head the Fed who would not say no to the White House's demands; who would ignore inflation risk for the sake of growth and would rapidly lower interest rates. With this expectation, while the dollar weakened, gold was rising rapidly with the perception of a safe haven, and silver was rising with its role as both an industrial demand and a dollar substitute. The shift of central banks from the dollar to gold in their reserve preferences was also an important factor supporting this movement.

However, Trump once again disrupted the scenario the market was accustomed to. Kevin Warsh, whose name has come to the fore for the Fed Chairmanship, was far from the loyal dovish profile the markets expected. Warsh, who has previously served on the Fed Board of Governors, has Wall Street experience, and continues his academic career, is known for his hawkish stance, especially on monetary policy. Most importantly, he has a line that prioritizes the Fed's independence against political pressures.

With the strengthening of this possibility, prices that had inflated with the expectation of easy money pulled back in a short time. The sharp sales in precious metals within two days showed once again how fragile the expectation ground on which the markets move is. Of course, not everyone is equally pessimistic. Warsh's recent assessments that productivity increases driven by artificial intelligence could pull inflation down also lead to interpretations that he might not be as closed to interest rate cuts in the future as previously thought. However, as always, markets preferred to buy into the most extreme scenarios rather than cautious analysis.

This sudden correction in precious metals reminds us of one of the most striking examples of speculation in financial history: the Hunt Brothers incident. The Hunt Brothers, who wanted to protect their wealth against inflation in the late 1970s, turned to silver due to a regulation that had come into effect in 1933 and imposed restrictions on the gold market, and they practically dominated the market with their silver purchases starting in 1977. These purchases had carried the ounce price of silver from 1.5 dollars to 50 dollars in March 1980.

However, the Fed's intervention and the restrictions it brought to silver transactions reversed the balances all at once. On March 27, 1980, the day that went down in financial history as Silver Thursday, the price of silver fell to 10.8 dollars. The Hunt Brothers lost 1.7 billion dollars in just one day and were driven to bankruptcy. Along with them, the banks that financed this rise and many investors who invested in silver also suffered heavy losses. This event was etched in memories as one of the clearest examples of how inflated expectations can turn into wreckage with a single policy move.

The pullback in precious metals today also carries a similar warning. It is difficult to predict whether Trump will take a completely different step tomorrow that will cause precious metal prices to climb rapidly again. However, what has happened shows us clearly: Blindly tying oneself to a single asset or a single political scenario can be an investor's most expensive mistake.

As financial history has shown many times, the most reliable way to protect wealth is to lean on a balanced investment portfolio, not a single investment vehicle."