Latest / Kinesis Money / The Lull Before a Gold & Silver Tsunami - LFTV Ep 295

Transcript

The Lull Before a Gold & Silver Tsunami - LFTV Ep 295 · Kinesis Money

• 0:00
  SPEAKER_00: Gold has decisively severed its bearish link to rising real yields and it in the bigger picture.
• 0:06
  SPEAKER_00: So short-term volatility is being leaned into.
• 0:10
  SPEAKER_00: They now have to keep renting a week.
• 0:13
  SPEAKER_00: We've got this ticking time bomb talking gold with the one and only Andrew McGuire.
• 0:20
  SPEAKER_00: Welcome to Life from the Vault.
• 0:25
  SPEAKER_00: Well, thanks for joining everyone.
• 0:28
  SPEAKER_00: And thanks for all the questions yet again.
• 0:30
  SPEAKER_00: I'm going to obviously um do my best to answer the, they're all relevant, but the most relevant ones for the for for today, so to speak.
• 0:41
  SPEAKER_00: And especially as we want to always connect the dots between the two market episodes.
• 0:46
  SPEAKER_00: Uh update upstairs, so that'll be two weeks ago.
• 0:49
  SPEAKER_00: I think it was on the 7th.
• 0:51
  SPEAKER_00: Uh, to today on the 21st.
• 0:53
  SPEAKER_00: So obviously that's when we're recording this.
• 0:55
  SPEAKER_00: Uh, we'll have some charts uh as well.
• 0:59
  SPEAKER_00: But I think in this episode, we're gonna take a look at who is behind capping gold at 4200 while surreptitiously taking the long side.
• 1:12
  SPEAKER_00: Now, first, a quick review, and then we'll look at the charts, exposing those very footprints.
• 1:20
  SPEAKER_00: Uh, and notwithstanding the last two weeks of synthetically driven volatility since our last episode, the broader performance of gold and silver should be assessed really in the context of the deployment of outsized, highly leveraged position concentration in COMEX futures market.
• 1:41
  SPEAKER_00: And when we say talk about position concentration, we're talking about usually the some the house actors um acting in unison or um being sanctioned to do so.
• 1:56
  SPEAKER_00: And by deploying this sort of level of concentration, which is the only way you can have these some these footprints would add up, uh what the house has been able to do is to both flush out all the remaining visible longs, and bear in mind they hold the book so they know where they are, and then through stealthy bid pulling, without digging a deeper hole, drawing in sufficient momentum sellers to lean into to cover short positions.
• 2:26
  SPEAKER_00: So obviously, you require open interest to do that.
• 2:31
  SPEAKER_00: Uh, you need some open interest to do that into.
• 2:34
  SPEAKER_00: Now, for very good reasons, this ongoing process will conclude not that far from now.
• 2:42
  SPEAKER_00: We'll look at that, and then we're talking about very quickly, actually.
• 2:46
  SPEAKER_00: Um, while momentums continue to push back against gold amid really house-related capping around 4200 bucks, underpinning central bank demand is evident.
• 2:58
  SPEAKER_00: And with the gold season beginning in less than two weeks, and with no long speculators left to rinse at all, ballooning layers of wrong footed, and these are the wrong at both ends momentum sellers now present attractive targets for the house.
• 3:17
  SPEAKER_00: They just happen to be short this time, but they're wrong at both ends.
• 3:21
  SPEAKER_00: They're also wrong when they when they've gotten bubble long.
• 3:25
  SPEAKER_00: But this is a bubble short situation, very similar to what we saw when they were bubble long into the end of January.
• 3:35
  SPEAKER_00: Now, there's no better way of exposing these mammoth footprints than to step through a brief review of the forces that culminated into last Wednesday's CPI surprise, um, where we saw extreme short-term uh uh uh like a long-stop flush.
• 3:54
  SPEAKER_00: It was a very short-term thing that happened, followed by goals physically driven upside gap close the very next within seven hours in the early trade on Thursday.
• 4:06
  SPEAKER_00: So we'll look at that in the charts as well.
• 4:09
  SPEAKER_00: But net of Comex position concentration exacerbating the volatility.
• 4:17
  SPEAKER_00: The official mainstream media cover story uh is that CPI shock affected short-term leverage macro traders who remain highly sensitive to movements in treasury yields.
• 4:30
  SPEAKER_00: Well, yeah, it's true.
• 4:32
  SPEAKER_00: Um, and also the US dollar and expectation for Federal Reserve policy, hence the sell-off.
• 4:38
  SPEAKER_00: Oh, yeah, nicely packaged, and let's move on.
• 4:43
  SPEAKER_00: However, under the headline driven action, unreported is the longer horizon, unleveraged physical buyers leaning into this synthetic discount to accumulate gold as protection against rising treasury debt, um, higher refinancing and debt servicing costs, uh, deteriorating fiscal sustainability, and the growing risk that these pressures are ultimately going to be addressed through renewed liquidity provision and ongoing currency debasement.
• 5:17
  SPEAKER_00: Now, this divergence in time horizons helps explain why investment demand, particularly through exchange traded funds, has remained resilient despite recent correction and elevated yields.
• 5:32
  SPEAKER_00: Now, ETFs have reached all-time highs into those pressures, while since the 25th of August highs, speculators have sold a net 4.5 million ounces in the futures markets.
• 5:46
  SPEAKER_00: This is not real bullion.
• 5:49
  SPEAKER_00: They've sold synthetic gold into the market.
• 5:51
  SPEAKER_00: Obviously, that has an effect on the market.
• 5:55
  SPEAKER_00: So into the CPI gaming event, Comex Gold net longs fell 8% into a three-month low of a of 115,000 contracts.
• 6:08
  SPEAKER_00: This is extremely low.
• 6:09
  SPEAKER_00: Bear in mind that's that is extremely low.
• 6:13
  SPEAKER_00: And what it did was it's underscoring the widening divergence between highly leveraged momentum-driven futures and option selling and the more resilient demand for longer-term investors.
• 6:26
  SPEAKER_00: And these investors have continued to accumulate gold through physical bullion and ETFs, and really uh lifting total ETF holdings to absolute record highs, unprecedented record highs.
• 6:42
  SPEAKER_00: And the race into both physical and ETF demand actually continues.
• 6:47
  SPEAKER_00: And as an example, into yesterday's, and I'm talking about October the 20th, yesterday's, into that cat comic selling, which we saw the heavy action, ETF inflows increased on that day by 157,05 ounces.
• 7:06
  SPEAKER_00: This is ETF inflows.
• 7:08
  SPEAKER_00: And over the last four weeks alone, about 35 tons has entered ETFs into.
• 7:16
  SPEAKER_00: If you look at the last month and you look at the heavy action, this is breaking the mold.
• 7:24
  SPEAKER_00: Now, the contrast, uh this what it does, this contrast reinforces liquidity providers' view that the ETF flows largely driven by institutional investors that are not simply mandated to buy, sell, or store physical bullion, and they're in so they're forced to use to buy shares in ETFs.
• 7:45
  SPEAKER_00: They're increasingly aligned, though, with the physical supported central bank and sovereign buyers.
• 7:52
  SPEAKER_00: Because it it it's even though the uh the on-ramps and the off-ranks are unallocated, ultimately it has to jive with where physical support is.
• 8:04
  SPEAKER_00: Otherwise, it's going to get arbitraged.
• 8:07
  SPEAKER_00: And rather than reacting solely to immediate monetary policy headwinds from elevated bond yields and a stronger dollar, in aggregate, these investors remain focused on really the longer-term fiscal debt sustainability and currency debasement risks.
• 8:26
  SPEAKER_00: Now, through opposing futures market directional position concentration, from a physical market perspective, um the the bullish divergence is just becoming increasingly pronounced.
• 8:41
  SPEAKER_00: An increasingly illiquid and highly leveraged Comex-centric derivative markets, dominated by obviously paper, settled futures and options traders, they're misreading the underlying physical market strength.
• 8:55
  SPEAKER_00: They don't see it, they don't have any visibility into it.
• 8:57
  SPEAKER_00: They're looking at a dot on the screen and a technical, uh historical um uh pattern, which may be constructed by the house, or it may just simply be historical.
• 9:09
  SPEAKER_00: And you know, so basically uh you can gear these guys to you by by the house can actually uh pull beards, um create um touches of moving averages which instigate a buy or a sell motion uh reaction from from these um uh momentums.
• 9:31
  SPEAKER_00: Um so basically the contracting open interest.
• 9:38
  SPEAKER_00: We're talking about this open interest.
• 9:41
  SPEAKER_00: Remember, I mean, goodness me, we're talking about uh about 800,000 contracts in 2020, uh down to literally uh less than half of that.
• 9:52
  SPEAKER_00: Uh this contracting open interest, or should we put it another way, the declining number of casino chips in play in the casino, what it's doing is evidencing a shrinking pool of leveraged supply being absorbed by better capitalized, longer horizon participants whose bids are actually supported by capital rather than margin.
• 10:17
  SPEAKER_00: And we're reaching the tipping point of a massive leverage unwind.
• 10:22
  SPEAKER_00: Um I mean, leverage cuts both ways.
• 10:25
  SPEAKER_00: As unleveraged buyers absorb price weakness and take delivery of physical bullion, the paper market loses its ability to force gold lower into those situations.
• 10:36
  SPEAKER_00: And that's then that also strengthens the bullish structure, and it reaches an inflection point that can then turn violently against the shorts, which is something we're starting to evidence now.
• 10:49
  SPEAKER_00: And when physical delivery demand exceeds the bullion available behind leverage paper claims, sellers must source the metal, cut exposure, or cover.
• 11:02
  SPEAKER_00: It's that simple.
• 11:04
  SPEAKER_00: And they're unwind as buying pressure as supply then tightens.
• 11:09
  SPEAKER_00: So offers can vanish faster than shorts can exit, um, creating a bid-only condition and accelerating the rally.
• 11:18
  SPEAKER_00: Now, worse, as prices decline, the percentage-based margin requirements, in other words, uh based on the price being higher or lower, the margin to hold those, the leverage to hold those positions can raise or lower.
• 11:34
  SPEAKER_00: Now, into a decline in price, a lower.
• 11:38
  SPEAKER_00: And it allows leverage to increase.
• 11:40
  SPEAKER_00: So when the price of gold actually turns up, margin calls force bubble short momentums to short cover into what essentially becomes a bid-only market condition.
• 11:54
  SPEAKER_00: So let's look at the charts and let's take a look at the multiple capping attempts that is really compressing this divergence.
• 12:04
  SPEAKER_00: So let's drill down into the violent reaction to CPI because it provides the perfect example of active official actors employing directional position concentration and the extent to which gold was synthetically gamed became clear after the$103 here to gap close here, two-way rinse to an exact gap close.
• 12:34
  SPEAKER_00: So the very next day, bearing in mind this is the AM fix just before the CPI gaming, and here's the AM fix afterwards, the very next day.
• 12:46
  SPEAKER_00: So it was settled above.
• 12:48
  SPEAKER_00: It's pre-CPI level.
• 12:50
  SPEAKER_00: Now, from a physical market perspective, it was as though this dislocation had never occurred.
• 12:57
  SPEAKER_00: So if you just ignored whatever happened below here, as far as the physical market was concerned, nothing happened.
• 13:04
  SPEAKER_00: So the commercial, the house short covering to meet delivery obligations followed through into last Friday's 4189.20, the highest PM fix, and this was here, and that followed through that buying uh since the 2nd of October.
• 13:23
  SPEAKER_00: Now the CPIB drove the dollar to its April 2025 highs, um, providing automated speculators the impetus to briefly push spot gold below 4100.
• 13:36
  SPEAKER_00: And this is the futures market, so but basically also futures below 4100, where it was met with very large arbitrage premiums.
• 13:46
  SPEAKER_00: Short covering emerged as newly drawn-in momentum sellers were leaned against by commercials facing the largest T plus one related short covering requirement of 2026.
• 13:59
  SPEAKER_00: And while it doesn't appear to be, according to the COMEX populated charts, it most certainly was from a physical market perspective.
• 14:09
  SPEAKER_00: Now, given the sheer volume of central bank sovereign and institutional buying into this CPI dip, the house was forced to begin ringing in the register on highly averaged, this is the wrong at both ends, momentum sellers.
• 14:25
  SPEAKER_00: And given the leveraged paper to unleverage physical gold overshoot, it was no surprise to evidence Asian buyers quickly taking advantage of lower prices, closing the overnight CPI gap.
• 14:39
  SPEAKER_00: Now you only have to look at every single pit open or news event, pit open, pit open, pit open, 1.30 in the morning selling, pit selling, pit selling, pit selling, pit selling, and again today, pit selling, and also selling off after London cleared yesterday.
• 14:59
  SPEAKER_00: So you can see this action is 100% synthetic and has nothing to do with the physical market, other than the physical market is arbitraging it.
• 15:11
  SPEAKER_00: So although, as we can see, these successive new releases and or every single pit open continues to be misread by narrowly focused momentum traders, the house facing substantial and rising delivery obligations remain on the long side, absorbing the subsequent increasingly muted waves of pit selling.
• 15:35
  SPEAKER_00: And just as gold was about to break out last Friday, you can see the momentum here, short covering, it was officially defended at the 50% retracement fiber at 42.2150.
• 15:54
  SPEAKER_00: And that bid pulling, it was bid pulley.
• 15:56
  SPEAKER_00: And uh that really to try and keep the wrong at both ends momentum sellers active.
• 16:02
  SPEAKER_00: So essentially, it was followed by the usual COMEC sellers trying their hand at capping gold and silver, and we'll look at silver in a minute, into thinner liquidity directly after the fix was settled.
• 16:18
  SPEAKER_00: As you can see here, we're just showing the footprints.
• 16:21
  SPEAKER_00: And once again, yesterday, waiting until the physical market was closed.
• 16:27
  SPEAKER_00: Because all our liquidity providers are of the opinion, and so is the house, a pit close above spot gold 4190, which is futures 4210, and we're talking about a pit close, was narrowly avoided last Friday.
• 16:47
  SPEAKER_00: And as mentioned earlier, while momentums continue to push back against gold amid house-related capping around spot 4200, the underpinning central bank demand is evident.
• 16:58
  SPEAKER_00: And with gold season beginning less than two weeks from now, and with no long specks left to rinse, ballooning layers of wrong footed, wrong at both ends momentum sellers now present attractive targets for the house, with liquidity providers positioned for a large sustained rally into the end of the fourth quarter, and that it's coiling just under this surface.
• 17:24
  SPEAKER_00: A sustained move above the 4252 level, which is actually a level breached during the late September sell-off, would then serve to dislodge momentum-driven short sentiment.
• 17:37
  SPEAKER_00: And against that backdrop, the house would be quick to ring the register into a substantial layer of shortstops identified all the way above 4352, setting off a margin called massive short squeeze.
• 17:53
  SPEAKER_00: Now, silver really provides the footprints that official intervention where position concentration limits were exceeded.
• 18:03
  SPEAKER_00: And this is the four-hour chart, so it looks less.
• 18:06
  SPEAKER_00: But essentially, this is the CPI move in silver.
• 18:12
  SPEAKER_00: And as we will see in a second, silver futures suffered a much larger automated downside rinse, with leverage speculators blindly targeting, but failing to breach the July low of$55.
• 18:27
  SPEAKER_00: Notably, they failed.
• 18:29
  SPEAKER_00: Now, unlike gold, silver combines monetary and industrial characteristics, leaving it more exposed to concerns about economic growth and industrial demand.
• 18:38
  SPEAKER_00: And with that narrative, far, far easier to game into thin open interest.
• 18:44
  SPEAKER_00: Now, the divergence is evidenced in the gold-silver ratio, which had broken above key resistance near 7260.
• 18:53
  SPEAKER_00: And sorry, if that level has or had become support, it would have signaled further silver underperformance.
• 19:01
  SPEAKER_00: However, while this purely synthetic cash-settled metric plays out, real-world tightness in physical supply at current prices has coiled silver into its most fundamentally and technically oversold level, COMEX-driven condition since October 2025 low of 45,515.
• 19:27
  SPEAKER_00: Silver is going to lead gold higher.
• 19:31
  SPEAKER_00: Now, with November gold and silver season commencing in less than two weeks from now, and with both gold and silver deeply, fundamentally and technically oversold.
• 19:41
  SPEAKER_00: I mean, just look at silver here and gold here, the commencement of a very large sustained rally into the end of the fourth quarter is coiling just under the surface.
• 19:55
  SPEAKER_00: And we see silver as leading the way.
• 19:59
  SPEAKER_00: And the option structures see silver support laying around 62 bucks, with the large-size Delta Hudge futures buying expected on a breach of 65.
• 20:11
  SPEAKER_00: I'm going to drill down into this very notable uh sell-off in a minute, but I had a lot of requests first for the COT report, which in this case measures a$2.06 sell-off between reports.
• 20:27
  SPEAKER_00: Bear in mind this is still current report.
• 20:29
  SPEAKER_00: This one won't be published until Friday.
• 20:33
  SPEAKER_00: And in gold, we're looking at$9.80 sell-off between reports.
• 20:41
  SPEAKER_00: However, I really need to underscore this report should be reviewed in the context of its complete omission of the offsetting hedges buried within the$1 trillion a week over-the-counter market into which we try and then connect these dots.
• 20:58
  SPEAKER_00: What cannot be hidden is the gradual shift revealed in the CO3 reports is that the house is taking the long side against deeply wrong-footed, Comex-centric gold and silver speculators.
• 21:10
  SPEAKER_00: They're going short, as we've said, long here, short here, long here, short here.
• 21:17
  SPEAKER_00: This is the same now in silver, where the insiders, the house, has gone long and the speculators have gone short.
• 21:25
  SPEAKER_00: And bearing in mind, these are percentage-based margin positions.
• 21:31
  SPEAKER_00: So when gold and silver rise, it's going to force a huge upsurge of short covering.
• 21:40
  SPEAKER_00: Because as the price rises, the percentage to hold those positions becomes higher, and then margin calls are called.
• 21:49
  SPEAKER_00: What this narrow report misses, though, is that the outflow of COMEX open interest is feeding an influx of liquidity into the global physical market.
• 21:57
  SPEAKER_00: And obviously, what is not captured in this Deliberately delayed report is the massive two spec, two-way long shorts rinse that followed CPI.
• 22:07
  SPEAKER_00: Obviously, this report was published before CPI.
• 22:10
  SPEAKER_00: Bottom line, there are no long stops left to rinse, but a lot of the yet untagged shortstop into 43.50 in gold.
• 22:19
  SPEAKER_00: And the house pitch manager's silver shorts, I mean, they were 100% hedged into any short positions they still hold, with very few actors left to play in the toxic sandpit.
• 22:34
  SPEAKER_00: And as we indicated, the changing option structure has set up the shorts for a similarly oversold upside rinse.
• 22:43
  SPEAKER_00: I mean, this setup is as structurally bullish as it can get.
• 22:48
  SPEAKER_00: So, as promised, let's drill down into the silver sell-off where no physical was put on sale whatsoever.
• 22:58
  SPEAKER_00: Now, if you remember, 1400-ton spoof we tracked during the last episode had already eliminated any rinsible longs.
• 23:07
  SPEAKER_00: However, the CPI sell-off was driven entirely by short selling, pushing December futures$3.46 per contract lower from$59.020 to$55.56.
• 23:21
  SPEAKER_00: Now, illustrate just how far this flash sell-off divolved from real physical supply and demand metrics, we need to examine the trading footprints.
• 23:31
  SPEAKER_00: Now, every contract has a buyer and a seller, but the top to bottom 32,800 December future contracts had changed hands between the house and the Comex speculators.
• 23:44
  SPEAKER_00: And I've just summed up a table to better illustrate this.
• 23:47
  SPEAKER_00: Now, in tonnage terms, that represented 5,100 tons of silver, equivalent to 20% of global mine supply, sold in less than seven hours.
• 23:59
  SPEAKER_00: In monetary terms, that is$567.4 million changing hands over the decline.
• 24:08
  SPEAKER_00: And the house bought the synthetically derived dip.
• 24:12
  SPEAKER_00: And that sums up just this action here.
• 24:16
  SPEAKER_00: Now, factor in what we previously uncovered.
• 24:20
  SPEAKER_00: While this purely synthetic cash-settled pricing mechanism plays out from the CPI engineered low, real-world physical supply remains tight.
• 24:29
  SPEAKER_00: Now keep in mind that aside from directly related ETF sales, where the on and the off ramps operate through unallocated cash-settled exposure, no physical silver was offered for sale during the sell-off.
• 24:43
  SPEAKER_00: And really, keep in mind that no physical was for sale in either silver or gold.
• 24:51
  SPEAKER_00: And the constructive takeaway from the last two weeks of trading, there's really threefold.
• 24:56
  SPEAKER_00: First, there are no long speculators left to rinse.
• 25:00
  SPEAKER_00: Second, ballooning layers of wrong footage, wrong at both ends, momentum sellers now present attractive targets for the house.
• 25:09
  SPEAKER_00: But most importantly, the massive position concentrated footprints has exposed COMEC's illiquidity.
• 25:18
  SPEAKER_00: And this resulting widespread volatility has served to shake out any remaining institutional open interest, accelerating the migration towards increasingly liquid, physically settled exchanges where prices are established by genuine supply and demand.
• 25:38
  SPEAKER_00: Now keep this chart in mind.
• 25:41
  SPEAKER_00: And yes, we're talking$4,000, almost$4,000 higher.
• 25:46
  SPEAKER_00: But keep this chart in mind when I talk later about something we've uncovered about the front running of the first quarter full-blown Hong Kong exchange, credit dollar accessible Hong Kong exchange in the first quarter, just as the BIS front-ran Bank of International Settlements.
• 26:12
  SPEAKER_00: And while it seems implausible, it is going to it is going to drive a huge short squeeze and don't discount$140 silver.
• 26:27
  SPEAKER_00: All that's coming up in a little while.
• 26:30
  SPEAKER_00: Well, I hope that uh it else helps illuminate some of the footprints.
• 26:36
  SPEAKER_00: Now, this is where we look at how returning Chinese physical liquidity meets a paper market uh short overshoot.
• 26:46
  SPEAKER_00: Now, the dominant theme over the last two weeks since our last market update episode was the anticipated return of the Chinese physical market liquidity following the one-week Golden Week holiday.
• 27:01
  SPEAKER_00: Now, in China's absence, paper market selling became increasingly one-sided, driving gold and silver into a deeply oversold condition and leaving momentum shorts vulnerable to renewed competition from returning physical buyers.
• 27:17
  SPEAKER_00: The reason I'm talking about this now is because it leads to something.
• 27:22
  SPEAKER_00: Expectations of renewed Chinese liquidity reinforced the constructive outlook across precious metals and the broader commodity complex.
• 27:33
  SPEAKER_00: A modest easing of geopolitical tensions in the Middle East, it weighed on the US dollar a bit, supported risk sentiment, and it helped kind of moderate elevated sovereign bond yields, and it provided a more favorable macro backdrop for the sector.
• 27:50
  SPEAKER_00: But that was seeing gold starting to come back.
• 27:53
  SPEAKER_00: And the expected re-entry of Chinese buyers, as well as position, as well positioned, uh very well positioned to impose discipline on the paper market.
• 28:04
  SPEAKER_00: So we're going to see some, this is where we see some interventions coming in.
• 28:10
  SPEAKER_00: As the physical bids returned, the house moved to begin profitably bringing the register on bubble short momentum exposure accumulated during the holiday-driven vacuum.
• 28:21
  SPEAKER_00: And as it became clear that the these late to the party momentum sellers were running, sellers were running into an increasing asymmetric risk of being forced to cover.
• 28:33
  SPEAKER_00: This is where official interventions resumed.
• 28:37
  SPEAKER_00: And who was behind it?
• 28:40
  SPEAKER_00: Now, of note, the rally off the bottom was 100% short covering, with no evidence, any specs had added, any potentially rinsible longs.
• 28:52
  SPEAKER_00: So it was really that's what the rally was, and it had to be stopped.
• 28:57
  SPEAKER_00: And with short covering objectives largely achieved, available downside liquidity appeared increasingly constrained.
• 29:06
  SPEAKER_00: The return of these Chinese physical participation, combined with sustained international sovereign demand, created the conditions for the holiday period short overshoot to be absorbed and reversed upwards.
• 29:20
  SPEAKER_00: This was until Bessence Exchange Stabilation Stabilization Fund once again intervened against gold.
• 29:31
  SPEAKER_00: Now, what indicates that the current interventions in gold are officially driven is the scale of the sell-offs into otherwise declining open interest comics chips.
• 29:43
  SPEAKER_00: And we've uncovered sell tickets that exceed single entity position limits at levels that a regulated bank would not risk without an exemption.
• 29:57
  SPEAKER_00: Now these ESF and Fed and agent bank transactions on their own behalf um obviously are transacts through other agent banks.
• 30:12
  SPEAKER_00: So and it's only these, it's only the ESF and the Fed that really have the exemptions to be able to operate under such would otherwise strict exemptions.
• 30:26
  SPEAKER_00: And as we just looked at on the chart, these whale-sized footprints are impossible to hide and exposed in the thinner liquidity of directionally related silver, you can't hide the silver footprints as well as you can gold.
• 30:45
  SPEAKER_00: And we've recently examined two notable examples of position limit breaches.
• 30:50
  SPEAKER_00: In the first covered in our last episode, there was the impossible 1400 tons of silver that was flash sold.
• 30:58
  SPEAKER_00: That was single entity sale that really was parachuted in by some other parties.
• 31:04
  SPEAKER_00: But essentially, that that's what drew our attention to it.
• 31:07
  SPEAKER_00: More recently, silver showed a similar clear intervention footprint alongside gold, where the official intervention was easier to obscure in the deeper, more liquid gold market.
• 31:19
  SPEAKER_00: So easily discernible in silver, much more difficult in gold.
• 31:25
  SPEAKER_00: Now keep in mind that spot, gold, and silver are both foreign exchange currency crosses against the dollar and are regularly intervened in.
• 31:34
  SPEAKER_00: All effects transactions or currencies are intervened in from time to time.
• 31:40
  SPEAKER_00: And actually, in Bessent's own words, he said, I have uh asymmetric information.
• 31:48
  SPEAKER_00: I am the house.
• 31:49
  SPEAKER_00: No one can forget those words.
• 31:51
  SPEAKER_00: I'm the house now.
• 31:52
  SPEAKER_00: You can bet against me if you want.
• 31:55
  SPEAKER_00: That's quote Bessent.
• 31:59
  SPEAKER_00: That's not language of a conventional central banker.
• 32:04
  SPEAKER_00: He's a former Soros macro trader.
• 32:08
  SPEAKER_00: He actually helped break the Bank of England in the foreign exchange currency market.
• 32:12
  SPEAKER_00: And later, then he positioned against the yen ahead of Abonomics, and they made billions on each side of these currency trades.
• 32:23
  SPEAKER_00: So he's a well-seasoned and very aggressive and well uh honed currency trader.
• 32:31
  SPEAKER_00: He's now on the other side of the equation in charge of the house, defending currencies, and as with the Yen interventions, is seeking to provide sufficient liquidity, this is the key, without forcing treasury sales.
• 32:45
  SPEAKER_00: That's what this is about.
• 32:47
  SPEAKER_00: These currency interventions are about.
• 32:50
  SPEAKER_00: Gold suppression is directly related to slow down US Treasury migrations into gold, create enough volatility and a lack of interest.
• 33:01
  SPEAKER_00: It's not working, but essentially that's what it's designed to do.
• 33:06
  SPEAKER_00: However, the exchange stabilization fund holds less than 220 billion.
• 33:12
  SPEAKER_00: Now, Bessent's self-stated intervention posture is therefore mismatched against a roughly 1 trillion a week foreign exchange gold market.
• 33:22
  SPEAKER_00: And more importantly, the scale of coordinated global central bank buying within that, his available ammunition does not match his rhetoric or the structural flow he's trying to actually contain in gold.
• 33:37
  SPEAKER_00: And this is what the current currency interventions in FX gold and by extension silver are about.
• 33:44
  SPEAKER_00: Best End is attempting to stem the de-dollarization of first-tier debt-laden US treasuries as capital flows into debt-free, zero counterparty risk first-tier physical gold.
• 33:58
  SPEAKER_00: Yet physical buyers are leaning into these visible interventions.
• 34:04
  SPEAKER_00: It's so clear that this intervention is going on, while the higher for longer rates compound actual concerns over a ballooning over 40 trillion US Treasury debt version into higher yields.
• 34:23
  SPEAKER_00: Now, Bessent is fully aware, though, that rising yields are intensifying uh fiscal concerns.
• 34:32
  SPEAKER_00: And the risk of obviously that risks currency debasement.
• 34:38
  SPEAKER_00: He's aware of that, and that foreign central bank sovereigns and institutional physical buyers are increasingly view gold as the only alternative first-year reserve asset capable of hedging rate volatility and the erosion of sovereign credit quality and currency purchasing power.
• 34:57
  SPEAKER_00: So the footprints suggest the House is also ultimately positioning for a long overdue US Treasury gold revaluation.
• 35:09
  SPEAKER_00: So bringing Judith Shelton into an advisory role with uh the ESF, and given her long history of uh pushing for a gold link dollar, it's not a coincidence that she was parachuted in.
• 35:27
  SPEAKER_00: And our liquidity providers assess that with the 1 trillion a week over-the-counter spot gold price underpinned very close to suppressed levels, and increasingly, and we've increasingly seeing arbitrage flows gaming over-the-counter gold for export out of London into nationally held gold vaults, the house price suppression layoffs are limited actually to a dwindling volume of COMEX open interest, and also borrowed ETF gold, which you can short sell, um, to flywheel a gold price revaluation.
• 36:07
  SPEAKER_00: So that's what it's limited to.
• 36:10
  SPEAKER_00: And while the house is already hedging against spec sellers, because they're synthetic, they're up there the market, and it costs nothing for them to short cover into, borrowed short-sold ETF gold still has to get paid back.
• 36:31
  SPEAKER_00: Now, while the on and off ramps for ETF gold and silver are conducted in over-the-counter unallocated form, these positions will have to be repaid at higher prices.
• 36:43
  SPEAKER_00: So as the central bank underpinned support levels rise into outflowing over-the-counter liquidity, the bandwidth to suppress gold will run against the exchange stabilization funds 220 billion in assets.
• 37:03
  SPEAKER_00: Sure, they can leverage those, but that's very limited.
• 37:07
  SPEAKER_00: And there's there is absolutely little doubt BessEN is buying up cheap gold into these rigged synthetic discounts.
• 37:17
  SPEAKER_00: So stepping back from the short-term volatility reveals a measurable shift.
• 37:24
  SPEAKER_00: Gold is no longer merely reacting to real yields, it's steadily absorbing and repricing the associated sovereign risk premium.
• 37:34
  SPEAKER_00: The relevant comparison is actually between the only two first-tier asset classes out there, other than cash, US treasuries and gold.
• 37:46
  SPEAKER_00: So, and as we drew attention to in our last episode, the last time the US sovereign bond yields traded at current levels, gold was priced at around 311 bucks.
• 37:59
  SPEAKER_00: And while gold has shown a short-term mechanical response, which is the chart volatility you're looking at on those charts, uh, and it's a response to higher bond yields.
• 38:12
  SPEAKER_00: It's really the Basel III compliant first-year gold now trades as a central bank underpinned$4,000 per ounce,$2,000 higher than in 2000 uh in 2002.
• 38:26
  SPEAKER_00: So$2,000 higher than when bond yields were at this level before.
• 38:36
  SPEAKER_00: Um, so it reflects the scale of the replacing uh required to balance the Treasury gold debasement trade.
• 38:44
  SPEAKER_00: It it crystallizes it.
• 38:46
  SPEAKER_00: It's simple as that.
• 38:48
  SPEAKER_00: And Bessent's aware that this historic divergence between debt-free first-tier gold and debt-laden US treasuries is structural.
• 38:58
  SPEAKER_00: Every physical facing liquidity provider we've spoken to takes the position that largely overlooked this, this is a massively overlooked divergence, and it's going to be a powerful driver of significantly higher gold prices.
• 39:14
  SPEAKER_00: And while legacy markets have not yet priced this shift in, global central banks, Bessence US Treasury, sovereigns, and an increasing number of LBMA bullion banks are positioning exactly for that.
• 39:30
  SPEAKER_00: And as far as global central bank sovereigns and institutional physical buyers are concerned, gold has decisively severed its bearish link to rising real yields and it in the bigger picture.
• 39:42
  SPEAKER_00: So short-term volatility is being leaned into.
• 39:46
  SPEAKER_00: And now it's now repricing gold as a strategic reserve collateral in what is really a structurally undersupplied physical market.
• 39:58
  SPEAKER_00: I mean, this is as bullish as it gets.
• 40:00
  SPEAKER_00: And the same repricing dynamic is evident in gold's relationship with the US dollar.
• 40:06
  SPEAKER_00: Uh, futures focused, mainstream media analysis, again, it continues to overlook the fact that gold and silver also trade as a currency cross.
• 40:14
  SPEAKER_00: Never do you see that.
• 40:16
  SPEAKER_00: They just quote it in dollars, but they're not, they don't view it as a currency cross against the dollar.
• 40:24
  SPEAKER_00: Uh and of course, all the other related fiat currencies.
• 40:28
  SPEAKER_00: And as measured against the dollar index from the August low of 98.5, which is uh when we saw uh gold rising temporarily up into last week's dollar high of 102.735, which was the height, the short-term reactionary inverse correlation ran into massive central bank buyers um between 4,000 and 4100.
• 41:00
  SPEAKER_00: In fact, the minute it crossed 4100, uh it was jumped on.
• 41:07
  SPEAKER_00: So in the larger picture, the it's the its influence is weakening as gold increasingly absorbs uh dollar strength.
• 41:19
  SPEAKER_00: So in 2002, the US dollar index reached above 120, while gold also traded about 300 bucks.
• 41:30
  SPEAKER_00: So, I mean, really?
• 41:31
  SPEAKER_00: You start to put these into perspective.
• 41:35
  SPEAKER_00: And more recently, the dollar index uh peak at 114 in dis in September of 2022 triggered an initial mechanically correlated sell-off in gold, which is sort of what we're seeing now.
• 41:48
  SPEAKER_00: However, that point ultimately marked the breakout of the advance through gold's long-standing synthetically capped 2000 ceiling.
• 41:57
  SPEAKER_00: We looked at that in the charts last week, so I won't really look at it again.
• 42:01
  SPEAKER_00: But with gold now supported above very strong central bank support at 4,000 to 4,100, it's evident that structural demand is increasingly out, outweighing the traditional headwind from a stronger dollar.
• 42:17
  SPEAKER_00: And this migration of demand away from leveraged futures and towards physically backed exposure, it further erodes the traditional yield and dollar relationships, and it just reinforces a case for structurally higher gold prices.
• 42:34
  SPEAKER_00: It is really quite simple.
• 42:36
  SPEAKER_00: Challenging this legacy cash-settled loco London over-the-counter benchmark, which is an unallocated gold market clearing roughly one trillion a week, 52 trillion a year, it's big exposes its structural mispricing.
• 42:55
  SPEAKER_00: When you think about it, um, rebalancing constrained physical supply against rising sovereign and institutional demand also requires a substantially higher gold price.
• 43:07
  SPEAKER_00: So the structural mispricing creates a strategic opening for China, constrained physical supply and rising sovereign demand increasingly favor markets.
• 43:20
  SPEAKER_00: What they're doing is they favor markets around deliverable bullion rather than leveraged unallocated claims, hence the race to those uh jurisdictions.
• 43:31
  SPEAKER_00: China's shift from concealed accumulation to public buying signals the PBOC's broader push towards the internationally used RMB with gold at its foundation.
• 43:44
  SPEAKER_00: We've done a lot of work on this, but it's happening and it's it's accelerating.
• 43:49
  SPEAKER_00: And while customs data, as we've looked at, captures only a fraction of the monetary gold held through these state banks, it is accelerating month by month.
• 44:00
  SPEAKER_00: Month by month, and they're happy for a part of that to be visible.
• 44:05
  SPEAKER_00: It's sending a message.
• 44:07
  SPEAKER_00: So this the strategy is reinforced by China's parallel reduction in US Treasury exposure.
• 44:15
  SPEAKER_00: So you just have to put the two together.
• 44:18
  SPEAKER_00: Its holdings are now at the lowest since 2008 and well below that of Japan and the UK.
• 44:26
  SPEAKER_00: And the it's increasing as these bilateral tensions are actually deepening.
• 44:35
  SPEAKER_00: So gold is therefore reasserting itself alongside the dollar as both a reserve asset and a settlement anchor.
• 44:42
  SPEAKER_00: You've got both going on.
• 44:44
  SPEAKER_00: And through the SGE-backed RMB gold ecosystem centered on Hong Kong, the PPSC is linking, renambo, liquidity to deliverable bullion and advancing a practical infrastructure for detollerization, encouraging to hold your your your what you sell into RB can converted to gold.
• 45:11
  SPEAKER_00: In Yuan, converted to gold.
• 45:14
  SPEAKER_00: Concerns over servicing more than 40 trillion of US debt at higher rates will accelerate sovereign reallocation into non-dollar assets, including a gold back yuan.
• 45:29
  SPEAKER_00: So rising US debt, dollar weaponization, leveraged paper claims, they're pushing institutions towards physical collateral and jurisdictional diversification.
• 45:42
  SPEAKER_00: Central banks are raising physical gold allocations and holding non-dollar settlement systems.
• 45:47
  SPEAKER_00: The dollar remains dominant, but gold offers the issue of free sanction-resistant neutrality.
• 45:54
  SPEAKER_00: So yes, they both exist side by side, and one is both are necessary.
• 46:00
  SPEAKER_00: And as a reminder, it's so important to remember Basel III and SFR rules made LBMA FX gold fixes physically deliverable in January 2023.
• 46:12
  SPEAKER_00: So, and as we talked about, there's just three to five tons actually get fixed, physically deliverable against what, six to eight hundred tons of daily cash settlements.
• 46:24
  SPEAKER_00: And while the HAU LBMA arbitrage definitely draws 400 hours bars back into national repatriations and into Hong Kong and uh and the SGE exchange.
• 46:38
  SPEAKER_00: It's so so essentially you've got the over-the-counter markets now, various central banks around the world are wanting their bullion back into their own jurisdiction.
• 46:52
  SPEAKER_00: And so this is a, I mean, we're also getting these bullish flows into the Hong Kong SGE uh disciplined um uh which is a disciplined environment, uh high quality liquid asset, and you have to have a you have to pay for your bullion bar, you have to uh when you when you buy it, uh you have to fully settle it when you sell it.
• 47:15
  SPEAKER_00: So it's so basically it's a physical price.
• 47:20
  SPEAKER_00: So the LBMA CME market makers, um, really what they're doing is strengthening physical price discovery.
• 47:31
  SPEAKER_00: That's what that's happening.
• 47:32
  SPEAKER_00: So physical depositories, um, depositories they streamline ownership and delivery for sovereign and institutional participants, and they need a high-quality liquid asset settlement.
• 47:44
  SPEAKER_00: So you can collateralize your your positions without selling them.
• 47:48
  SPEAKER_00: Um, and that's what is expanding access to Hong Kong's physical pricing gateway.
• 47:55
  SPEAKER_00: And and as we know, uh it's only part launched.
• 47:58
  SPEAKER_00: Wait till the first quarter, it's gonna get front-run, and we'll look at that in a little while.
• 48:02
  SPEAKER_00: But um look, this structural repricing that is gathering force under this chart noise is really the lull before, as I say, a tsunami.
• 48:18
  SPEAKER_00: And the rise in sovereign bond yields is itself increasingly part of the gold thesis rather than a straightforward headwind.
• 48:28
  SPEAKER_00: And higher yields reflect weaker demand or selling of heavily indebted sovereign paper as investors reassess their duration, refinancing inflation risks.
• 48:41
  SPEAKER_00: So, because you're not buying it and you're selling it, it's raising the yields.
• 48:46
  SPEAKER_00: So obviously, the interventions are active.
• 48:50
  SPEAKER_00: So, in that environment, reserve managers and sovereign institutions seeking an alternative liquid first-year asset are naturally drawn towards allocated physical gold held within secure, vaulted, collateral, comparable market infrastructure.
• 49:05
  SPEAKER_00: And obviously, unfortunately, a lot of these uh institutions aren't mandated to hold gold, so uh so are invested in ETFs, which are definitely not 100% physically backed.
• 49:20
  SPEAKER_00: Now, because they can be shorted, so therefore you don't know who the counterparty is.
• 49:25
  SPEAKER_00: And it depends, there is no limit to that.
• 49:28
  SPEAKER_00: Uh, so it's just based on margin.
• 49:31
  SPEAKER_00: Look, there are many, many more um developments, Buddhish developments.
• 49:39
  SPEAKER_00: There's a couple, but there's a couple that really have my attention.
• 49:43
  SPEAKER_00: Um and and these are unappreciated factors, which is helping Hong Kong physical gold infrastructure and other central banks to repatriate their gold.
• 49:54
  SPEAKER_00: It's incentivizing, and it's happening on an institutional scale more rapidly than was ever anticipated.
• 50:03
  SPEAKER_00: And one of them is to do, I think we touched on it last time, is to do with the once unassailable LBMA.
• 50:10
  SPEAKER_00: And against a backdrop of potentially significant litigation involving the LBMA, the organization is facing growing regulatory and client pressures to align more closely with physically settled market structures.
• 50:25
  SPEAKER_00: In the openly discussed in the recent LBMA um meetings, several member banks are reportedly exploring greater compatibility with the Shanghai gold exchange.
• 50:42
  SPEAKER_00: And obviously, they that their physical delivery model is really attractive.
• 50:49
  SPEAKER_00: And while LBMA bullion banks are increasingly and openly positioning gold as an alternative first-year asset, this is important.
• 50:58
  SPEAKER_00: And although the outcome of any legal action, of course, it's uncertain, in aggregate, these developments are sufficient to accelerate structural reform and materially reshape the LBMA's current cash subtle operating model, even if they survive, which they may not.
• 51:17
  SPEAKER_00: Valcambi, one of the largest gold refiners, plans to establish its first refinery outside Switzerland in Hong Kong through a partnership with Shu Wing Steel and the proposed operation.
• 51:31
  SPEAKER_00: It'll combine precious metals refining with vaulting services and extending uh Hong Kong's capabilities across physical bullion, the whole physical bullion value chain.
• 51:42
  SPEAKER_00: Now, the investments reflect a growing strategic importance of Asian physical demand and Hong Kong's ambition to compete with established refining, trading, and storage centers.
• 51:55
  SPEAKER_00: Now, officials are pursuing a whole value chain model that combines Swiss style refining, London-style over-the-counter trading and storage, and US-style futures infrastructure within a single regional hub.
• 52:11
  SPEAKER_00: Now, crucially, unlike legacy pricing structures dominated by cash settlement, all three upgraded components, refining, over-the-counter trading, and futures infrastructures are intended to operate on an NSFR compliant, physically deliverable basis, anchoring price discovery more accurately and more directly to verifiable bullion supply and demand metrics.
• 52:41
  SPEAKER_00: Now, this development sits within a broader program to deepen market liquidity and institutional participation.
• 52:48
  SPEAKER_00: Now, on July the 6th, Hong Kong began these trial operations for a gold clearing system.
• 52:54
  SPEAKER_00: It introduced local price benchmark, it secured participation from some leading Chinese banks and a major institutional LBMA and NOL and non-LBMA bullion banks, including JP Morgan, HSBC.
• 53:08
  SPEAKER_00: Now, these institutions are preparing for the full global facing launch scheduled for the first quarter of 2027.
• 53:17
  SPEAKER_00: And why is this important?
• 53:20
  SPEAKER_00: At the current pace, our well-connected uh liquidity provider assessments indicate that anticipatory positioning is already gathering front-running momentum.
• 53:34
  SPEAKER_00: The pattern bears comparison with the previous major bullish structure transition.
• 53:41
  SPEAKER_00: Do you remember when the BIS covered approximately 500 tons of legacy goal derivative exposure, front-running goals reclassification by two months as a first-year asset capable of competing with U.S.
• 53:55
  SPEAKER_00: treasuries?
• 53:56
  SPEAKER_00: Now, the advanced positioning led a sustained repricing as central banks, sovereigns, and institutions gained access to a newly reclassified first-year gold, resulting in a$4,000 rally from the November BIS squaring moment into January 2026.
• 54:17
  SPEAKER_00: Okay, that was an overshoot because of the specs, but nevertheless, still it was a$4,000 rally driven front-run.
• 54:28
  SPEAKER_00: And a similar front-running dynamic is anticipated to developing ahead of the Hong Kong's expanded first quarter 2020 physically deliverable market infrastructure.
• 54:40
  SPEAKER_00: And that's why we're looking for significantly higher prices.
• 54:44
  SPEAKER_00: This is unanticipated.
• 55:00
  SPEAKER_00: 60,000 tons, plus what the what the citizens have.
• 55:06
  SPEAKER_00: So in strategic terms, the initiative is designed to expand the Yuan's role in global bullion transactions while retaining dollar-based access for international participants.
• 55:19
  SPEAKER_00: Think about it, dollar-based access.
• 55:22
  SPEAKER_00: And rather than, I mean, this opens it to everyone, and rather than uh demonstrating a wholesale migration from the legacy hubs, we're evidencing an incremental rebalancing of capacity towards Asia.
• 55:38
  SPEAKER_00: The engagement of Valcambi, alongside official uh outreach to MKS PAMP, Arga Horaeas, indicates the market, the major refiners are establishing a closer operational presence near the region's expanding pool of physical demand.
• 55:54
  SPEAKER_00: We've been talking about it for some time.
• 55:56
  SPEAKER_00: This is now in writing.
• 55:59
  SPEAKER_00: And this trading liquidity and these custody requirements is an absolute game changer.
• 56:08
  SPEAKER_00: And the broader market implication is the emergence of a more physically anchored price discovery corridor, linking Hong Kong with mainland Chinese demand and the rapidly expanding global-facing Shanghai gold exchange ecosystem.
• 56:24
  SPEAKER_00: By integrating refining, vaulting, clearing, benchmark pricing, and prospective futures in both US dollars and Chinese Yuan, Hong Kong will facilitate a more direct transmission of regional physical supply and demand conditions into internationally accessible, true supply-demand drive prices.
• 56:47
  SPEAKER_00: Where does that leave the LBMA?
• 56:49
  SPEAKER_00: Where does that leave the COMEX?
• 56:51
  SPEAKER_00: I ask you.
• 56:52
  SPEAKER_00: This supports the development of gold as a high-quality collateral and a settlement asset within an increasingly liquid Asian market architecture.
• 57:03
  SPEAKER_00: So to sum up, under the immediate chart noise that we've been looking at, Hong Kong is assembling the bullish infrastructure required to become a globally relevant physical bullion hub at the intersection of international capital and Chinese demand.
• 57:20
  SPEAKER_00: And as this execution continues, a larger share of refining, custody clearing, and price formation will migrate towards Asia, not by immediately displacing London, Switzerland, or New York, but by creating a parallel, increasingly liquid market into which physical flows exert a greater influence and gold can be traded and settled in both dollars and yuan.
• 57:49
  SPEAKER_00: This is a very bullish setup.
• 57:53
  SPEAKER_00: Now we think that there is only one question to ask you.
• 57:58
  SPEAKER_00: Along with Bessent and every central bank sovereign and a growing number of first-year bullion banks, ready.
• 58:05
  SPEAKER_00: Are you ready for a physically driven fourth quarter upside gold breakout?
• 58:11
  SPEAKER_00: Potentially$4,000 higher.
• 58:14
  SPEAKER_00: Watch out in November as this all starts to come, get the front running commences.
• 58:21
  SPEAKER_00: And then also, don't discount$140 physical silver realignment.
• 58:29
  SPEAKER_00: That's the only question I will ask you.
• 58:31
  SPEAKER_00: Are you set up for it?