Latest / Kinesis Money / China Lights Fort Knox Gold Revaluation Fuse! - LFTV Ep 283

Transcript

China Lights Fort Knox Gold Revaluation Fuse! - LFTV Ep 283 · Kinesis Money

• 0:00
  SPEAKER_01: Gold now having overtaken US Treasuries as the top reserve asset, as trust in dollar-based systems weakens, the shift confirms that gold is being treated as a strategic sovereign asset, not just a reserve holding.
• 0:30
  SPEAKER_00: Welcome to Life in the Vault, brought to you by Kinesis Money, and we're certainly glad you've joined us here today.
• 0:35
  SPEAKER_00: You know, Life in the Vault is the show that goes beyond the headlines to uncover the truth about the precious metals industry.
• 0:41
  SPEAKER_00: And joining us today is Kinesis's very own world-renowned whistleblower and precious metals industry expert, Andrew McGuire.
• 0:50
  SPEAKER_00: And this week we'll be answering more questions from you, the Life in the Vault community.
• 0:55
  SPEAKER_00: So keep those questions coming in just by clicking on that link down there below in the description.
• 1:00
  SPEAKER_00: And you never know, your question just may be chosen for Andrew to answer right here on Life in the Vault.
• 1:07
  SPEAKER_00: So let's head over to the UK and talking gold with Andrew McGuire.
• 1:14
  SPEAKER_00: Hey Andrew, uh, we've had a lot of questions here around the launch of this Hong Kong Shanghai physical price setting hub.
• 1:22
  SPEAKER_00: And while it's in its early days, I guess, uh, into the rollout.
• 1:26
  SPEAKER_00: Can you bring us up to speed as to what you're seeing as the, you know, because we've got this uh physical over here, and we've got the paper, the physical war is playing out right in front of us.
• 1:36
  SPEAKER_00: Can you bring us up to date on what you're seeing?
• 1:39
  SPEAKER_01: Hey, thanks, Shane, for getting all the questions together.
• 1:42
  SPEAKER_01: Um, hey, it's great to be with you.
• 1:44
  SPEAKER_01: And uh let's have a look at all this stuff because I tell you what, if I was going to title this episode anything, it would be uh gold revaluation and the return of monetary scrutiny, because there's a lot going on here.
• 2:02
  SPEAKER_01: So we're gonna examine the rapidly closing uh and the yet still unrealized disconnect between current highly leveraged COMEX-driven end of month, and that's the Fed BIS mark-to-market event, which we're going through now.
• 2:18
  SPEAKER_01: So just look at the action and we'll look at it in the charts later.
• 2:21
  SPEAKER_01: Um, and and that that's good.
• 2:23
  SPEAKER_01: And we're going through that into tomorrow's first notice day, which we'll explain later, and Friday's end of the month last, what we see is the last kick at the can, which is making a substantial flow of uh it's hiding a substantial flow of unleveraged 400-ounce physical bars um moving into the Hong Kong SGE system, and why this synthetic market overshoot is actually gonna backfire into in a very significant way as August unfolds and a rising physical floor begins to assert itself.
• 3:04
  SPEAKER_01: And also directly related to this historic bearish paper gold versus bullish physical gold battle, and by no coincidence, we're gonna look at the CME's desperate attempt to stay relevant and how that's also gonna accelerate its demise.
• 3:23
  SPEAKER_01: However, let's keep the questions uh flow sequential, and let's start by connecting the dots uh from our last episode uh it was recorded two weeks ago on the 15th of July, and let's look at what we are actually seeing now.
• 3:40
  SPEAKER_01: Now, following last Friday's launch of the global facing Hong Kong SGE gold clearing settlement pricing and delivery architecture, Bessent's sudden focus on integrity of US gold assets is unlikely to be coincidental.
• 3:58
  SPEAKER_01: Now that China is openly building a physically anchored alternative to the traditional London New York paper pricing axis, which is forcing renewed scrutiny of America's official gold reserves.
• 4:13
  SPEAKER_01: Now, as we noted in our last episode, last Friday's 24th of July launch of the GC Connected Hong Kong gold clearing system is a material development.
• 4:26
  SPEAKER_01: And there was very little doubt that the White House has been monitoring this state very closely.
• 4:32
  SPEAKER_01: And given that China now has the infrastructure required to challenge their previously captive COMEX LBMA price setting regime, which is about to facilitate a global central bank gold revaluation process, ultimately leading to revaluation event outside their control.
• 4:54
  SPEAKER_01: This is definitely on the front burner.
• 4:56
  SPEAKER_01: And this has undoubtedly put Fort Fort Knox back in the spotlight, which is what prompted Bessent to announce that US Treasury gold reserves were, and everyone's heard the statement, uh, present and accounted for.
• 5:10
  SPEAKER_01: Quote.
• 5:12
  SPEAKER_01: But the real market question is actually bigger than that.
• 5:15
  SPEAKER_01: It's whether the gold is there at all, and and it's whether America's official gold should now be independently audited, revalued closer to market reality, and treated as a strategic reserve asset in a rapidly shifting monetary order.
• 5:34
  SPEAKER_01: These things are all on the front burner.
• 5:37
  SPEAKER_01: And this that question is becoming much more urgent as the PBOC moves to exert greater control over global price discovery.
• 5:48
  SPEAKER_01: Uh, the LBMA COMEX unallocated fudge factor, where gold swaps and leases can remain on a central bank balance sheet.
• 5:58
  SPEAKER_01: It now puts the US Treasury gold directly in the line of fire.
• 6:02
  SPEAKER_01: And without a full audit of the counterparty risk tied to these gold loans, the Fed will face an even larger upswell of repatriation demands and have no choice but to clear the air.
• 6:15
  SPEAKER_01: And it is imminent.
• 6:17
  SPEAKER_01: The questions are literally being brought forward by the fact that the pricing is being set outside of their control.
• 6:26
  SPEAKER_01: And a public bar-by-bar audit would restore some credibility, but it would not answer the bigger question is how should the 147.3 million ounces of US Treasury gold be valued?
• 6:42
  SPEAKER_01: And that's a big question.
• 6:43
  SPEAKER_01: And trust has already been dented.
• 6:46
  SPEAKER_01: I mean, concerns over vault integrity that intensified in 2013.
• 6:51
  SPEAKER_01: We looked at it in better and more detail.
• 6:53
  SPEAKER_01: And this was when the Fed was unable to repatriate Deutsche Bank Bundesbank gold in a timely manner.
• 7:00
  SPEAKER_01: And it was no coincidence that the PBOC measurably stepped up selling US treasuries for gold priced in dollars at that time.
• 7:09
  SPEAKER_01: And since then, foreign central banks have become increasingly wary of the US-London vaulting system and the rehypothecation risks that are embedded in it, especially as the double counting loophole that allows lease gold to remain on a central bank's balance sheet.
• 7:30
  SPEAKER_01: The optics really worsened when the Fed refused to even allow Deutsches Bundesbank to inspect their US gold assets.
• 7:45
  SPEAKER_01: And these reserves have not faced an independent third-party audit since Nixon entered the dollar gold peg in 1971.
• 7:54
  SPEAKER_01: So, bottom line, Fort Knox is no longer just a vault story.
• 7:59
  SPEAKER_01: It's a verification, it's a valuation and trust story.
• 8:03
  SPEAKER_01: And in a world of financial stress, de-dollarization, and you've got shifting monetary architecture, America's official gold reserves are moving back into the markets, onto the market's radar.
• 8:18
  SPEAKER_01: And the valuation issue is where this gets really interesting for markets.
• 8:23
  SPEAKER_01: With no auditable data on how many competing ownership claims would be needed to be reconciled.
• 8:31
  SPEAKER_01: Any revaluation estimate is actually pure speculation at this point, but the floor is undoubtedly significantly higher than current prices as we see uh being played out today.
• 8:45
  SPEAKER_01: And well, and we're recording this on Wednesday for release tomorrow on Thursday.
• 8:50
  SPEAKER_01: So, um, and also we have FOMC later.
• 8:52
  SPEAKER_01: We'll look at that in a minute, but um obviously this is a perfect gaming day uh for the paper markets.
• 8:59
  SPEAKER_01: Now, with current estimates, I mean, revaluation, where is it?
• 9:04
  SPEAKER_01: I mean, current estimates actually vary between 10 and 50,000, depending on, and and credible people talking about between 10 and 50.
• 9:15
  SPEAKER_01: More immediately, at a minimum, based on an upswell of delivery demands and tightening supply at current prices, liquidity providers have raised their minimum estimation to 8,000 to 10,000 range.
• 9:29
  SPEAKER_01: And once revalued, and that's just the initial stage, and whether that gets done over a weekend is is open to debate, possibly.
• 9:40
  SPEAKER_01: But once revalued, as gold strengthens the asset side of sovereign balance sheet, it's it gives the Fed a powerful incentive to align with other central banks, including the PBOC, in managing a controlled upward gold price adjustment.
• 9:57
  SPEAKER_01: And to provide sufficient liquidity, um, gold would have to be revalued significantly higher than in the 4,000 range where it is today.
• 10:07
  SPEAKER_01: I mean, if you divide the 40 trillion, close to 40 trillion of US Treasury debt, and you you get a$150,000 an ounce.
• 10:16
  SPEAKER_01: However, the mid-band of the 10 to 50k estimates, which are coming from a range of liquidity providers and well hooked up people, the mid-range is a more realistic$30,000.
• 10:32
  SPEAKER_01: And this revaluation process has begun.
• 10:37
  SPEAKER_01: Now, this Financial Times piece highlights how global central banks have lost trust in storing their physical gold in New York or London.
• 10:45
  SPEAKER_01: And following the past four months of geopolitical uncertainty, they're accelerating efforts to repatriate sovereign assets.
• 10:53
  SPEAKER_01: And with gold now having overtaken US Treasuries as the top reserve asset, as trust in dollar-based systems weakens, the shift confirms that gold is being treated as a strategic sovereign asset, not just a reserve holding.
• 11:08
  SPEAKER_01: Now, this structural revaluation theme dates back to 2014, when the head of the Shanghai Gold Exchange stated at an LBMA conference that gold was being consumed in the East, but still priced in the West.
• 11:25
  SPEAKER_01: It was the starting gun.
• 11:27
  SPEAKER_01: China understood that the gap between the paper price and the physical value really began quietly absorbing underpriced Western benchmark gold from a market still dominated by unallocated cash-settled flows.
• 11:46
  SPEAKER_01: In a clear illustration of Western market arrogance, his comments were underestimated at precisely the time that the LBMA was navigating the defensive cartel-driven$600 sell-off that followed the Deutsche Bank 2013 delivery default, as you can see on this chart here, which was on the 1st of April, the White House orchestrated a bullion bank bailout.
• 12:13
  SPEAKER_01: Remember, it was a Sunday meeting, they called all the bullion banks together, and they instigated a bailout prompted by the LBMA member.
• 12:21
  SPEAKER_01: That was the ABN Amrose inability to meet very similar bullion repatriation demands, cash-settling client bullion accounts, that sparked a redemption request cycle that spread like wildfire across the LBMA bullion banks and extended through to the end of 2015, as you can see here on this chart.
• 12:44
  SPEAKER_01: And no prizes for who was on the long side of this sell-off.
• 12:49
  SPEAKER_01: Perhaps the$50 to$112 per ounce SGE premiums and massive ETF outflows provides just a small clue.
• 13:00
  SPEAKER_01: Now the BIS reclassification of gold as a first-year asset on the 1st of January 2023, that made so London fixed gold has since become increasingly relevant as T plus one NSFR deliverable collateral.
• 13:18
  SPEAKER_01: Whereas we have paper diluted events, the BIS, the NSFR compliance forced anything offered at the fixes to be T plus one deliverable.
• 13:31
  SPEAKER_01: This event provided China the trigger it needed to rotate first tier US Treasury exposure into first-tier physical gold.
• 13:43
  SPEAKER_01: And it then moved to take delivery of almost all of the three to five tons.
• 13:49
  SPEAKER_01: We've been talking about this for years, three to five tons priced at the daily fixes.
• 13:55
  SPEAKER_01: This is physical metal still being priced off a paper-heavy uh structure where we have 600 to 800 tons of unallocated, cash-settled gold changing hands daily across really what is a structurally short uh set of COT books, commercial books, uh bullion bank books.
• 14:19
  SPEAKER_01: The largest percentage of these daily deliveries flowed out of, off the grid, completely off the grid as monetary gold, never to return.
• 14:31
  SPEAKER_01: And when it is revealed, and and people will no longer wonder how it was possible for the PBOC to have accrued 40,000 to 45,000 tons of Western physical gold.
• 14:43
  SPEAKER_01: I mean, even some of the bullion banks are talking about 30,000 tons.
• 14:47
  SPEAKER_01: But this is a much more realistic number based on uh our very, very well connected liquidity providers that face those markets, bridge those markets.
• 14:59
  SPEAKER_01: Now, physical gold accumulations really support the BBOC, PBOC's broader mandate to insulate Chinese investors from the destabilizing influence of COMEX-led Western gold volatility, which has historically created a negative backwash into China's domestic market.
• 15:19
  SPEAKER_01: They didn't want that.
• 15:21
  SPEAKER_01: And by restricting access to highly leveraged and externally influenced speculative channels within China, the PBOC was reinforcing its long-standing objective, encouraging Chinese citizens to accumulate physical gold as a safe haven asset backed up by the PBOC to appreciate against debt-back fiat currencies.
• 15:45
  SPEAKER_01: They have kept that promise since 2010, when they first started encouraging citizens to buy gold, around about a thousand bucks.
• 15:55
  SPEAKER_01: Now, against this backdrop, it's no coincidence that China's largest gold ETF, which is the Huan Wifu Gold ETF, um, that has overtaken the um the Pine Bridge CSI 300 stock ETF.
• 16:12
  SPEAKER_01: And that's a stock-based EF.
• 16:14
  SPEAKER_01: Now, so the gold ETF now claims the top Chinese investment asset.
• 16:21
  SPEAKER_01: And this is by design and by encouragement.
• 16:25
  SPEAKER_01: And taking control of the global gold and silver markets is the bedrock of China's rapid build-out of national resilience system, designed really to absorb severe external shocks from sanctions, blockades, supply chain collapses to natural disasters and increasingly risks of a major war.
• 16:49
  SPEAKER_01: That's not to forget China is a military superpower and has absorbed lessons from the Russian and Iranian theaters, really to step up, insulating itself from dollar heg money.
• 17:02
  SPEAKER_01: And as we discussed last time, a gold-backed Yuan RMB is an integral component of building Fortress China.
• 17:12
  SPEAKER_01: A Sun Tzu style strategy, really for a state preparing not only to deter future conflict with the US, but also to function through prolonged crisis and extreme disruptions, which we are seeing now.
• 17:30
  SPEAKER_01: Now through gold, China is actually moving the price discovery game east.
• 17:38
  SPEAKER_01: So synced with cornering physical gold pricing and consumption, here is more evidence China is accelerating its dedollarization strategy by cutting panda bonds costs, boosting offshore yuan liquidity, and encouraging foreign borrowers to raise RMB funding.
• 17:56
  SPEAKER_01: Bearing in mind RMB is convertible to gold.
• 17:59
  SPEAKER_01: And this message is clear.
• 18:01
  SPEAKER_01: Beijing wants deeper yuan capital markets, less reliance on the dollar system, and a stronger alternative reserve asset base as confidence in US Treasury weakens.
• 18:14
  SPEAKER_01: Now it really needs to be underscored that Hong Kong is not just another gold venue, which seems to be what some of the mainstream has been talking about.
• 18:24
  SPEAKER_01: It marks the commencement of global-facing structural reset.
• 18:30
  SPEAKER_01: China has built eastern clearing, pricing, vaulting, and physical delivery architecture outside London, New York paper access.
• 18:40
  SPEAKER_01: The Hong Kong SGE Link expanded vaulting capacities and Bloomberg backed an HAU rolling physical price reference, physical price reference running all the way during the day directly challenges the two benchmark local London Comex XAU benchmark fixes, which is why we're seeing premiums at those fixes.
• 19:06
  SPEAKER_01: And this is the most bullish structural reset in gold market history because China's Eastern Gold Clearing, pricing, settlement, and delivery system operates outside the London New York paper axis.
• 19:18
  SPEAKER_01: Now, the Hong Kong Shanghai Gold Exchange link um expanded vaulting and the Bloomberg-backed HAU physical price uh reference for deliverable RMP gold futures, physically backed gold futures, directly challenges the local London Comex diluted XAU benchmark.
• 19:42
  SPEAKER_01: I don't think it just seems to be that it's amazing to me that the mainstream aren't all over this.
• 19:49
  SPEAKER_01: And with FX Gold NSFR compliant and T plus one deliverable at the London fixes, this HAU XAU arbitrage window is going to force the paper-to-physical gap to close very, very fast.
• 20:03
  SPEAKER_01: So to accommodate this, the PBOC also removed restrictions on gold flows between Shanghai and Hong Kong.
• 20:11
  SPEAKER_01: And that turns western-facing SGE, the Western-facing SGE gold corridor into the deepest physical liquidity pool in the global marketplace.
• 20:23
  SPEAKER_01: So the HAU price gives institutions, which is what they've attracted, a physically deliverable over-the-counter settlement reference, live, clear evidence that China is building the plumbing to price, finance, and mobilize physical gold across Asia and then also globally.
• 20:46
  SPEAKER_01: Now for traders and by osmosis for investors, it is a market structure shift towards the world's largest physical physical demand region.
• 20:58
  SPEAKER_01: And as liquidity um uh settlement and deliveries move east, gold is being pulled away from a Western paper pricing model and towards an Asian physical reserve asset model.
• 21:12
  SPEAKER_01: That is bullish for price, it's bullish for available physical premiums, and it's bullish for the long-term monetary re-rating of gold.
• 21:23
  SPEAKER_01: And the key point, the the ongoing drain of local London physical liquidity has most recently been marked by uh completely uh missed uh by the by the um uh because because of the NV, because the PBOC's clamp down on Chinese speculative positioning, um really this this increase this this physical liquidity inflows have actually been hidden by by the by this process.
• 21:55
  SPEAKER_01: And that uh I mean that policy flush uh created.
• 22:00
  SPEAKER_01: Visible downside pressure on spot gold, which Western derivative traders have continued to misread as bearish.
• 22:08
  SPEAKER_01: And I can see today, yet again.
• 22:11
  SPEAKER_01: And instead of seeing a controlled washout of speculative length, which is really what was happening, they've added unbacked COMEC shorts into a tightening physical market.
• 22:23
  SPEAKER_01: That is disastrous ultimately.
• 22:25
  SPEAKER_01: Meanwhile, the LBMA 400 hours bar drain remains in force, restricting what it's doing is restricting LBMA COMEC's credit capacity to lend fractionalized metal to these spec shorts.
• 22:40
  SPEAKER_01: And this is just as T plus one delivery pressures is tightening the noose.
• 22:46
  SPEAKER_01: This is all happening.
• 22:47
  SPEAKER_01: It's masked by this end-of-month BIS squaring event.
• 22:52
  SPEAKER_01: Now, this month of August is where the really the bearish paper leverage really collides with the bullish physical demand.
• 23:01
  SPEAKER_01: Central banks and sovereigns have kept by through the full 30% sell-off as speculative loans were fully flushed, and then shorts were drawn in.
• 23:13
  SPEAKER_01: That's giving them something to take the other side of.
• 23:16
  SPEAKER_01: And this is exactly the setup that the bullion banks and well-connected institutions have also been capitalizing on into weaker paper price action, taking the long side of speculators into tightening physical supplies.
• 23:31
  SPEAKER_01: It's really simple.
• 23:32
  SPEAKER_01: The trade setup is actually hidden in plain sight.
• 23:36
  SPEAKER_01: China is opening a globally accessible physical gateway into the expanding SGE corridor through Singapore.
• 23:45
  SPEAKER_01: We've got Africa, Saudi Arabia, Latin America, just, I mean, these are the biggest hubs.
• 23:54
  SPEAKER_01: All of them are gold-centric.
• 23:57
  SPEAKER_01: And they're all being prepared for integration.
• 24:01
  SPEAKER_01: And at the same time, and this this is going to surprise, it won't just be Hong Kong.
• 24:06
  SPEAKER_01: When these others come on stream, similarly, we're going to need bullion to stock into those areas.
• 24:14
  SPEAKER_01: At the same time, Beijing's already established Yuan clearing uh coverage across every major gold trading hub.
• 24:22
  SPEAKER_01: The rails are already in place.
• 24:25
  SPEAKER_01: I just can't believe that it's not been seen by more people.
• 24:29
  SPEAKER_01: And to understand, really, to answer some subscribers' questions, how is it the mainstream analysts are missing the point?
• 24:40
  SPEAKER_01: Is that the current Western-driven bear market momentum sellers are focused on the wrong signal.
• 24:47
  SPEAKER_01: They're sending the wrong signal.
• 24:49
  SPEAKER_01: Price weakness is the flush, but the structural bid is the real story.
• 24:55
  SPEAKER_01: And they are completely missing.
• 24:57
  SPEAKER_01: One of the most important asset allocation shifts since Nixon ended the dollar's convertibility into gold.
• 25:04
  SPEAKER_01: Under their noses, it's happening.
• 25:06
  SPEAKER_01: Beijing is turning gold into financial plumbing for a new R and B linked settlement architecture, bank by back by physical delivery, collateral pools, vaulting, and offshore yuan clearing.
• 25:20
  SPEAKER_01: All the things required.
• 25:22
  SPEAKER_01: So for traders, that means downside paper pressure is increasingly run into deeper physical demand floor, a deeper, much deeper physical demand floor in liquidity.
• 25:34
  SPEAKER_01: And that is the a powerful setup for substantial upside repricing.
• 25:41
  SPEAKER_01: So under the mainstream need media's noses, not that they know the difference between paper and physical gold, uh, because they never dis differentiate the two, the structural bid for physical gold is, as I say, deepening.
• 25:57
  SPEAKER_01: For price, this means China's expansion of gold delivery, clearing, vaulting, and offshore RB settlement infrastructure is reinforcing a long-term central bank supported physical demand gold price appreciation flaw beneath an increasing liquid physical market.
• 26:15
  SPEAKER_01: And by osmosis, the PPOC's clear push to reduce Comex's influence over China's physical gold and silver markets has been the mainstream narrative, uh, has actually seen the mainstream narrative uh kind of uh shift a little bit.
• 26:34
  SPEAKER_01: Uh, a market which has once for years been framed as weak because of rising oil prices and geopolitical risk is now being forced to acknowledge the same drivers as bullish catalysts for safe haven precious nettles.
• 26:51
  SPEAKER_01: And as we highlighted near the recent lows, Gold's decline was being explained away as a reaction to geopolitical escalations.
• 27:00
  SPEAKER_01: And that very convenient narrative masks the deeper structural issue, which is the growing disconnect between cash-settled paper pricing and the relentless underlying physical demand.
• 27:13
  SPEAKER_01: Now, as a physical demand, as physical demand continues to absorb available paper short supply, the form-fitted weakness driven by strong safe haven Asian physical demand, these inputs are increasingly being recognized as the fuel for higher gold and silver prices.
• 27:32
  SPEAKER_01: And while many do not understand the mechanics uh behind this shift, the bullish change in market behavior is finally making what it's it's people are wising up.
• 27:44
  SPEAKER_01: And some of the mainstream media is actually wising up to this.
• 27:48
  SPEAKER_01: Once the broader market um fully recognizes this reversal, the upside risk becomes explosive.
• 27:56
  SPEAKER_01: And perhaps this is code for front-running them.
• 28:00
  SPEAKER_01: I'm just saying.
• 28:01
  SPEAKER_00: Hey, Andrew, in the last two weeks, one of the most asked questions again is uh from the community is what are you seeing here in the short term?
• 28:09
  SPEAKER_01: Excellent.
• 28:10
  SPEAKER_01: Yes, I think we need to look at that as well.
• 28:12
  SPEAKER_01: So let's hop and look at some charts um here.
• 28:16
  SPEAKER_01: Just for the record, we're recording this on Wednesday afternoon uh at around about 20 past four in the afternoon.
• 28:24
  SPEAKER_01: That's an hour and 20 minutes after the uh PM fix, and is for release tomorrow.
• 28:30
  SPEAKER_01: But obviously, the Fed's end-of-month BIS squaring footprints are pretty clear.
• 28:36
  SPEAKER_01: And if we look at the BIS footprints for exactly this same period last month, what they've done is, and this is definitely um officially driven, uh, what they've done is needing to get it back to these kind of levels.
• 28:53
  SPEAKER_01: And and really, uh, as far as I'm concerned, this is with most participants sidelined ahead of FOMC today.
• 29:02
  SPEAKER_01: We can see that the Comex bid was pulled yesterday, if we drill down into the lesser charts, and despite absolutely no news, no drivers whatsoever, the cell footprints that began in thin extreme condition at Tuesday's open gained momentum as the session then progressed.
• 29:27
  SPEAKER_01: And that's followed through to today.
• 29:29
  SPEAKER_01: And what we're looking at here is the expiring August contract, and basically this goes into first notice uh tomorrow.
• 29:40
  SPEAKER_01: Uh, then that rolls into the December contract, which is here, and that's trading at around a$50 uh premium to spot.
• 29:53
  SPEAKER_01: So when we look at the very short-term action, all the clues, a structural change in behavior are being made is are becoming evident.
• 30:01
  SPEAKER_01: And calls around the desks since Friday evidence strong Shanghai premiums confirming inflows of T plus one deliverable 400 ounce bars from London to Hong Kong aimed at bolstering physical liquidity, they've increasingly offset automated and mechanical COMEX fiat gold selling into dollar strength and rising oil prices, which would have been a heck of a lot better because some of it, I mean, into the mid-May, I mean, we saw oil rising into the mid-May highs above$101.
• 30:33
  SPEAKER_01: And while this mechanical selling has foreign exchange selling, fiat gold selling has bolstered momentum shorts, it's also rinsed out fresh long stops.
• 30:43
  SPEAKER_01: Now, liquidity providers view this as constructive.
• 30:46
  SPEAKER_01: The sell ignition attempts have stripped out excess long stop froth, leaving a cleaner setup for a short covering squeeze as physical demand continues to absorb paper selling.
• 30:58
  SPEAKER_01: Commercials exposed to upcoming T plus one delivery obligations, which are coming through at these fixes, and I'll go back to the August contract because it gives us a lot more history.
• 31:10
  SPEAKER_01: So the commercials are increasingly being forced to take the long side of these unbacked speculative short sales.
• 31:18
  SPEAKER_01: As a result, the paper-to-physical arbitrage opportunity is estimated to gain further momentum.
• 31:25
  SPEAKER_01: However, with Shanghai spot premiums averaging around a$10,$10 at the fixes, liquidity provides a point to sticky Hong Kong SGE physical demand, assessing it would be surprising if commercials did not start ringing the register on extremely overstretched leveraged momentum shorts into this strong T plus 1,400 ounce demand.
• 31:48
  SPEAKER_01: Now, obviously, that probably waits until the bed is squared.
• 31:53
  SPEAKER_01: It's BIS bets.
• 31:55
  SPEAKER_01: Also, looking at silver, Shanghai spot premiums over London are consistently around 10 to 11%, with prices right now at this time$64.78.
• 32:10
  SPEAKER_01: And if we step back and have a look at where we started this week, what on hope that there would be no more strikes, we can see that gold came very, very close to its breakout point, after which it was aggressively sold.
• 32:28
  SPEAKER_01: And again, it was this is largely to do with bid pulling.
• 32:32
  SPEAKER_01: And knowing that FOMC was coming up later today, really a lot of uncertainty was taken.
• 32:39
  SPEAKER_01: This is all really at the thinnest possible hour.
• 32:43
  SPEAKER_01: Who on earth would put this kind of selling into play at one o'clock in the morning?
• 32:48
  SPEAKER_01: Here's one o'clock in the morning.
• 32:50
  SPEAKER_01: Then if you move on to this morning, and this is where we opened overnight, and what happened?
• 32:57
  SPEAKER_01: Asia comes in once again, and you know, obviously, even with a surprise attack on the US base overnight, oil prices and inflation expectations move higher.
• 33:08
  SPEAKER_01: But interestingly, this lifted the physical bid in Asia.
• 33:13
  SPEAKER_01: But part of the course, price has been pushed back during the Western trade, of course.
• 33:19
  SPEAKER_01: And we've become accustomed to around this around first notice events, which is where paperback futures positions, especially in an expiring contract like the August contract, are forced to roll, in this case, into the December contract, or be delivered or closed, usually deceptively in illiquid or pre-news conditions.
• 33:44
  SPEAKER_01: And that's exactly what's going on here.
• 33:46
  SPEAKER_01: Look at the volume.
• 33:48
  SPEAKER_01: Huge volume based upon very, very little information.
• 33:52
  SPEAKER_01: And that's before FOMC today.
• 33:56
  SPEAKER_01: And for so, really, what first notice is is where paperback gold August futures contracts here are literally forced to roll into the December contract.
• 34:09
  SPEAKER_01: As I say, usually delivered or closed out as disruptively as possible.
• 34:15
  SPEAKER_01: None of these shanegas go unnoticed by physical buyers.
• 34:19
  SPEAKER_01: Goldman also came out yesterday suggesting nibbling on gold.
• 34:23
  SPEAKER_01: So short-term bearish action into month end, and this is spot gold, into the BIS squaring event, is colliding with large T plus one delivery outflows into the Hong Kong SGE hub, further compressing the bearish paper versus bullish physical gold spring.
• 34:45
  SPEAKER_01: Just when most don't expect it, a physically driven rally is expected to take hold in thin August holiday liquidity.
• 34:53
  SPEAKER_01: A quick look at silver on the uh uh 240 charts.
• 34:58
  SPEAKER_01: Very, very, very strong demand, Asian demand.
• 35:03
  SPEAKER_01: As I say, 11% premiums.
• 35:06
  SPEAKER_01: So um this is going to weigh on, and this is clearly, I mean, silver's related to uh to gold, and the the the heavy action in gold is following through into silver, but there's absolutely no reason to have silver below 60.
• 35:21
  SPEAKER_01: Looking at the option structure, that actually the sweet spot is around over over 60.
• 35:26
  SPEAKER_01: So this is definitely deeply, deeply oversold.
• 35:30
  SPEAKER_01: And if we look at the same 240 charts in the expiring August contract, well, clearly, and you can see that August is trading at an almost a$3 discount to spot as it as it uh moves into first notice.
• 35:44
  SPEAKER_01: This is all about BIS squaring, and it is gonna backfire.
• 35:49
  SPEAKER_01: Now, more broadly, several underappreciated bullish drivers are set to further tighten physical supply, uh, forcing competing bids um to move higher, to secure physical determined supply and demand prices.
• 36:06
  SPEAKER_01: Now, while the wider rollout of the SGE gold corridor is already uh reshaping true price discovery, Laos is the first Southeast Asian nation to move away from the paper-diluted cash-settled LBMA fixes to adopt the Hong Kong SGE gold price setting architecture and its physically determined HAU price ticker.
• 36:29
  SPEAKER_01: The agreement strengthens physical supply channels, uh refining access for them, market liquidity, and cross-border capital market connectivity.
• 36:40
  SPEAKER_01: This is a structural liquidity signal for all Asian gold markets, for all global south-facing gold markets, marking the first of what will attract many other agreements, advancing Hong Kong's mandate to become a regional gold uh trading and clearing hub, supported by SGE cooperation, expanded vaulting capacity, new investment products, tokenization, AML alignment, and belt and road market promotions.
• 37:13
  SPEAKER_01: See, the underlying bullish case for regional gold demand is being reinforced by unfettered physical access at true, real supply-demand prices, deeper regional clearing, expanded vaulting capacity, and really a very strong institutional infrastructure, which is absolutely necessary, and open up broader gold-based backed instrument products, and of course, this improved regional liquidity.
• 37:45
  SPEAKER_01: All of this is taking volume and business out of the West.
• 37:51
  SPEAKER_01: I mean, together, these factors are really tightening the link between spot demand, price delivery, and institutional flows.
• 38:00
  SPEAKER_01: So, bottom line, I mean, gold investors are being drawn away from legacy unallocated LBMA hubs.
• 38:08
  SPEAKER_01: Hong Kong's expanding role in Asia's gold trading and clearing architecture offers all global-facing participants improved access to physical supply.
• 38:21
  SPEAKER_01: None of this like doing a buying it on the over-the-counter market outside of a fix and then uh having to pay a higher price, renegotiate the high the larger you want, the supply you want, the the the higher the price.
• 38:35
  SPEAKER_01: All of all of this rubbish.
• 38:36
  SPEAKER_01: And also when we look at the COMEX situation, and you see the swap dealers necessarily going short on one side, what's not factored in is the long, unallocated long positions on the over-the-counter side.
• 38:51
  SPEAKER_01: So this is a huge muddle.
• 38:54
  SPEAKER_01: Um, so really this is what this is what the market needs.
• 39:02
  SPEAKER_01: They want wealth protection, they want potential upside, but they want it based on real numbers.
• 39:08
  SPEAKER_01: So, and that's gonna further cement Gold's role as a tradable reserve asset.
• 39:13
  SPEAKER_01: Together, these four forces point to a structural revaluation of gold as liquidity ownership and price discovery migrate closer to these to physical markets.
• 39:27
  SPEAKER_01: That's gonna happen far, far quicker than anyone expects.
• 39:31
  SPEAKER_01: So, to answer your question on what we are seeing on the ground chain, with discretionary buyers still underpositioned, uh, CTAs uh moving closer to mechanical buy triggers and upside optionality still very, very cheap, the risk reward is increasingly skewed towards a sharp move higher.
• 39:51
  SPEAKER_01: Multiple wrong-footed momentum-fueled attempts by speculators to double down and stretch the short envelope are now running into commercials under T plus one delivery pressure to deliver 400-ounce bars into Hong Kong.
• 40:07
  SPEAKER_01: And that, as we say, that's reducing the credit capacity available to fund bubble shorts into very strong physical gold demand, just as technically oversold gold coils into a tight bullish wedge.
• 40:21
  SPEAKER_01: Following the PBOC's speculative crackdown, Shanghai futures exchange positioning also remains near the lows, with Western weak hands flushed out.
• 40:31
  SPEAKER_01: Uh, we've got sentiment, apathetic, uh, long positioning still very light, and the immediate risk is now skewed towards speculative short stops.
• 40:44
  SPEAKER_01: A clean upside break is likely going to trigger a very sharp squeeze as short specs are forced to cover, then flip to rebuild longs.
• 40:56
  SPEAKER_01: This hasn't started yet, but it will.
• 40:59
  SPEAKER_00: Hey Andrew, you have a an assessment here on a well-timed CME-LBMA attempt, really, to try to stay relevant.
• 41:07
  SPEAKER_00: Can you share uh what you found on this assessment, please?
• 41:11
  SPEAKER_01: Perfect, Shane.
• 41:12
  SPEAKER_01: Uh while this has largely flown under the mainstream media radar, I'm going to address some questions surrounding uh the Sunday, July 26th rollout of a 24-hour gold futures trading, um, in fact, two trading contracts.
• 41:32
  SPEAKER_01: Um, and that's um because there's futures trading alongside the proposed competing, uh, and there's a uh Kalashi CFTC approved uh perpetual gold contract also coming into play.
• 41:46
  SPEAKER_01: Now the last the latter is being introduced under the guise of a swap, hence it can get CFTC approval.
• 41:53
  SPEAKER_01: However, both systematic uh both of these are completely um uh then they're non-deliverable, dilutive gold structures, and they risk backfiring by accelerating the demise of COMEX as a credible pricing exchange.
• 42:11
  SPEAKER_01: Now, the Hong Kong SGE, as the Hong Kong SGE builds a deeper physically anchored price, the CME risks losing control of the gold narrative.
• 42:21
  SPEAKER_01: So what the SG do is SGE is doing is draining physical market liquidity away from the LBMA, and in a desperate attempt to stay relevant, the exchange is scrambling to attract speculators to fill a void left by the wholesale exit of institutional traders.
• 42:39
  SPEAKER_01: Its response is both desperate and telling as it scrambled to launch the new 24-hour one-ounce gold futures contract this park past weekend.
• 42:51
  SPEAKER_01: Now, I'm going to refer to two Bloomberg articles outlining the imminent launch of the perpetual one-ounce gold contract and the expanded round-the-clock trading.
• 43:03
  SPEAKER_01: Now, the timing is no accident.
• 43:06
  SPEAKER_01: This new contract is not innovation for innovation's sake, it's defense.
• 43:11
  SPEAKER_01: The CME is also moving to front-run the Calci's own 24-hour one-ounce gold perpetual product, which sits outside the regular market hours and outside the traditional futures structure.
• 43:23
  SPEAKER_01: And the key difference is that the CME's contract still expires in tandem with the 100-ounce GC gold futures complex, you know, the bit larger complex, uh, keeping leverage tight to paper futures, obviously.
• 43:38
  SPEAKER_01: But neither contract is directly convertible to physical deliverable metal.
• 43:43
  SPEAKER_01: So why does this matter for gold and silver traders?
• 43:46
  SPEAKER_01: As physical gold and silver liquidity increasingly migrates eastwards and becomes more transparent through physical hubs, exchanges and tokenized real work asset world asset channels, the traditional Comec.
• 44:00
  SPEAKER_01: Model is being forced to defend its relevance with increasingly leveraged, cash-settled, non-deliverable trading products, deepening the very imbalance it seeks to conceal.
• 44:13
  SPEAKER_01: And these paper and crypto-linked contracts may appear to deepen liquidity, but in reality, they extend leverage price exposure through legacy position concentration structures and position really are the problem.
• 44:29
  SPEAKER_01: These structures thrive in illiquid conditions and they do not require physical metal settlement.
• 44:36
  SPEAKER_01: So targeted users are led to believe that this synthetic liquidity represents a balanced market, while the remaining are blind to the underlying paper to physical imbalance.
• 44:50
  SPEAKER_01: They're completely unaware that this paper to physical imbalance continues to distort price discovery, of which they are the target.
• 45:00
  SPEAKER_01: That illusion holds only while cash settled pricing tracks physical availability.
• 45:07
  SPEAKER_01: Now, if a basis blowout exposes this gap, real metal players, refiners, bullion banks, sovereign buyers, wholesalers, physical arbitrage tests, and contract market makers will buy undervalued paper exposure, stand against it with physical demand at the next FX C plus one deliverable NSFR compliant fix, and monetize the spread between the synthetic pricing and real-world deliverable metal.
• 45:36
  SPEAKER_01: In that environment, COMEX and related synthetic venues become liquidity pools provided by leverage speculators, with contract market makers positioned to monetize this dislocation where paper pricing is ultimately forced to converge with physical reality.
• 45:54
  SPEAKER_01: They're aware of it, but the takers for this contract are not.
• 45:58
  SPEAKER_01: And they'll be trading outside of ours.
• 46:00
  SPEAKER_01: And for gold and silver traders, the risk is absolutely clear.
• 46:05
  SPEAKER_01: Cash-settled paper markets suppress or distort price discovery temporarily, but they cannot permanently override tightening physical supply.
• 46:14
  SPEAKER_01: And as physical liquidity deepens, paper shorts and leveraged synthetic positions become increasingly vulnerable to basis blowouts, delivery stress, short squeezes, and repricing events.
• 46:29
  SPEAKER_01: Now, as the price setting baton shifts away from the COMEX and the LBMS control towards the SGE's liquid, physically subtle supply-demand-driven benchmarks, the relevance of these COMEX initiatives increasingly depends on illiquid synthetic volume.
• 46:49
  SPEAKER_01: However, the real arbitrage power is shifting towards the physical holders.
• 46:54
  SPEAKER_01: In a tightening metals market, leverage users of cash-settled, non-deliverable contracts, they risk becoming the liquidity, the very liquidity that physical players and contract market makers monetize into inevitable basis events.
• 47:10
  SPEAKER_01: I'm sorry if I repeated myself, but it's so important to understand.
• 47:14
  SPEAKER_01: And while China moves the price discovery game east, the COMEX foolishly doubles down on the paper trade, failing to realize the arbitrage fallout will serve to rinse out the very last few remaining clients they have.
• 47:30
  SPEAKER_01: So in the very short term, price action will depend heavily on today.
• 47:35
  SPEAKER_01: Again, Trump says he's going to go.
• 47:38
  SPEAKER_01: I won't use the words, but he, you know, it's going to blow the effing, whatever, out of uh Iran.
• 47:45
  SPEAKER_01: What that's done is suddenly spike um everything down lower, gold down lower mechanically.
• 47:52
  SPEAKER_01: So the immediate action will depend on whether Trump escalates or de-escalates.
• 47:57
  SPEAKER_01: Either way, strong Shanghai spot gold and silver premiums, alongside very large physically backed Chinese ETF inflows, underscores that physical bids remain intact.
• 48:10
  SPEAKER_01: And this is further supported by continued central bank and sovereign accumulations with or without paper-driven sell-offs.
• 48:18
  SPEAKER_01: And while the ongoing drain of LBMA 400 hours powers continues to constrain the credit capacity required to fund these negative short exposures, we it just leaves one question: to what degree are you prepared to protect your wealth into one of the most important asset allocation shifts since Nixon ended the dollar's convertibility into gold?
• 48:44
  SPEAKER_01: I hope you're well positioned.
• 48:46
  SPEAKER_00: All right, that wraps up another episode of Live from the Vault, brought to you by Kinesis Money.
• 48:51
  SPEAKER_00: And a big thank you to Andrew McGuire for sharing his deep market knowledge and to you also for tuning in and being a part of this growing global community.
• 49:00
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• 49:08
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• 49:19
  SPEAKER_00: Now get your questions into Andrew McGuire and keep your questions coming.
• 49:24
  SPEAKER_00: And you never know, they may be selected for our next episode right here on Life from the Vault.
• 49:29
  SPEAKER_00: And with that, we'll be back next week with more truth that you won't find in the mainstream media.
• 49:34
  SPEAKER_00: And until then, bye physical.
• 49:36
  SPEAKER_00: Make sure it's back one to one, and we'll see you next time right here on Life from the Vault.
• 49:40
  SPEAKER_00: Bye for now.