Transcription
President Xi is giving a very clear signal. He's playing financial advisor to the world, and he's telling people to buy real gold. And I think that applies very much so to Canadians, especially with the state of the Canadian dollar today.
So, I, I mean, what happened was, let's back up even a little bit further. For those of you who don't know, who have been watching us for a while, is the central banks around the world have been selling US Treasuries and buying gold. You know, at our boot camp, we walked through very detailed. We've been doing this for for years now, telling people since 2022 that the system, you know, effectively had had no way out of the enormous debt. And, you know, the average person should be having getting off of 0% an allocation to gold in their portfolios.
[snorts] And because the central banks around the world, you know, also saw that, and they've been accumulating gold. So, selling off US debt and accumulating gold. And that's been happening. And what also happened in China is a bunch of the commercial banks, they were actually, a bunch of the commercial banks were allowing customers to buy basically leverage gold products, paper gold. But I want to really delineate in between paper gold because there's different types of paper gold, some better than others, some worse than others, okay?
So, the type of paper gold that people were buying in China was being done with very high leverage, okay? And the type of instruments essentially allowed them to bet on gold prices without having to settle the instrument with physical gold, okay? Now, the, the, the, these products are effectively being shut down. So, retail investors will not be able to effectively speculate on the price of gold with leverage using products that don't require physical settlement.
Okay, that, that's a lot. There's, there's a lot of a lot of words happening there. And so, it's not that there won't be any type of paper gold at all because I've seen that floating around. That's not entirely accurate. It's just the type of instruments that don't require physical settlement or have too high of a degree of leverage. And the guys, the official narrative from this is it's to protect the retail investor, um, that they, you know, they're, they're not investing in too speculative of products, okay?
Um, and I'm sure that's, you know, not untrue, but I don't believe that that's the, the, the sole reason or even the most important reason for the ban, okay? I believe that the, the most important reason is, you know, China has been building basically physical gold settlement system out of Shanghai. Basically a gold bank out of Shanghai. And it's, you know, it's might not be in the best interest of retail investors to be betting on speculative prod, you know, speculative investment products with high leverage. But it's also not really good if you're intending to have a gold-backed system, and that's what you're betting on as a country, okay?
So, effectively, they want the world to, you know, they want trading partners to be transacting in either the Chinese yuan or basket currency that's backed by gold to allow them kind of an escape hatch from the US dollar. Um, you know, making the other currencies more trusted because they have a gold backing. And, and so what the, the paper gold was allowing is basically there's, you know, too much capital flowing into products that aren't necessarily settling in physical gold.
Okay. So, what that does is it basically artificially suppresses the price, okay? Because capital's going in, but no physical gold's changing hands, okay? Um, and that's, you know, it, it can [clears throat] it can cause price volatility, but the main thing is it's not just volatility, it's the suppression of the price in general too that it causes. And so, I believe that the, you know, in addition to protecting the retail investors, which, which, you know, is is not entirely untrue, I just don't think it's the most significant reason here.
Um, what that's going to do is it is going to stabilize the price somewhat because gold will have to transact physical gold, and it'll have to be done with less leverage. Also, it'll create true price discovery. And so, what happens with the true price discovery is now, you know, basically the lid's going to be off the price. Uh, you know, if every dollar going into gold has to be settled in physical gold, ideally, you know, according to the Chinese government, through their clear, you know, through their clearinghouse that they're building in Shanghai, um, you know, we could see continued upward price pressure on gold. Does that make sense to you?
>> Yeah. So, with the, the, the paper product that they had in China, it basically, it didn't have to be settled in gold. So, I mean, that, you know, what were they expecting in return, especially if they're highly leveraged, and it's not really backed against the price of gold, like how, how did that kind of square?
>> Well, I mean, Chinese investors are not much different than North American investors in that. And they're, they're more speculative and gambling rather than investing. Okay? Um, you know, it's, it's kind of the, you know, the get rich quick, the speculating, not investing, I call it, right? If they can do it with leverage, it's, it's the same reasoning. It's just one step away from, you know, betting on online sports, basically.
>> Right.
>> Um, it's more fun if you can put, uh, you know, a thousand bucks down and somehow, if you, if you get the timing right, come out with a hundred thousand dollars, even though it's, you know, the odds are wildly stacked against you. Okay?
>> Yeah.
>> Um, and it's not that, and, and this is where I push back where I just don't think it's entirely to protect the retail investor because there's still other products that are, you know, available in China that, uh, you know, allows people to participate in in different commodities or other financial instruments with a high degree of leverage. The fact that they're focusing on gold, I think, you know, points to the true issue. It's not like they're cracking down on all highly leveraged investment products. They're cracking down on highly leveraged investment products that deal in gold. And, and I think that that, in that in itself, that's the tell.
Okay? Um, and, and so, you know, I, I believe that there, it, it signals the continued resolve that they're going to continue to accumulate gold. They're going to continue to encourage their trading partners to accumulate gold. And ideally, um, encourage their trading partners to accumulate gold that's held at least in part inside of the, you know, the, the gold deposits and the vaults that are, um, being constructed in Shanghai.
>> Well,
>> ultimately, that creates a demand for the Chinese yuan because then people could transact with the Chinese yuan through Hong Kong because of capital controls. And effectively, in products that would have to settle physically in physical gold.
>> It like they [snorts] are almost, you know, trying to create a, an attractive option to the US dollar. But, I mean, right now, the US dollar has that, you know, hegemony across, you know, all of these, all of these markets, including China, because China owns, uh, so many treasuries, like US Treasuries. So, they're kind of betting against themselves on that. Um, you know, moving towards this more of a lot of almost a gold standard or a pseudo gold standard as opposed to US-backed US Treasuries. So, how are they, how are they going to make that happen? Because, I mean, you know, they're heavily invested. They hold a lot of US debt right now. Um, and then, so if they're, they're wanting to kind of combat that with an actual gold-backed one, um, what the heck is going to happen with those those investments in treasury? They just going to slowly liquidate those or or what?
>> Yes, that, that is exactly the, the game plan. It's to not liquidate them at once. It's to slowly and steadily get out of that position. Because, if they were to do so at once, they would just get less back in return. You know, they, they could, they could crater the value of their own investments. And so,
>> Yeah.
>> um, you know, it's funny when you talk about, you know, different investments being liquid or illiquid. If you hold too much of anything, it becomes illiquid.
>> Yeah.
>> That's the, you know, that's the case of, you know, if you own SpaceX stock, for example, um, you know, for the viewers that are listening to this channel, it's, it's a very liquid asset. You could sell it right now. But, if you're Elon Musk, you can't sell it. Um, you know, so if you own enough of anything, it becomes illiquid. And that's, you know, a lot of the large central banks around the world, although they're dealing in, you know, supposedly the most liquid asset on planet Earth, which is US Treasuries, it becomes illiquid if you own too much of them. And so, you know, the answer to that is to slowly and steadily over time is to get out of that position and continue accumulating gold. And, and that's what they're, and that's what they're doing, okay?
And so, I believe that that caused a bit of a temporary shock in the gold prices along with the geopolitical events that are continuing to happen on again, off again in Iran. Um, but as you can see behind me here, the Strait of Hormuz looks, kind of all right by me. So, um, into the Persian Gulf, I no troubles here. Um, but, you know, I, I really think that over time, if you, if you cause that physical settlement with more and more capital going into gold and forcing it into gold products that require physical settlement, that's going to have a true upward pressure on gold prices. Not only stabilizing gold prices, reducing the amount of swings and volatility, but a true price discovery. And price discovery with, you know, continually increased supply, continually increased demand means increased prices. And that's, that's a very likely outcome from, uh, this what's happened. And I think Xi has has has very clearly signaled to the world, um, you know, you know, very importantly to Canadians and, and, you know, I would say very important to especially any country that's, you know, not the US. Not the US dollar is is you could have continual downward pressure on any currency that's not backed by gold, okay?
So, if this, like imagine there there are winners and losers in this and in in this game, and there are currencies that are are going to take a gold position, they're going to have gold reserves. There are currencies that are not going to have gold reserves. And the US government is supposedly still supposed to have the largest gold reserve, although we can't audit it. You know, there's, there's no audit of Fort Knox there, but, uh, supposedly the largest position. So, continued upward prices. And, and, and this is the point where, you know, Canadians have been missing these signals. They've been missing these signals for a while. You know, I've been screaming from the mountaintops since 2022 saying, "Get off of zero on gold and Bitcoin." And this is just, you know, how far we've come through this process, and we've seen that it's not just the signals that I was seeing before where it was, you know, a small amount of central bank buying in 2022. I was buying it primarily because the, you know, the deficit spending around the world made no sense coming out of COVID.
What they're trying to shut down is the type of paper instruments that are high degree of leverage, don't require physical settlement. Not a regular gold ETF. Okay? So, a gold ETF that's just backed on a one-to-one basis with the gold bullion, that's still the type of instrument that's desirable, uh, I think, to, you know, to individual investors and also desirable to the Chinese government with their with their plans. So, and so I think it's, it's really important to drive it back home for the Canadians that what does that mean? It's like, well, I mean, if you've been sitting on the sidelines with, uh, with gold since 2022, you know, I think it's time to realize that this, this isn't done yet. Just because you have that pullback, uh, in pricing recently, it's like this has been happening. The de-dollarization, the selling off of US Treasuries and buying gold has been happening for a decade. Okay?
Um, and it's only accelerating. And now we're seeing regulation which forces the settlement of what they view as the backing of money in, you know, in physical delivery, which increases the strength of that, you know, it increases the price stability of that commodity. And it also has continued upward pricing pressure on the physical supply. And so, if you're Canadian, I think there's, there's a couple things that I think you really have to think about. It's like, number one, gold is a part of your portfolio, not all of it. You know, it's, it's the type of thing, it's like you do not want to have a 0% allocation. You also don't want to have a 100% allocation. I don't think that's a risk reward there. At that point, you're kind of speculating more than you're investing. And so, number two is I think most people are missing the boat in that the main risk that they have is their portfolio is just not big enough. You know, a few ounces of gold is not going to help you either way. You know, gold, number one, let's get to $1.3 million liquid. It's, it's at that point that inflation, which is, you know, basically inevitable at this point, starts working for you rather than against you. And I think that's important to remember.
And I think, you know, then the debate is, should it be physical or should it be paper? I think for most people, the right type of paper gold is where to start. Okay? So, if you're a, you know, a $100,000 net worth or below, it's, it's like the argument to buy physical gold bullion is probably pretty weak because I can't leverage it. I have to buy it in 1 oz increments. So, today's prices, I'm, you know, I'm averaging in at $6,000 an ounce. That's, uh, that's a, that's a rough go. It doesn't allow people to dollar-cost average very well. And the biggest thing is it's very difficult to leverage against it. If you really want to accelerate your returns, it's done with leverage. And leveraging physical gold, although not impossible, is is difficult, time-consuming, and not nearly as efficient.
Okay? So, the, the type of gold ETFs that we're talking about, you know, there's, there's a number of them. Um, like, uh, you know, uh, Kilo.be that we talk about at the boot camp, but there's a number of them. Basically, anything that's on a one-to-one basis, backed on a one-to-one basis with gold, that's not currency hedged, because one of the reasons why you buy gold is you want exposure to other currencies, basically away from your own currency. It's one of the, the purposes of buying gold is not directly tied to the Canadian dollar. So, you don't want some sort of hedging with the Canadian dollar when you already have a disproportionate amount of your assets tied up in things that are denominated in Canadian dollars, especially. Uh, let's call it Canadian real estate, right? You know, for the average Canadian, I think they have a disproportionate amount of their net worth tied up in in real estate, and primarily Canadian real estate. And so, one of the purposes is is getting away from that.
So, you know, I think it's, it's, you know, step one, you realize you got to get off of zero. Step two, you start to realize at the lower levels of wealth that the paper ETFs are probably better, allows you to dollar-cost average in more responsibly in smaller increments over time. Um, you know, and then, and then step three, it's like you have to have, you have to make the pot big enough anyways, because your major risk is inflation. You know, you know, if, if Xi's buying gold, if China's buying gold, it's because they don't believe in the dollar. They don't believe that US Treasuries will have a real rate of return. You know, why do you buy something that doesn't produce any cash flow in favor of, you know, instead of something that does produce cash flow? It's because you think that cash flow that's coming from the US Treasuries won't be as high as the, the actual real inflation. And that's why you buy it, right?
But then over time, it's, you know, once you do have the pot big enough, I think that the goal does switch to actually getting the physical gold, okay? So, for our clients when we're working with them, once they have $1.3 million left, it now becomes the objective that we should be acquiring physical gold. Um, and, and that's, I think the trajectory that people have to go through, like how, you know, what do you do with this information where you know that the Chinese government, one of the world's superpowers, is basically saying like gold is is the sacred cow. It's the thing that we're going to base, you know, we're hitch our wagon to. Um, so now you realize that I, I should probably get off of zero. And then you realize that there are some really good advantages to the paper gold, namely being able to, you know, dollar-cost average in small denominations. Um, and also being able to leverage against it as the way, you know, as we teach people in the boot camp. And then once you get the pot big enough that you, you know, are you're no longer a victim of inflation, you're a benefactor to inflation, now you want to reduce the risk associated with the paper products by acquiring some physical gold. And that's the path, and that's what you do with this information.