The 29 Trillion Race to Buy Up the World's Gold

On the morning of February 28th, 2022, somewhere in a Moscow government office, a phone rang. Russia's central bank had just discovered that 300 billion dollars of its foreign currency reserves, money it had spent two decades accumulating, was gone. Not stolen, not seized, just turned off. And every other government on the planet was watching it. Riyadh, Warsaw, New Delhi. And every single one of them came to the same conclusion that day. It can happen to Russia. It can happen to us. And what's happened since that day is the biggest sovereign gold rush in modern history. In other words, nobody's talking about it. I'm Felix Prehn. I'm an ex-investment banker and economist. This is Rose, who's our chief gold analyst. Winston is over here too somewhere, golden analyst. And literally what happened since that February 28th, 2022, and what that means for the economy and the dollar, and what that means for your portfolio, is what you're going to be learning in the next few minutes. So what happened that day? That 300 billion dollars in Russian central bank reserves was held mostly in US dollars. It was held also in US debt. So US treasuries and a little bit in a monkey currency called the euro. And it wasn't seized. It wasn't sanctioned. It was literally just switched off. Like there is a power switch to make money disappear. Every other sovereign nation, other than the US, immediately understood that US dollars are not yours. They belong to somebody else. They are yours as long as you behave. And that's a fundamentally different asset than what they thought they owned, right? You think you've got money in the bank, you think it's yours. It's actually the banks, by the way. So the dollar reserves at every central bank in the world used to be considered the safest asset on earth. That changed in 2022. So the next question then is, if you don't want to hold dollars as a central bank, because this is now a risky thing to own if you piss off the commander in chief, what's the only other major reserve asset no foreign government can freeze? Well, it looks something a little bit like this. You might have seen one of these. I'm, of course, talking about gold. Gold sitting in your own vault. That's the only other opportunity out there for central banks. That's the entire trade. And by vault, I really mean own vault, which is why even the Europeans are bringing their gold home from New York. So what happened? Go back to 2022 when Russia lost 300 billion dollars. How much was gold trading at? Well, it was trading at about 1800 US dollars per ounce. The peak so far this year was 5589 dollars and a few cents. This is the first part you need to understand. The second part you really want to understand is that the biggest player started buying and hasn't stopped. The People's Bank of China is now on a, I think it's an 18-month buying spree, as I'm recording this. They officially hold about 10 percent of their reserves in gold. By the way, if you're interested in what central banks are doing, we actually track it on our Intel map here. We have a layer that tracks what central banks are doing in the world. So say where Poland is buying or Kazakhstan or Uzbekistan or whatever. And then we also tell you, summarized here with the Winston AI, what's actually going on there. But you can track even further if you want to go a little bit loony with it. What the smart money is doing. Are they buying or selling this week? Plus the premiums being paid in Shanghai for it. Inventory, stress tests and the likelihood of a gold or silver squeeze. It's all there for the taking. That's a tool that we built. You can get access to that through the link in the description. I think it's like six dollars a week or something like that. I believe in making institutional data available and really, really affordable rates, because everybody should have this information at their fingertips. So back to China. We think China probably holds a lot more gold than it's telling us, because we know something. We know that about 57% of all the central bank buying last year was what? Unreported. They don't have to report it. We just see unusual volumes. And who's the biggest non-reporter? Well, the suspicion is that it's China. So they're buying gold with the dollars that they earn from selling, you know, iPhones, EVs, solar panels, trade surplus. And then they buy physical gold. They're not announcing it. They're just doing it. So you've got 18 months of buying biggest buyer out there. The third move is a country that's a little bit smaller. It is Poland, one of the smarter European nations. You don't think about Poland that often, right? But Poland is the most aggressive publicly reported buyer in the world of gold. Their central bank governor said in January, citing national security reasons as to why he's buying gold. So central bank governors don't usually talk like generals, right? So you've got a finance guy using national security language about gold. It tells us quite a lot. This is a European ally, right? It's a NATO ally of the US. But Poland sits next to Ukraine. They've been watching what frozen reserves and sanctions look like up close. They're very close to the consequences of that 2022 freeze. And then we have move number four, which is the Gulf move. Saudi Arabia and the end of the petrodollar. The country that built the dollar system started quietly leaving it. I made a video on that the other day if you want to watch that. In 1971, after Nixon broke the gold link to the dollar, the US made a deal with Saudi Arabia. Saudi Arabia was going to sell its oil only in US dollars. You want oil, you need to buy US dollars. The US said in return, we're going to protect you, our Saudi friends. That's how the petrodollar came about. So we went from the gold standard to the petrodollar standard. It is the foundation of our entire financial system. Saudi Arabia says they haven't bought any gold. But Swiss industry analysts have caught Saudi Arabia importing roughly 160 tons of gold from Switzerland in the last few years. And the amount would suggest it's going into the central bank vaults. So the architects of the petrodollar are quietly converting their dollars into gold. Now, I always say we do not watch the news. News is fairly pointless. We watch the money flows. And I know it's ironic I'm using a dollar symbol to signify money. That's how ingrained it is for us, right? But the money flow says to us that the petrodollar is being unwound by people. So the dollar flows used to go through oil back to the good old USA. Now, some of that oil money is now going into renminbi. Some of that is going into the euro. Some of that is going into gold. And then, and this is one thing I like looking at, we call it the long tail. We have a lot of tails around here. Don't be kittens. There are over 20 countries who are quietly piling in. 22 central banks reported gold purchases last year. Net buyers are now the rule. And you can see that. As the data gets updated, it'll be on our map. You see here Poland, right? You see here Kazakhstan. You see here India. All reporting purchases, right? Ghana, Brazil, all these guys. Indonesia. They're all buying gold. So buying gold is now the rule. It isn't just the exception. So what's the pattern here? It is the emerging markets, EM as the lunatics on what you'd like to call it, because it makes them sound smarter. But the heck's EM? Emerging markets. Emerging markets are often resource exporters. So countries that export oil, coal, minerals, these countries sell dollars. And traditionally, they've been putting them into dollar assets. And just to give you a comparison of just how big a deal this is, pre-2022, this is data from Goldman Sachs. You'd think they'd know a thing or two about that. Pre-2022, central banks bought about 17 tons per month of gold. Now, and ever since, it is about 60 tons per month. So almost four times what they used to buy. And it's been going on for about four years. It's the first time in modern history. Now, if you're wondering how we came up with the title to this, the gold that is above ground. So if this is your soil, right? Up here is, you know, where we live and, you know, where the sun shines. Sort of thing that my goddaughter draws. We have gold worth about 29 trillion dollars. About 20% sits in central banks, CB, central banks. More acronyms to make myself sound smarter. And how much just comes out of the ground through mining every year? It's about 0.5 trillion per year, which isn't really all that much. And the central banks, the sovereign buyers, are buying up all of that money, all of that gold coming out of the ground. So basically, no additional gold is available from mining. And that's been the case now for over three years. But then, of course, there are institutional investors, there are retail investors, there are jewelry markets. It's an industrial demand for about 10% of it. So if these central banks keep buying, and going to keep buying maybe at an accelerated rate, and the Iran war might be another reason for countries to buy gold faster, there is no factory making more gold. There are no rate cuts that print gold. There's no government that can print gold. There is exactly as much gold on earth right now as there will ever be in any reasonable time horizon. And because the governments are buying it faster than the planet can produce it. You're starting to see the picture. Most investors make one of a couple of mistakes with gold investors. First of all, I'm not a financial advisor. I'm not a registered financial advisor. I'm telling you what to buy. Just sharing my research with you. Well, Winston's research. People think, and this is mistake number one, they think gold is in a bubble and that they missed it. So gold peaked and then it dropped about 16%. And I've been getting some angry comments about that. But that is normal. We call it a bull market consolidation. In the 1970s, gold dropped 50% in the middle of a 2,300% rally. It's testing you. And that's why it's very, very important you have a proper strategy around this. Proper allocation, exit rules, and so on. But the biggest part, I think, of the gold thesis is something called the World Gold Council. Sounds a bit conspiratorial, doesn't it? They are central banks. Are you going to be buying gold in 2026? 95% said yes or we or yeah, right? 95% of central banks. None plan to reduce their holdings. But there is another mistake I see. And it is the all-in crowd. And if you're one of those, you're probably pissed off at me that I'm mentioning it. I don't believe gold should be your portfolio. Gold is part of our metals allocation. Most people think 10 to 15% might be a reasonable place to be. You can be higher. That's okay. But you need to understand the risk. You need to not be in a position where you need to sell it. The moment it crashes 50%, which is very likely to do. So the wealthier you are, actually, the more gold you can afford to hold. And the last mistake is people don't know the difference between paper and actual gold because they are not the same. They're two different markets and they're diverging. Paper is things like ETFs. There's a futures market for it. Gold is the physical thing. Well, that's an artful drawing, isn't it? I should get a gold star for that. Central banks do not buy GLD ETFs. They're buying London Good Delivery bars and they're putting them in their own vault. That is a clue. I'm not saying put all your money under your mattress. That's definitely not a good idea. And if you hold significant amounts, a vault, insurance, all that stuff is important. Now, does that mean that you should never own a gold ETF? No, it doesn't mean that. If you are more like a trader, who wants to hold gold for a little while to take advantage of the momentum, then yeah, sure. Go nuts. ETFs, all good. But if you're buying it as insurance against the dollar losing value, which is guaranteed, in my humble opinion, insurance against inflation, then I think the physical, let's get physical, is where you want to be. Buy it from reputable dealers. Go and ask your AI. Your LLM will tell you reputable dealers in your country. The bigger the piece, the lower the markup. So buy the biggest piece you can buy. Those are for the long hold, I don't trust the system type people. The gold ETFs, they track the price, they're liquid, they're easy to buy, but it's typically a paper clip. There's a third option and that is gold miners. If you're interested in that, put miners in the comments down below and I'd be really happy to do an entire video on gold miners, how we select them, the system we use, the system Wall Street uses, and so on. And gold miners are essentially a leveraged play on gold. Think about it. They own gold that's below ground. That all goes up in value. So therefore, the company increases in value faster than the actual price of gold. I do gold miners and I do physical. I don't really trade the ETFs, but you can. There's nothing wrong with it. Now, is this going to be a smooth lineup? In my humble opinion, it's going to be a pretty jerky lineup, but I could be wrong. I'm going to be very clear on that. I haven't got a crystal ball. Winston ate it. So if you're the sort of person who buys when everyone's talking about it and then sells when you're panicking, maybe this isn't for you. And how do you avoid that? Well, one thing is to not make it all your money. One thing is to make it a small percentage of your portfolio so you don't care whether it goes up or down. Gold is measured in dollars, but really, I would measure it in ounces because the actual temporary value is pretty irrelevant if you are a near forever holder. You might wonder why should I hold something forever? Well, build long term wealth for you and your family, your offspring, and so on. And it is still a hedge if the world does end tomorrow. Well, then it doesn't really matter. But say the banking system collapses. You can go out and you can buy some really, really good salad with it or maybe seeds to grow some. So the world isn't collapsing. It is rotating. We're going from a pure dollar system to a system that's going to be more complicated. So the dollar will still be here, but it'll just be smaller. And there will be other things, other assets that will be bigger. And in my humble opinion, gold will be one of those that will hold value because it's done it for the last 5,000 years. On the last 5,000 years, do not guarantee it's going to be the same in the next 5,000 years. The FTC makes me say that because it's probably true. But if you have no gold exposure or you're sitting on cash, you're probably losing purchasing power. So don't wait for the perfect entry point. Do your research. Come to your own conclusion. This is about not depending on a system that can be turned off. The way it was turned off at the sovereign level on February 28th, 2022.