Gold & Silver Alert: China and India Just Made a Huge Move This Week

Yesterday morning, gold traded down to $4,000 an ounce, and by the time I sat down to record this, it's back around $4,077. And look, a bounce is a bounce. What matters is what's happening around it. While gold was climbing, long-term treasury yields were also climbing, and oil was also climbing as well. All three of them up together at the same time. If you spend any time around markets you know, that's not how it's supposed to work. When yields rise, gold is supposed to fall. That's the rule every trading desk in the world prices against. This week, the rule broke. Today, I'm going to dig into why. Because you need to understand what's happening here so you can protect yourself. Now, I'm Eric with Summit Metals. We do the work institutions do for themselves in a way people like you and me can actually use. Our standing levels long-term have not changed. 5,500 gold, 120 silver. Spot, as I'm recording this, gold is at $4,077, silver at $5,911. But here's what's moving. And the SMPI, the Summit Metals Pressure Index, is at 61. It's remaining, I should say, in high conviction. Before we get into it, everything I'm covering today, the targets, the China timeline, the full data table, it's all in this week's PDF brief. It's the first link in the description. So let's do a little bit of an accountability check when we start for this week. Through this entire drawdown, from the highs earlier this year, all the way down to the low gold printed yesterday, I have not touched the long-term targets. Plenty of channels quietly walked their numbers back when it got ugly. I did not do that. Because the conditions those targets were built on have not changed. Prices changed. The thesis has not. And this week, for the first time in months, the market started agreeing with that thesis out loud. Now, let's talk about why the rule broke. I want to take you back to August of 1979. A new Fed chairman takes office, Paul Volcker. Anyone who's been in finance knows that name. He was legendary for decades. Everyone remembers how that story ended. He crushed inflation. He became a legend. They named a rule after him. What people forget is how it started. For months after he took the job, the market had no idea who he really was. Was he going to be tough? Was he going to fold the way the chairman before him folded? No one knew. And while the world waited to find out, gold went from $300 an ounce to $850. Not because the world ended, but because you cannot price the man who sets the price of money until you've actually seen him tested. So the market bought insurance until he proved himself. That is exactly where we're standing right now. Kevin Warsh is a few months into running the Federal Reserve, and here's the sum total of what markets actually know about him. At the ECB forum three weeks ago, he was asked whether July would bring a rate decision one way or the other. He declined to answer. He doesn't believe in forward guidance. He says prices are too high, and then he stops talking. In other words, a market that spent the last 15 years being spoon-fed the Fed's next move is now flying completely blind. Oh, and it gets better. His own committee is split right down the middle. Of the 18 policymakers who put projections on paper in June, half went rates held or even cut. Another half want rate hikes before the end of the year. On the single most important question in global finance, it's basically now to them a coin flip. It's a toss-up. So put yourself in the seat of anyone running serious money right now, and I would add to that you and me. A pension fund, a sovereign wealth fund, you have no read on the new chairman, and there's a war pushing oil higher underneath you. What do you do? You don't wait to find out who Warsh is. You buy the insurance first and ask questions later. That's what gold rising alongside yields actually means. For 40 years, when the world got scared, money ran into the long bond. The world is scared right now, and the money is not running there. Keep that in mind, because everything else that happened this week lines up perfectly with it. Now, three things happened this past week in three different corners of the world, and they're all telling the same story. First, Jamie Dimon runs the biggest bank in America, and his firm deals treasuries for a living. He sat for an interview on July 16th, and it went public this week. He said he would not buy stocks or treasuries at current prices. On the 10-year, he went even further. Even if inflation falls all the way back to target, he thinks the 10-year should still yield 4 to 4.5%. Now, think about that. The man whose bank sits closer to the treasury market than almost anyone alive is telling you there's little upside in owning them. When I was on Wall Street, you learned to listen very carefully when a man in that seat volunteers something he does not have to say. Now, second, the Fed's July inflation picture came in, and on the surface, it looks like relief. Headline inflation is forecast to keep coming down, but look at why. That number is falling because oil prices fell earlier in the summer. Before the Strait of Hormuz emptied out, before the Houthis declared a maritime embargo against Saudi Arabia this week, which threatens the backup export route the Saudis were using to get around Hormuz in the first place, that oil relief is already gone. Crude is up roughly 30% from its July lows, and underneath the headline, Coarse PCE is sitting at 3.4% and barely moving. That is the 63rd consecutive month above the Fed's target. 63 months over 5 years. So, the new chairman in Harrison's inflation problem, the headline number, is temporarily hiding, and an oil market that's about to put it right back on the front page. Finally, third, and this is the one I want you to remember. This Friday, July 24th, the retail paper metals market in China effectively closes. ICBC, the biggest bank on earth by assets, along with Postal Savings Bank, Ping An, and other banks are shutting down retail precious metals trading tied to the Shanghai Gold Exchange. Existing customers get three options. Close the position, move to something unlevered, or take physical delivery. Understand very clearly what that means. The Chinese banking system just told millions of own gold. Not a claim on gold, the actual metal itself. Things like we sell right here at Summit Metals. And now, let's add one other thing that most people are also unaware of. India just doubled what's called the duty drawback on gold and silver jewelry exports. Let me give you the plain English version of what this actually means, because there's a real signal buried in this as well. India imports metal. Its jewelers turn that metal into product. They export it, and the government refunds the import duties so the exporter isn't taxed coming and going. Those refunds are fixed rupee amounts per kilo. Now, here's why this matters. Metal prices roughly doubled over the past year, and the refund table was built for the old prices. So India's jewelry exporters, and those are some of the biggest physical gold and silver buyers on the planet, were getting back maybe half of what they'd actually paid, with the difference stuck as trapped working capital. Last week, the government doubled the table to catch up. In other words, India didn't just throw its exporters a bone. It marked its own tax code to these metal prices. Governments do not rewrite tax schedules for a spike they expect to fade. They do it when they've concluded the new prices are in fact the new normal. That is the second largest gold consumer on earth telling you in an official customs notification that $4,000 gold in their perspective or in their mind is not going away. Now, here's one more layer, and it comes from our own index. The Summit Metals Pressure Index barely moved this week, and that flat reading hides the part. The single biggest mover inside it was short volume in the major gold ETFs, which just spiked off multi-year lows. Paper traders are leaning short into the very week China closes its paper window. I hedge our metals here at Summit Metals every day, and I'll tell you what history says about persistent shorting at extremes like this. It has preceded squeezes far more often than breakdowns. So where do I stand? Gold, I believe the direction remains up. My read is that yesterday's washout was the flush that ends this big drawdown. And the forces I just walk you through point back toward the long-term target we've maintained now for a period of many months. For silver, I also believe the direction is up, and frankly, the cleaner setup of the two as we speak right now. Industrial demand hasn't blinked through any of this. And with the gold to silver ratio now near 69, silver still remains cheap relative to gold. Understand why those targets stand, because it's really important. It's not me being stubborn. Run the math, in fact, that the new chairman also has to run. Growth came in at 1.6% last quarter. He can't hike hard into an economy that is slow and breaking. And if something does break, the Fed will respond the way the Fed always responds, and that response is absolute rocket fuel for metals. If he doesn't hike, inflation keeps running above target, and metals stay on the bid. Either way, you end up in the same place. And here's what would prove me wrong. Now, this is important. If Walsh hikes next week, keeps hiking into an economy this slow, and nothing breaks, then he's Volcker on day one. The timeline on those targets stretches, and I'll own that adjustment right here on this channel. If you're holding physical, hold. What happened this year was a paper flush, and China just showed you, in writing, which side of the market survives when the system gets actually stressed. If you're an accumulator, this is the kind of window you wait for. Gold under 4,100. Silver under 60. With everything I just walked you through, buy your normal amount on your normal schedule. And if you need to sell, if there's a real reason, tuition, a roof over your head, then sell. And don't feel guilty about it. That's what your metal is for. That's why you built this incredible position. We take sell orders every single day, and we quote against spot, and we'll give you a fair price. Now, here's the question I want to leave for the comments, and I want you to pick a side. Do you think gold gets back to 5,500 inside the next 12 months? Yes or no? And tell me why. What are you, for example, seeing in the headlines that maybe I'm not covering? And again, remember, we have a PDF brief that goes through all the math, all the timelines, everything we've talked about before. It is the first link in the description. Check my work against it next Tuesday. It's a great way to see if what we're saying actually came true or played out as we thought. So the Fed decides next week, I'll be back the morning after with what it actually means. To reiterate our levels, 5,500 gold and 120 silver long-term. Now, we're not financial advisors, and we ask you to speak with your financial advisor before making any financial decision. I'm Eric with Summit Metals. I'll see you in the next one. Thanks for tuning in and happy stacking.