What China Knows: Why It Suddenly Tripled Its Gold Buying- Clive Thompson

Hi, everyone. Welcome back to the Daniela Kambonis show. Joined again by Clive Thompson. Always good to have him on. I'm getting straight to it. China just bought 20 tons of gold in July. It's their biggest monthly haul since late 2023. They've now been buying for 21 straight months. The official story is diversification. But when a country that size suddenly steps on the accelerator like this, you have to ask, what do they know that the rest of the world is still pretending not to see? And then almost on cue, Senator Rand Paul walks into Fort Knox this week. He comes out and doesn't just say the gold is there. He uses the visit to hammer home that the dollar has lost the vast majority of its purchasing power since we left the gold standard. So I have two questions for the great Clive Thompson today. Clive, first and foremost, welcome. Good to see you. Thank you, Daniela. It's great to be on your show and thumbs up for all your viewers. Thank you. Thank you. Yes, we love our viewers and they want to know why has China loaded up with gold at this exact moment? Clive, break it down for us. The figures which came out last Friday astonished me because it was whilst it was not the highest number of ounces ever bought by China. It looks to me like it was the highest dollar amount ever spent on gold in the month of July. And we're coming from last year when they were typically buying 30 or 40,000 ounces a month. I'm going to talk in ounces rather than tons. I know you said 20 tons, Daniela, but I find it easier to talk in ounces. So they were buying 30 to 40,000 ounces per month in September, October, November, December, January, February through to this year. And then in February, they suddenly stepped up their purchases from the 30,000 ounces to 160,000 ounces. They increased it again in April to 260,000 ounces and again in May to 320,000 ounces and in June to 480,000 ounces. And then the astonishing figure we had in July, which has just come out, is the 640,000 ounces of silver of gold that they bought. As you said, Daniel, the question is why? Now, I'm going to look at the positive side and say, I think that they like the price, but a lot of people have written to me and said, no, no, Clive, you've got it wrong. They're preparing for something much, much worse. And I don't want to speculate on Armageddon type scenarios, but clearly they're in a in a phase when they're rapidly increasing their gold purchases. Having said that, they're starting from a very low base. A couple of years ago, gold represented 3% of their total reserves, according to their official numbers. And I know people are going to say all the numbers are rubbish, but we've got nothing else to go on but the official numbers. We're now at 8% of their reserves in gold, whereas most of the major Western countries have gold reserves of 60, 70%. So they're way behind the curve compared with the rest of the world. And it could be that they just got a plan to catch up and have more gold in their reserves. Now, there's lots of reasons why they'd want to do that at the moment, which are perfectly benign. And one of them, of course, is a concern that the level of US government debt is such that we'll see higher yields down the line and thus lower bond prices. And it makes sense to have something else, which is more likely to go up in the light of increasing government debt. So wait, two points. So one, let's I'm just curious. Let's play out that Armageddon situation that some of your friends or colleagues have alluded to when they're preparing for the worst. What does the worst look like? Is it the situation in the US? Well, there's obviously a scenario. I don't think that there's going to be an Armageddon situation in the USA anytime soon. But obviously, what people are talking about is the risk that they will have sanctions imposed against them in the same way that Russia had sanctions. Now, Russia, when it invaded Ukraine, suddenly found that it was unable to deploy its US dollar assets. That would have included dollar cash balances as well as treasuries. China, of course, has a major part of its reserves in US dollar cash and US reserves. So if they fear that there might be some sanctions down the line for some reason, it would make sense to hold other things. And obviously, gold is the one thing where there's no counterparty risk and nobody can tell you you can't spend it. And we've seen recently gold, Russia recently sold some of its gold. Why did it sell its gold? Because it needed the money to buy things and it couldn't spend dollars because the dollars are frozen. So China is perhaps thinking the same way. And that makes a lot of sense. And that was the second point I wanted to bring up. I find that mainstream media focuses so much on the selling, you know, whether it was Russia or whether it was Turkey or whether it was India. Yet this news of China's massive buying in July. I don't know, at least in my opinion, was was was a lot lower on the radar here. Clive, I'm going to go. I know people would prefer the Armageddon scenario, but I'm rather going to go with the fact that they like the price. You know, a smart investors buy when there is a distressed seller. We have two distressed sellers in the marketplace, or we've had it in the last few months. We've had Turkey having to sell because it's basically hasn't got any oil. It's got to it's got to keep industry running. And we've had Russia having to sell because it can't deploy its dollars and it needs to buy stuff. I don't know what they're buying, but they obviously need to buy stuff or they wouldn't sell the gold. That's the last thing you had. And that's the reason a central bank buys gold in the first place. They buy gold for a scenario when you actually need money for something where you have no choice. It's the last thing you sell. So that's what's basically happening there. That's their four sellers. That's a distressed seller. And if you buy when there's a distressed seller in the market, you generally get a good price. So I'm going to go with that. Clive, what do you make of Rand Paul's visit to Fort Knox? Scott Vessant was just there. I mean, when was the last time an administration has paid this many visits? Maybe it wasn't documented. Maybe it wasn't, you know, public knowledge. But there's a lot of talk of Fort Knox gold that started with the, you know, the we wanted a gold audit. What do you make of his visit? Should we be reading into it or do you think nothing's there? Well, I'm quite sure that ever since the beginning of time, there have been various dignitaries who've been visiting Fort Knox offered on. And it's kind of like a glorified invitation. So you can have a nice lunch and walk around and make a few nice noises afterwards. There's no chance that any of those people who've visited Fort Knox could go and count the bars. What they're going to see is if assuming the vaults were actually open to them, they're going to see a room full of gold looking bars. But they have no way of knowing if they're real. They've got no way of knowing how many there are or doing any calculation. To do an audit, which was promised when Trump came into power, would take many weeks. You'd have to have a team of people and security guards monitoring the auditors who are busy counting the bars and ticking off the ones they've counted and and also perhaps saying the bars, because some of those bars, we don't they're very, very old. And we can't know 100 percent for sure what the quality is. We do know that France, when they took possession of their gold very recently, decided that the better option was to sell the gold bars that they have in New York, which didn't meet international standards of today and repurchase international standard bars from Paris rather than. So basically, they sold the bars they had in New York and bought ones in Paris. And I think I made a slight profit on the deal as well, if I'm not wrong, because they didn't say they didn't they didn't they didn't want to go down the route of having to get these bars in and test every single one of them to see if it's got a 99.99 percent gold. Clive, he did use the occasion, however, to hammer home the point that since we've been off the gold standard since 1971, the dollar has lost, you know, 85 percent of its purchasing power. Thoughts on that statement? Well, Daniela, for everybody who's ever played Monopoly, and I think that's most people, you'll know that the one thing which happens in Monopoly, especially if you've got a large group of players, is that as the game progresses, there's more money in the game because every time you pass go, you collect money. And the more money that's in the game, when somebody has to sell a property or a house or anything else like that, the bidding happens between the other players. And the more money they've got, the higher the bidding price goes. And here we are in the world where the amount of money in circulation and the amount of debt from the government is at all time record levels and looking like it's going to continue rising by, if we talk about the debt, by two trillion a year. We obviously don't know how much the money supply will rise, but we've got this all time record debt and it's nowhere, not even a fraction of what the gold is. So literally, if the gold was used to pay the interest on the national debt, it would barely cover one year's interest. Clive, I want to bring up, since it's been a while since we spoke, about the US play to save the yen, dumping euros, basically. Your thoughts on this power play move? The Japanese central bank holds lots of treasuries and they have to defend the yen. So there's one way that if it was down to Japan alone to defend the yen, that would be to sell US dollar assets and buy Japanese yen. What US assets would they sell? They'd have to sell US treasuries if they wanted to defend the yen from collapsing. On the other hand, if they sold US treasuries, that would push up US treasury yields, which is not much to the liking of the US government. The US government's got a bunch of euros. It can buy yen, therefore protecting the yen from an outright collapse. Thus, as the yen is no longer in danger territory temporarily, it means that the Japanese do not need to sell the US treasuries and therefore the yields can stay within, I'm going to say, acceptable boundaries rather than going up because someone's selling bonds and pushing the prices down. So it kind of makes sense for the US government to have used its euros. I don't know if they used all of them. I didn't even go into that. But it makes sense for them to help out Japan in these circumstances. Very interesting. I guess just to wrap, Clive, what do you want? I mean, look, it's been an exciting summer, gold and silver, you know, both catching or breathing some sigh of relief this week. Your thoughts on the overall market and what you want the people at home to know? Well, I've always said that you have to be diversified and do things gradually. So if you are thinking that you don't have enough gold or silver in your portfolio, and I know that's what we talk about, then my suggestion is to buy it gradually over time so you can look at what you've done and find out if you feel comfortable with your position. What you shouldn't do is have a position which is so large that if the price changes rapidly upwards or rapidly downwards, you feel compelled to take some action because you're driven by an emotional decision. So that's kind of the question for every individual. It's going to be different for every person. Some people can have a very large position and accept a huge rise and not be tempted to sell. Other people will be very trigger happy at a 5% or 10% rise. And likewise there'll be people out there who, if they see their gold or silver fall 50% or 25% is going to, they're going to say, my God, the world is the end of the world. I should, I've got too much. So if you don't have too much and you say, well, a 25% fall or 50% fall on that bit, I shrug my shoulders. I don't care because I've got all the other things. That's great. The point is if you're watching the price every single day, you might have too much unless you have balls of steel. On that note, Clive, I appreciate your thoughts on giving us the lowdown on China's buying spree. It's definitely a news item we will continue to follow. Thank you so much, Clive. Thank you, Daniel. Before we go, can I just ask if your readers would like to buy my book called Little Trot and the Great Gold Rush. It's book four out of the five books and it contains lots of financial words, including a nice education for children about gold. And it's available on Amazon. That's right. It's a lovely storybook. It's not an educational book. It's not a textbook. You can read it to your three-year-old. You can read it. Your 18-year-old is going to start asking you awkward questions if he reads it. Okay. Well, that's fantastic. So when does book five come out or are they all out now? They're all out and they're all on Amazon. Book one is Little Trot Learns to Save Money. Little Trot Discovers Inflation is book two and so on. Okay. I'll have to keep that in mind. My colleague Taylor Kenny just announced her pregnancy. So that might make a good baby gift for her. Clive, thank you. And listen to Clive and to my wonderful colleagues at ITM Trading. You need to have some position in gold and silver during these times and they will help you build the perfect strategy that's built around what's best for your needs in this moment in time. So reach out to them. It's free. It's wonderful. It's educational. And as always, I love speaking with Clive. Well, we'll catch up with you soon, OK? Lovely speaking with you, Daniela, and thumbs up to all your viewers. Bye bye now. Thumbs up to all my viewers. We'll see you all soon. Thanks for watching.