Gold Becomes the “New Money” As Bonds Blow Up, China To Control Price - Piepenburg

Hi, everyone. Welcome back to the Daniela Kambonis show on the road. It's my vacation, but news does not sleep. And my guest today is also on vacation, but he has graciously accepted to to join me today. Matthew Peipenberg is the partner at Von Greer's former hedge fund manager and bestselling author of Rig to Fail. And he is one of the sharpest minds on gold and currency risk that I have ever interviewed. He spotted seven clear signals, all screaming the same thing. In one golden direction, we're going to get his take on the latest in the gold market and so much more. Matthews, thank you so much for taking the time away from your vacation to spend some a few minutes with me here today. Thank you. Oh, Danielle, for you, it's always a pleasure. I always enjoy our conversations very much. Well, look, you gave a fantastic talk at the Rick Rule Symposium in July, seemed like so many months ago now that I wanted to get your thoughts on here on air here. With our audience about what you make of the current state of the gold market really depends on your profile, because if you're a trader or if you're arbitraging these precious metals or you're looking at certain comparables, it's a very, very different mindset than someone who's investing in gold for the reasons that we do it. I'm not saying one is right and one is wrong. It's very, very different mindsets. And for us, not just gold as a wealth preservation asset, it's a mean, but it's very important. We see a setting sun for paper currencies and a rising sun for precious metals as a better collateral. And what I wanted to talk about in Florida, which I really want to kind of pound my fist on all year and not just this year, but every year. Is that we have to look at it as a sea change in the global monetary system, and that can sound like macro woo woo and not is important, but I think it's important if you're an investor, not a trader, because if you're a trader, which is a very difficult thing to do in commodities in general and certainly in precious metals, I'm not much of a help because that's not what we're about. And it's not what I'm about. As an investor, I see the dollar's direction in particular and fiat money in general. So for us, gold is a very simple and very obvious without being condescending investment over the many years to come. And by that, I mean, it's not just another asset class that you compare against the DXY or you compare against the US dollar. It's really becoming the new global collateral. It doesn't mean a goldback yuan or goldback dollar or a goldback ruble or a goldback BRICS currency. What it's becoming is the more trusted reserve asset. And that's not just a statement defending the gold camp or the precious metals camp. The traders I talk to who trade rates, who trade currencies, who trade treasuries, who trade other government bonds. We're all seeing this and gold keeps coming up in the conversation from Judy Shelton to the prop deaths at big banks. And it's more than just, again, another asset. It is becoming this critical collateral. And rather than just say that to defend gold, you have to look at the flows to get the conviction to hold this asset as a far better value, as a far better piece of money than a paper currency. And again, rather than say that, you have to look at what's happening. And then again, what I try to make very clear all the time, and particularly in Florida, is there is no coincidence there's been a five X increase in central bank gold stacking since we weaponized the dollar in 2022 in the Ukraine. It's no coincidence that central banks now hold more gold than U.S. treasuries, and it's no coincidence there are more sellers than buyers of our sacred 10 year treasury Boeing. But very, very important. It's also no coincidence that the pace of gold stacking by central banks in 2026 is the highest on record. So you step back and you ask why, if gold is such a discredited, peaked out asset, the big whales are accumulating. It's such a quiet but enormous pace. And in particular, you have to look at China. And I'm not a maven for China or a defender of China, but is the Chinese art of war. The Asian art of war says two very important things. Never underestimate your enemy. And as the Chinese and the art of war also say is, if your enemy is shooting itself in the foot, let them keep shooting. So we have to look at what China is doing in particular, because we have gone from a one polar world to a multipolar world, in particular, a China led east. And the evidence of that isn't because China is gold stacking to make jewelry or dentistry or golden monkeys. China is playing a very patient and deliberate game to call out the bluff on the death of U.S. currencies, not the end, but the death of its hegemony. And again, that may sound sensational or a defense of the gold camp. But certain facts make this beyond sensational. I think it's important to remind in our short time that the People's Bank of China has had its 20th straight month of net gold buying. It's also important to know that China just imported 700 tons in the first five months, 700 tons of gold in the first five months of this year and 14000 tons since 2015. Now, you may not like China. You may not want to live in China. I fully understand your distrust of China, but they're not stupid. And they're definitely playing the long game. And you have to ask why. And you also have to look beyond just the gold stacking as a clear distrust and sign of the direction that China sees gold as the new trusted collateral, the new trusted trade settlement asset. You have to ask also why there is a move right now to depaperized the gold market, which has been the bane of the free price discovery in gold since the 70s. We all know what happens on the COMEX or in the LBA markets led by the CME in Chicago, this exodus of physical gold outside of the U.S. It's a major, the major U.S. export because other sovereign nations and major whales want physical gold, not paper gold. And China announced in June and it became real in July that they're creating a new settlement and clearinghouse in Hong Kong where they're going to trade gold based on physical properties, not the paper futures contracts that have been an open manipulation of the gold price for decades. That's a sea change warning, not only the sea change and what is happening in the global monetary system, but how gold is going to be priced. You can't have a 200 day moving average of gold in the New York LBMA markets in the West and have a different one in the east in Shanghai. And what that is a signal of is China, again, is playing the long game that gold is going to be the new money, not the new currency du jour, the goldback currency, but it's the new direction. And the money is in the gold is certainly flowing from west to east. So that is a very important sea change what's happening in Hong Kong and China. And, you know, the ICBC, excuse me, the ICBC was the first bank to kind of end this future papers contract game, this nonsense, this legalized price discovery fraud that we've seen in New York for decades. But you also have to keep in mind that the 2014 China, which everyone didn't take seriously, is just a toy maker with the Made in China sign there. The head of the Shanghai exchange told a bunch of Western bankers almost 12 years ago that very soon China will be determining the price of physical gold. And that is actually what we're living through. I'm not projecting this. This is happening right now in Hong Kong and China. The other thing we have to keep in mind is another fact. The Chinese citizens aren't being told to buy stocks or to buy kind of bullish, bullish assets. The Chinese citizens now hold more gold ETFs than they hold stock ETFs. Again, my point is they are playing the long game, not because they're silly or because they're manipulated, but because they're playing the direction of the golden hockey puck for the next five, 10, 20, 30 years, because the West has debased its currencies and debased it and destroyed its bond market, you know, monetizing its bond market with debased currencies to keep a paper system alive that the East knows is unsustainable. It doesn't mean the dollar dies or ends tomorrow or that the U.S. disappears, but the hegemony is definitely disappearing. And it's accelerated since 2022. A long winded way of saying gold is not just another asset to discuss or compare against other assets or look at the price action to keep you distracted while the whales accumulated. But I want listeners who are investors and not traders. Again, nothing against traders. I was a trader for many years. But for those who are investors, you have to have the conviction to see this direction and be patient. We could talk about the price moves current, but they're really irrelevant as the price direction of the next three to five to 10 years where gold is going to 15, 20,000 easily. If you're an investor, that gives you conviction. If you're a trader, of course, you're going to be upset and distracted by massive, you know, 30 percent moves in the gold price and since since January. But if you're an investor, we're doing exactly what the central banks are doing and what China is doing is we're accumulating in a fire sale, which the COMEX created for the very benefit of the whales while they scared the plankton, the retail investors out of this asset. The Chinese investors are buying it in spades. And we're arguing about NVIDIA and AI. It's really fascinating. Matthew, I don't know what's more beautiful, the setting behind me or how you said that I could not have summed that up more perfectly. I mean, that's absolutely my belief system and our belief that I can trading. But to your point, I want to just stick to that point about the setting sun and debasing currencies and bring up the U.S. saving the yen by selling it. OK, it does that. Is that part of their play, their overall global play, you know, against Europe and perhaps against China? But it's always is always a financial proxy war with China. You got to give Jim Rickers credit for the currency war book that he wrote years ago. He warned of a currency war, a trade war and a hot war. We have a currency and trade war with China. We have a proxy hot war in Iran against China. That's a much different discussion on oil in terms of the Japanese carry trade. It's absolutely essential to keep the yields down in Japan. They have a 1 percent yield since June, and that's too much for the Japanese carry trade, because for decades, Japan has been the prop desk for the shadow bankers in the hedge fund world that I came from. Because when when Japan was running zero to negative percent interest rates, what we would do is go to Japan, take out a loan in yen, convert that in a swap to dollars and invest in the S&P and U.S. Treasuries. And that went on for decades. What happened? They tried this in August. They blinked in 2024. But this year, the Japanese did raise rates and they stuck with it. And that put an end to the carry trade. And that's a lot of ramifications. When you end the carry trade, that means Japanese investors are bringing their money back to the to Japan because their yen is at the weakest against the dollar in 40 years. So it's the time to sell tech, AI, et cetera. That's why the Nasdaq saw its worst July in decades. But they brought that money back. But they also had to sell a lot of U.S. Treasuries. The Japanese finance minister put 73 billion to prop up the yen. It failed. And now they do another 36 billion. They have to sell U.S. Treasuries to buy their own JGBs to keep deals down and prop up their currency. It isn't working. Now, Besant wants to send more money to help. They say to help Japan, but what they want to do is create a Japan that can once again stop dumping our U.S. Treasuries again. Boring. But if Japan, which was our biggest buyer, along with China for years of U.S. Treasury, just sold more treasuries in the first half of this year than the last five years combined. If there's a massive dumping of treasuries by Japan and also by the U.S. hedge funds, which have to buy back yen, they have to sell treasuries to to buy back yen. That pushes the bond price down in the 10 year and it pushes its yields up to four or five, four, six, four, seven, which is fatal. Rules are boring, but they're shark fins is all this dumping because of the carry trade and other things happens at once. The yield rises on that, you know, that 10 year. We're looking at a 40 trillion dollar public debt and eight trillion of which has to be refinanced in the next 12 months at a higher rate. A lot of that higher rate driven U.S. Treasury sell off is driven by the Japanese carry trade. So it's in our best interest not to help Japan because of its citizens and its import costs, et cetera, but to help our U.S. Treasury is so important that people listening understand that bond market is complex, was very simple. The bond market is everything. And when the yields hit these levels, that is the absolute terror of the secretary of the Treasury and the Fed, because that makes the cost of paying our own interest expense, which is three billion dollars a day. More and more unsustainable, which means we have to debase our U.S. dollar even more to pay our interest expense. And that is why gold is in a secular bull market despite the price action right now. And the global M2 money supply is going at seven percent a year. We're going to see more and more all time highs in massive. I'm seeing massive price appreciation in the middle in the next three to four years, which I'm patiently waiting for. But I don't care about the daily action. But the carry trade is a threat to the U.S. Treasury because both Japanese and U.S. funds are dumping treasuries to support their own carry trade related ripple effects, all of which are horrible for the Treasury. So the long answer to a short question, it's very important. The Japanese carry trade is devastating, not just the U.S. Treasuries, but to tech stocks, which just saw a huge sell off into the Nasdaq. It's a very devastating convergence when you have this carry trade disaster. You've got a private credit ticking time bomb and you've got an A.I. bubble all waiting to pop this red balloon called the S&P, which is the only good narrative the U.S. has right now. And that's in a very fragile state. So it's a fascinating, disturbing time, but nothing surprising. Very foreseeable, impossible to time, but very foreseeable. You know, I guess, Matthew, so so I sense concern. I sense concern, but I feel you feel empowered with gold. I do, because, again, I'm an investor, not a trader. And I've been a trader for decades. I'm not being negative to traders in any asset class. But a lot of the Fugazi Fugazi and the price action, the frustration with the spot price is distracting investors from the longer term play. The sun rising for gold isn't a meme. It is the direction of all the flows among the whales who are distracting the plankton with price action, noise, headlines, clickbait. Again, I was on the buy side. I'm very cynical. Many will think I'm selling my book. I get it. But I'm telling you, if you're investing because you don't believe in the purchasing power of your currency and certainly the U.S. dollar, despite its relative strength and a fairly unimpressive DXY, the issue is so simple. You are being robbed every day by the debasement of your dollar. The invisible tax of completely misreported inflation. Can you add on that invisible tax to your income tax? Your net return every year in your currency, in your portfolio, in your checking account, even in your S&P performance isn't really that impressive. And so, no, gold isn't this other asset that I hope gets me a 10 percent return. Gold will hold its value for sure as we head towards further and further debasement. This is the end of the credit cycle is the end of the dollar's dominance. It's not the end of the U.S. dollar. It's not the end of America. It's going to be a different repriced dollar. It already is. Look at look at rates. Marsh hasn't even raised rates. The 10 years gone up more than 80 basis points without the Fed having to do anything. And the DXY is at what, ninety nine and one hundred. This isn't the milkshake theories. One fifty DXY. The dollar just isn't traded like it's traded like another asset, just like another risk asset. And the U.S. tenure is almost looking like a jump on. And so, you know, you have to look at these things objectively and you will always hear people say, how can you be objective if you're selling lots of gold from Switzerland? I understand the cynicism, but try and get past that. Matthew, thank you so much for this, I guess, summer roundup of precisely what is happening in the gold market. And talk about making a wonderful case of why you should be owning physical gold. And of course, I always urge you to reach out to my wonderful colleagues at ITM Trading. Reach out to us. We can walk you through a strategy based around owning physical precious metals. We'll see you soon.