Big Gold Moves: French Central Bank Moves 129 Tons of Gold out of US

I believe it's fair to say that something structural appears to be happening in the gold market. Last week, you had the central bank of the Netherlands, the Dutch Central Bank, confirm that they moved 86 tons of gold out of North America, out of the U.S. and out of Canada, moving it to Europe for safekeeping. Earlier this year, the country of France did something similar. They removed all their gold reserves from the U.S. in favor of keeping them at home. Germany did the same as well a few years ago. Their central bank moved 111 tons of gold that they had in New York, and they decided to keep it back home in Germany. And all of this is on top of record gold buying from central banks across the world. Now, we've, of course, covered on multiple episodes the gold buying from the central banks of places like China, Russia and India. But other countries' central banks appear to also be buying record amounts of gold in the last few years. You have Poland, Uzbekistan, Hungary, Kazakhstan, and a long trail of central banks in smaller countries buying up the precious metal. And so then my question naturally becomes, what are these central bankers seeing that's having them buy more and more gold, hitting new records seemingly every single month? And so in order to get a better idea of what's happening behind the scenes in this market, I got a chance to speak with Mackay Block from American Hartford Gold to give me a sort of a picture from someone who is actually in the industry and has a pulse on the finger of what's happening. And just for full disclosure, for one, American Hartford Gold has been a frequent sponsor of this channel, and also they've been my own personal gold dealer for five years now. Take a listen. Mackay, thank you so much for joining us. What I wanted to do was to start with getting a kind of an overall picture of the gold market, especially from someone who is in it, who probably feels the pulse a lot more than me, who just buys it occasionally. The first question I would have is, how would you currently describe the gold market for the general audience, especially after the January spike in gold, and now it's hovering around like 40, 44, 4,300? How would you characterize the gold market if you were just in an elevator with someone and you had just maybe a few minutes? Yeah, great question. We're in the mid to low 4000s right now. I'd say that the conditions overall are very bullish. If you look at it, gold was up 64% last year. Silver was up about 142%. Part of the correction that we're seeing is just a normal correction. In any healthy bull run, you're going to see two steps forward, one step back, a period of consolidation before the market can resume up. And so we did see a normal correction happening at the beginning of this year. Then we had the war in Iran that caused some further selling off of risk assets. Gold and silver sold off even further along with that. What we're getting is this reset in the market right now. And so we really have a great opportunity for investors to get into gold and silver much lower than where they may have wanted to at the start of the year. They felt they were missing out on that momentum. It's giving them a breath to do so. So it's a great opportunity to get into the market at this point. We feel that really the bottom is in and the market is stabilizing a bit here. Well, let me get your opinion on something, because I remember when the Ukraine-Russia war kicked off in 2022 in February. I believe within a few days, gold broke 2,000. That was, I think, the first time it had ever broken 2,000. I was at my desk and someone came by to me, because I always talk about buying gold on the show. And they're like, oh, is now a good time to buy gold? And I was looking at them. I'm like, I mean, I guess you could say that, but people always wait until it's like the top of the market and then they're like, oh, yeah, let me, oh, this is a hot market. Let me get in on this. And so, but what's funny is like saying that now, because at that time I told them, I'm like, I mean, probably not. I mean, I don't know, maybe way, but you never know, because it could just go parabolic and then never come back to 2,000. But looking back on a 2,000, obviously, it would be a good like entrance point as well. So I guess, and for me, when gold hit, whatever it hit in like January, my thesis was still to wait until it's like, like very, very like my, my, this is my own personal thesis, like waiting until it's like 40 or 50,000 per ounce. And then I would consider selling. Do you think, because again, that's just my own kind of like, like thesis and investing. Do you think that's realistic or that would that take like so long that I might as well, basically sell when I'm 70? Yeah. I mean, that's probably a long ways off before we get to 40 or 50,000 for gold, but you have to realize that there's no ceiling on gold because there's no floor for where the dollar can head. As we continue to print money, government debt, global debt goes up, the value of the dollar is falling, and that's why gold is rising. And then you lump in all these other concerns, geopolitics, inflation, the list goes on and on. That's what's causing gold to be in the structural bull market. So we have a long trajectory ahead of us for where precious metals are headed. You know, it's up to every individual investor to figure out where they want to jump off. A lot of people are just buying gold to know that they have something that's a real tangible wealth that's never going away. And so I would say that you're not alone in that people are wanting to see gold go significantly higher before they would ever consider selling because you're selling into a currency that what good does that do? You're trying to protect yourself from that devaluation. Does that make sense? It does make sense. And it's funny I say that because I did. I needed to cover a certain expense, like an unexpected expense a few months ago, like a month and a half ago. And so I needed to liquidate some of my precious metals to get the cash to do that. And I didn't want to. You know, it was very painful to do that. But when I was considering which one to liquidate, gold versus silver, I kind of looked at I usually like look at the gold silver ratio to figure out like which one is overvalued versus undervalued. And so I decided that gold was gold was in the gold silver ratio more like less undervalued than silver. And so I decided to go for the gold selling gold rather than selling some silver in order to cover this debt. Do you think that was a good idea in terms of the gold silver ratio, like from your perspective being in the market? Yeah, I mean, look, silver is actually incredibly undervalued compared to gold right now. There's this natural relationship between gold and silver of roughly 16 to one. And essentially what that means is throughout history, 16 ounces silver was really the same price as one ounce of gold. That's what they estimated was the quantity of silver available compared to gold on the earth as well. What we see is we're actually pulling out about eight ounces silver for every ounce of gold. And so that ratio should be much closer. Both metals are exceedingly harder and harder to get out of the ground, much more rare. Well, if you look at the price today, we're currently close to 70 to one. And what that tells us is that silver is way short of where it needs to be in relationship to the price of gold right now. So gold is always that first mover in the market. Silver rushes to catch up to gold. And you always see these bigger swings out of silver. We saw that in January, a major run up on the silver side, while gold was showing a lot of strength as well. But what I would tell you is that's probably a really great move you made because gold is more valuable than silver at this point. Silver is very undervalued, which means we need to see another run up on the silver side. So hang on to your silver until you see that move. Yeah. Okay. I'm glad that you agree with that assessment because whenever silver moves, the percentage move is so crazy. You know, sometimes, you know, gold is up like, oh, six percent, seven percent. You look at silver and it's like 20 percent. But of course, it's physically big. That's the issue with silver. It's hard to store. The upside, it seems like it's significant because I guess it's still in the 60s. So it could easily, let's say, if it goes to 120, which would just be reaching the top of earlier this year, that would be a 100 percent move. So there's a lot of upside there. The projections are for gold to maybe do 20, 30 percent by the end of the year. Silver could be anywhere between 100 to 200 percent, even greater than that. It's not that it has to happen by the end of the year, but as these metals move up together, we always see an outperformance on the silver side. What I tell my clients, Roman, is that gold is very good for stability and preservation. So you want to look at that for kind of that stable piece of your portfolio. Wealth preservation, silver is great for growth. You're going to be on for a ride. You need to be able to hang on. You're going to get some ups and downs, but you're going to get a lot of growth out of the silver side. Yeah, my thesis on silver is very similar to my thesis on gold. I'm just holding until it's an unrealistic price, and then I'm willing to liquidate. So you mentioned when you were describing the gold-silver ratio, the idea of getting the gold and the silver out of the ground. I remember in late 2019, early 2020, I watched this really good market video, a video about the gold and silver mining market, that industry as a whole. In it, it mentioned that getting an ounce of silver out of the ground basically was costing the miners $11 per ounce. It just happened to mention that. So in 2020, when the markets tanked because of COVID and the news of the lockdowns, I remember I was watching the price of silver, and like everything, like the stock market, everything crashed. It crashed, and I remember seeing it hit like $11 per ounce. I remember looking at that and thinking like, wow, I don't think it can go any lower, which probably is not the best thing to think about as an investor because I'm sure a lot of fortunes have been lost. Yeah, exactly, that type of thinking. But I thought like, okay, if you're hitting that floor, then you can always bounce up. And I was correct. I bought at $11, and about two weeks later, it was up to $33 because it was just a small correction, right? But that was sort of my thinking there. Do you happen to know, what's that number now? What's the cost for the miners to get an ounce of gold and an ounce of silver out of the ground? Yeah, there's a lot of different factors to look at here, right? But if you just take the general consensus on this, for existing mines, the cost to get silver out of the ground is anywhere between $20 to $35 an ounce. Now, you look at that and think, well, why is the price in the mid-60s right now? How does that make sense? But there's so much more going on here. It's the demand, right? When we look at what's going on on the AI side, robotics, and that the whole world that we're moving into is requiring silver in the global economy, and we're not producing enough. And so just because a miner can get an ounce out at a low price doesn't mean that that's what it's actually worth. And then Roman, I've read projections from a lot of people in the mining industry, when they look forward for the next decade, two decades, the cost to get silver out of the ground from future mines, if they want to open up a new production, anywhere between $100 to $150 an ounce. The cost to get silver out of the ground is increasing. The ore deposits are yielding less and less quality silver. And then also, we're having to dig deeper and deeper. And we just need to see something change on that side to be able to get silver out cheaper, or the price has to go sky high. Well, it's funny, when you said it's 20 to 35, compared to six years ago, when I remember this number being at 11, that's a 100% increase. And I guess that's just due to inflation. And ironically, the price of silver is over 100% higher, just like that. It really is like the perfect inflation hedge, right? It's like, as inflation rises, naturally, that rises as well, and absorbs those dollars. Yeah, and we think about the cost of fuel, inflation going up, it costs the miners more to just even run their production. That's something we have to take into consideration. So that number and that trend is set. All right, we actually have a very special message from our friends over at American Hartford Gold, who are hosting a free live webinar called Gold and Silver 101. And it's happening this Thursday, September the 17th, at 10am Pacific and 1pm Eastern. It's completely free to attend. 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What are you seeing on the back end? So you're actually on the sell side. So what are you currently seeing with gold buying and silver buying activity in the markets? More gold buying, more silver buying, more buyers, more sellers. Like what's the market looking like right now? Right. You know, as the market was going up and we saw this huge frenzy early on in the year, it's really funny because investors like to buy in groups. They're buying a pack when there's excitement, momentum, everybody comes into the market. So there was this exuberance and we saw an increase in buying and investing early on in the year. When the market dropped, it scares everybody. You take a beat. We're starting to see that resilience come back. A lot of an interest in getting into gold and silver right now. I think just the general consensus is people are concerned. They know that something is amiss in the economy. It's the most overvalued stock market we've seen really in American history. There's a lot of factors at play and people are wanting to have some real preservation and protection and they're coming to gold and silver for that. So the buying is still there, certainly. We've seen a little bit of an ebb and flow, but I think the underlying concerns have not gone away regardless of what's happening in the market with the fluctuations. Your business is domestic, right? So this is like domestic demand by the U.S. market, right? Yeah, we're just dealing with U.S. investors, people like you and me that are looking at their retirement savings, what they've stored up in cash and just realizing we want something that's not just a paper-based asset. That's who we're servicing at American Heart for Gold. Okay, so that's the domestic side, but gold is obviously a global commodity. So I wanted to ask you a bit about some of the global factors that are impacting the price and how they might impact the market as a whole moving forward. The first is east versus west. I read an article maybe two weeks ago about how gold is migrating from east to west, just like it migrated from Europe to the U.S. following the world wars. Even if you don't service the Asian market, are you seeing this trend on the back end when you're like reading the industry literature? And what does that actually mean for the common investor if it's true? Yeah, certainly we're seeing that. There's obviously rising geopolitical concerns and stress. And what we see is that countries are wanting to go back to being more sovereign, right? So there's this repatriation of gold out of the U.S., out of North America, back to their homes. We just saw the Central Bank of the Netherlands pull all of their gold out of North America, U.S. and Canada took it home. And what they cited is a potential crisis, wanting to be more prepared for what's coming. That's big. On the other side of it, we see that Russia and China are really trying to build a structure outside of the traditional western trading hubs. And so they're buying tremendous amounts of gold, obviously wanting to keep all that in their system. And so there is this movement of gold from the West over to the East. What I would say and how that impacts our investors and why it's important to you and I is there's a tremendous amount of focus on gold right now. If the banks are trying to get shored up and prepare for what's coming, they're trying to get more sovereign and have control of their gold, isn't that something that you and I should be doing as well when we look at our money and the way that we invest? Shouldn't we have something that's real, that's tangible, that's outside of whatever market factors are I mean, yeah, you're preaching to the converted here. I agree. But I just really look at these governments with huge amounts of money that they're able to swing around. And I just like riding those coattails. When I see the central bank of what was it, India recently or Uzbekistan, Poland, Kazakhstan, I wrote down China, obviously. When I see them buying all these metric tons of gold, I'm like, well, there's demand right there. Hopefully I can ride those coattails. Let me ask you about paper versus physical. On the investment side, we've seen Western ETF outflows at the same time that in Asia, the physical buying and over-the-counter activity are staying firmer. So is gold becoming a two-speed market with basically the paper West and the physical East? And if so, how does that actually affect anything if it does? That's a great question. There's always going to be demand for physical gold everywhere, but you do see that in a sense. If you look at the Asian markets, there's a cultural and a historic significance there. They've always leaned on gold. That's been part of their history. And so there's this already built in demand for jewelry and things like that. China, India, huge buyers of gold. They're always having this insatiable appetite for it. So that's happening on the individual investing side. Also, when you look at just the banks and what they're trying to build up out there, is sovereignty away from the Western system. So there's this multipolar world that's happening right now. So they're going to be more long-term. They're buying and they're holding on. I'd say in the East, they're a little bit more long-term thinking. China says they think in centuries and millennia. Here, we're thinking days, weeks, and months. So the US is a little bit more about convenience. We see the price of gold and silver coming down. There's got to be outflows. People are taking that profit, whereas they're holding it elsewhere in the world. The other piece of this is, especially with the Iran war coming up, that conflict has caused tremendous uncertainty around the globe. See, oil and gas prices rising. That's having these rolling global recessions, especially as everyone else is in such great government debt. Here at home, we're kind of pulling the strings. We're controlling things a little bit more. And I would say that the pain of that conflict and rising inflation and all that has not really hit here the way that it has elsewhere. And it's not as in our face. And so we feel a little bit more free to sell when the market's going to come down and just position ourselves accordingly. And they're gearing up for that. They're actually trying to buffer themselves against those concerns that they're facing right now. And that's what I would really encourage individual investors to think that long-term strategy is. We're not just trying to pivot in and out and make trades. If we're actually concerned about what's going on in the world or maybe here domestically, having something that we hold on to, like you said, I'm never going to sell my gold and silver till it gets way up here. That's a good strategy. You never have to worry about your sovereignty or your own net worth if you've got something that you're holding on to that's real wealth. Do you view the kind of paper market as a game of musical chairs? Because if something ever does happen and suddenly everyone wants to collect, to take receipt of their physical metal, do you think it'll be like, sorry, not all of it, but a good chunk of it is in Asia. You have this piece of paper. Good luck. Is it like that or is that a naive view that I have? Yeah, no, there's the institutional side that's playing this really significant game at the top of it. And then you have the individual investors like you and I that can invest into an ETF. And essentially what that is, it's a company that owns gold. You're buying a share in the gold that they have. Well, they can write any number of contracts on that same ounce of gold. So if everybody wants to get delivery of that gold that they supposedly own out of the ETF, there's not enough gold to go around. And the same is true on that larger institutional side. These are huge contracts and the volume of trading does not match the actual supply of physical gold backing that. And so you really get this market that's over leveraged, that has huge price volatility. It's very liquid. You can get in and out. It's a great trade, but really it's not the place that you want to go for preservation if you're actually concerned about those things. So I think your example of musical chairs is perfect. Who's going to end up with it at the end of the day? There's not enough for everybody. In terms of the central banks that we mentioned. So before it would be just a handful of central banks from like, I remember starting in like, I think maybe even 2018 up until 2023. Obviously I have like alerts set for these things. So there would always be a story almost every month, like China broke new record at buying gold for their central bank the next month. China broke another new record for buying gold, another new record. Russia was doing the same thing. But recently I have been seeing a lot of other countries, Poland, Uzbekistan, Kazakhstan, India, other Baltic states. So it seems like at least it's showing up on the official data that their central banks are buying up more gold. So does that mean that we're basically entering into this, I guess what, water that it's not just like one or two countries propping up the central bank buying, but now it's like actually getting diversified across many different countries, all of whom can, no matter what their GDP is, they can still buy metric tons worth. And if so, if we're moving into this zone where it's not just like one or two central banks, it's many central banks. What is that? Does that like diversify the risk? A and B, does that do anything to the price potentially in the future if there's more conflict that all these different central banks are going to go into the gold market? I mean, there's only a finite amount of supply will hopefully will that price go higher? What do you think? Yeah, great question. Last I looked anywhere between 90 to 96% of central banks are buying gold right now, right? That's a record amount of banks buying and they're buying record amounts of gold. There's a reason for that. And it used to really be China and Russia just loading up year after year after year, like you said, setting records. Well, now we see that Poland and Uzbekistan have really stood out as the two top buyers and China and Russia below that. And so it really is this more broad based where every central bank around the globe is starting to load into gold for a reason. And what that does is it creates a lot more market resilience. One bank needs to sell for any number of market dangers or reasons for liquidity. It's not going to impact the overall gold sector. So we get this resilience built into it. And then, of course, with the entire demand going up at the central bank level, they're sucking that supply out of the investment banks. They're sucking that supply out of the system in general. And so that's going to cause a price floor and a lot more stability in the market overall. And not everybody's going to dump gold at once. And so you do have a lot more of a structured market at this point in time than maybe a few years ago. Can you give us three possible scenarios moving forward with everything that we discussed? A bearish path for gold, a sort of like middle of the road path, and a bullish path. Can you lay those out? What would cause each path? What factors would cause them? And what's the potential price at those different directions? So it's really hard for me to find a bearish scenario for gold if I look at the macro, because we are in a structural bull market for gold and silver. There's a lot of factors that are pushing gold and silver up higher over the course of really the next handful of years. And those aren't going away anytime soon. But if we look more short term, what would be a bearish scenario for gold is if we stay stuck in this conflict, a lot of uncertainty around that. Maybe the Fed raises interest rates, and that causes foreign and domestic investors to put their money into bonds, treasuries, because they're giving a decent yield. That uncertainty may keep them there longer. And so gold will continue to tread water where it's at. I don't really see a scenario where gold is going to drop. But it may stay stuck around the $4,000 to $5,000 for a lot longer than what we expect, if that's the case. Midterm, if you kind of look at just how we've moderated over even the last six years, we've seen tremendous performance out of the precious metals market. We haven't even encountered a crisis yet. So let's just say the Fed lowers interest rates, but the economy stays strong. There's no crisis. That's where we're going to have that consistent steady growth on gold and silver. And the projection there is realistically back at $6,000, or near that towards the end of the year, $7,000, $8,000 beyond that. I think it's going to be very surprising how quickly we can get to $10,000 an ounce on gold, though. On the other side of it, a very bullish scenario. If we look at all the reasons that we're really concerned, let's say that the war in Iran either escalates, and it actually does what war typically does to gold and silver, which is very bullish, or it gets resolved. That problem kind of goes away. The Fed cuts rates, or if they raise rates and they crash the market, either one of those scenarios is going to be very bullish for gold. And if we do go into some kind of crisis, whether that be a market crash, banking issues, continued government debt piling up, we're at $40 trillion right now. There's a lot of concern around that. So money eventually just piles into gold. And I would say that, again, getting to $10,000 an ounce a lot quicker than what we expect is very realistic on gold. Now, silver is going to follow suit, and it's going to have that gold to silver ratio that's going to continue to pull silver along. So you can do the math on that. As high as gold goes, you take anywhere between 30 or 40 to 1 on that, and that's a pretty reasonable projection on where silver should be in tandem with gold. Anything else you have, any final words on how to use gold as sort of a hedge against the uncertainties of the current situation we're in with wars, and the future of work, and AI, a devalued dollar? Any final thoughts? Yeah, look, I'd say when you have billionaire hedge fund managers, CEOs of investment banks, legendary investors, and analysts, and economists that are all telling you to get a hedge and buy gold, that's a warning that we want to heed. There's real issues that are going on in the right now. Jamie Dimon not too long ago said, I wouldn't touch treasuries with a 10-foot pole, I wouldn't buy stocks at this level. Everything has danger and risk built into it at this point in time. You have Ray Dalio saying this is the most dangerous time in American history for investing. And they're all warning about this currency crisis. Again, $40 trillion of government debt. Every year, we add $2 to $3 trillion to that. Where is the dollar going to be as we go into this future? These are real concerns that are driving people into precious metals. And so I would say do what the banks are doing, own gold, get a real hedge, and actually have some real wealth that's outside of this paper system. Either way, gold is going to win. If the Fed cuts rates, again, that means that bonds and treasuries are not as lucrative or enticing for foreign investors, so money moves into gold as that conservative investment. Gold goes up. If the Fed raises rates because they have to restrict the money flow, that's probably going to crash the economy at some point in time. And you think about how risky the stock market may be right now. Every single factor that economists look at, this is the most overvalued the stock market's been in American history. And there's very few companies pushing that market up. It's all really wrapped up in AI. And this is a very unproven model. It's very reminiscent of the dot-com bubble, even the 2008 great financial crisis. There's just a lot of reasons that people are looking at precious metals. And it's a bit of a new investment for a lot of people. They're not necessarily as familiar with gold and silver as they are stocks and bonds. And what I would say is it's just the other side of the market. If you notice that something's amiss, you're a little bit concerned, anything that we're saying here resonates to you, it's a good move to actually take some step and get into precious metals and protect what you've worked your entire life to build up. I know that I sleep a lot easier at night knowing that I have real tangible wealth on hand. My clients have found that as well. We're actually hosting a webinar this Thursday at 10 a.m. Pacific time. So if you go to Americanheartforgold.com, sign up for that, or you can download our app from the App Store, get involved. We're actually giving away a free gold coin to one of the attendees there. And it's a great way to actually learn a little bit more about this, just gold and silver 101, get your foundation, know that you can actually make that step. Okay, we'll throw the link to the webinar down in the description box below then. And if anyone wants to reach out to American Hartford Gold, their information will be down there in the description box below. Roman, I really appreciate it. Great talking with you today. You too. Take care. You too.