Sage Investment Club

Authored by GoldfixToday is our day off, but this just came across and we wanted you all to see it before we wrote on it. Early this morning Bloomberg did a post describing the “who” bought all the gold recently. TD Securities did a more comprehensive report on it today1, including the “why” part.Just now Zerohedge also posted an excellent write up of that report. In doing so they  provide insight as why this gold is being hoarded. From: ‘A Sanctions-Evasion War-Chest Ahead Of Taiwan Invasion’ – Why Is China Hoarding Gold Again?[T]he role of gold may be changing as first Russia, then other countries (China) seek to force out the petrodollar and replace it with petrogold, a move which would finally lead to substantial price upside for the yellow metal which has gone nowhere in the past 2 years.Certainly if an invasion or threat of one were to happen, China would have to shore up its FX reserves with Gold.TD also gives four interesting reasons why this accumulation may be occurring, to which we add a 5th possibility below:Reserve Currency AmbitionsHedging SanctionsChinese Reopening DemandRestocking for Chinese New YearWe add a fifth reason given our previous stalking of Chinese gold behavior since 2017. Keeping in mind it can be any or all of the above reasons in combination with the 5th we add the following with high conviction:China has blockchain. China has retail demand bottled up. China is in a very good position to give their domestic demand access to physical Gold using blockchain. In doing so they would help their CBDC, drive gold prices to the more proper level, and cannot be blamed for anything untoward.In fact we sort of predicted this type of eventuality in 2017, where the Chinese government would be more forceful in directing its people to buy Gold: FROM: China “Owns Gold Through its People”That is a direct quote from a Chinese banking official. What does that even mean?  It means that China has directed its citizens to be buyers of Gold. Every swoon in Chinese stocks brings more Chinese gold buying. The Yuan’s inclusion in the IMF SDR and China’s subsequent pitching an SDR bond to its people is also a potential Gold play. China is using its companies, exchanges, banks and people as piggy banks for when it needs its Gold. Then it will likely confiscate it “for the good of the country” SourceThe only difference is they may not have to confiscate it if everyone is on the  CBDC blockchain. It will still be in the Shanghai Gold Exchange.All The Gold China buys has remained in China for decades…Take this very seriously: When we say “in combination with any of the factors” above, China may be getting ready to unleash the retail hordes of their BRICS public into Gold and Silver now. If  they were to attack the dollar financially while destabilizing Taiwan, it would be very bad. If they don’t make a move on Taiwan, this is still very bad… and very likely.Most recently we noted the mechanism by which this will happen here: How The East Will Buy Gold for the Next 100 YearsComtech Gold Tokens (CGO) will be created on the XinFin Protocol (XDC) blockchain network based on the deposit of physical gold bars located in DMCC-approved vaults.Each gold bar will be backed by a Tradeflow warrant, meaning that the increased ease of trading a tokenised asset is combined with the additional security, transparency, and real-asset allocation provided by the Tradeflow warrant.While we are not 100% sure, we are 99% sure this is in their wheelhouse to do right now. This in combination with any of the reasons given above will blow the price of Gold sky high not unlike an oversubscribed IPO. It will happen. We do not know if it is now, but this is how we get true price discovery from the East without them being accused of currency manipulation. This is the plan.  And what happens to Silver if that happens?What does the US do if that happens? Here’s a hint:• The rally in gold prices over the past two months has defied analyst expectations for continued weakness, including TD Securities’. Yet, we see little evidence that the rise in gold prices is associated with a changing macro narrative. Given the bearish macro backdrop, speculative interest in gold has remained exceptionally lackluster as the world barrels towards a recession, especially after accounting for recent shifts in CTA positioning. Still, gold prices have continued to firm, retracing more than 50% of their significant drawdown from 2022 highs.• This begs the question: who in the world is this mystery buyer driving prices higher? Armed with a flows-based approach, we present strong evidence that behemoth Chinese and official sector purchases may have single-handedly catalyzed a $150/oz mispricing in gold markets. What is less clear is what has driven these massive purchases.• We investigate whether a sanctions-evasion war chest associated a potential invasion of Taiwan, China’s reserve currency ambitions, massive pent-up demand associated with the Chinese reopening, or Chinese New Year demand could be consistent with this extreme buying activity. Chinese demand appears unrelenting for the time being, but barring a grandiose geopolitical regime change, we find that it would likely subside towards normal levels in coming months. This would leave gold prices vulnerable to a steep consolidation lower, given gold’s lack of alternative buyers and its current mispricing relative to its recent historical relationship with real rates. We turn to our tracking of positioning for the top ten gold traders in China to scour for nascent signs of peaking Chinese demand, which could present a tactical signal for a noteworthy repricing lower.Good LuckContinue Reading here.Follow VBL’s Ghost on twitterContributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.Loading…

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