How BRICS is Driving the Gold Price
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Hello, everybody, and welcome to this edition of Finance U. I am your host, Chris Martinson of Peak Financial Investing, and today we're going to be discussing gold hitting $2,800 now. It's the BRICS conference. What's coming out of that? And what is going on with treasuries and Bitcoin? What are they telling us? I think they're telling us something. To help us interpret all that is David Russell, CEO of GoldCore. David, good to see you again.

Good to see you, Chris. How are you? Good. So you're joining us from Dublin. Are you in Ireland at the moment? I am indeed, yes. Dublin, Ireland. So, well, thank you for taking the time today. Where do we start? Well, the punchline is gold just poked its head above 2,800 this morning. It's been relentlessly rising, but that's for reasons. Maybe we could discuss some of those reasons and we'll discuss gold itself. Sure. What's top of mind for you for explaining this?

and last time I was on, last couple of times I was on,

We talked about the fact that this isn't a retail-led rally at all. We know that. This is central bank buying, okay? And in particular, this is central bank buying that is not Western central banks to the same degree that it is Eastern central banks. I'm going to say Eastern. I mean everywhere east of Europe, basically. We have just had the BRICS conference there within the last week or so, depending on when this goes out. That...

is hugely significant to explain what is going on here and the rally that we have seen this year. I was looking at that and watching that closely and there are kind of, there are seven key things that came out of that, right? But there's one or two of them that are major impacts for the gold price. But the seven things that we have

If we look at what's happening, we've got the BRICS, Brazil, Russia, India, China. Okay. Now, let's have a look at that. And if you look at India, China, now they've been kind of, there's been an awful tension along the border there with them for the last four years. They are coming to an agreement on that as a result coming out of the BRICS conference. And there's a de-escalation of tension there. You

You've got one of those that's got a population of about... They both have a population close to 1.45 billion. Each billion. Yeah. With a big B, right? That's 2.9 billion between the two of them. That's 35% of the world's population. Now, if you just add in the other parts of the bricks that aren't India and China, that gets up to 40%.

of world population. This is a huge trading block and if we look quick of exactly what the purpose of BRICS is, it is effectively to stop trading amongst themselves using the US dollar and at the same time reduce their trading with the US. So this is

revolutionary in terms of geofinance, global markets. It's huge. Putin talked about the second thing that he talked about was effectively establishing a new world order. Again, these are big statements to hear. They want to expand that BRICS association. They have 30 countries on the waiting list.

30 countries. So now we're talking about something that's going from 40% of the world population up to something that is significantly higher than that. So we've got a growing appetite for this de-dollarization, or at least a growing appetite to reduce the reliance on the dollar.

The other thing that we might touch on this again later is he talked about the geopolitical, Putin this is, talked about the geopolitical tension that there is in the Middle East at the moment and how he believes that we are very close to a war breaking out, particularly in this instance between Israel and Iran. Now we know the close ties then that there are between Iran and Russia, Russia and China. So we've got an axis growing on that side of things.

and a leading component of that axis, Russia, believing that there is going to be a war breaking out in the Middle East. This doesn't bode well for us anywhere in the globe, but we'll just park that part for a second. They're talking about developing a cross-border payment system.

So this is effectively the swift for bricks. Now, they're not just talking about it as in the early stages of brainstorming. They're actually saying these things publicly. They've been thinking about it, planning it for years, and they are in the process of doing it.

They're talking about having a grain exchange between the BRICS nations. So again, this is talking about moving the exchanges and having exchanges that are there to compete with the incumbent exchanges that we have in the likes of the... in Europe, the UK and the US. So going in direct competition with this. And then the most important one of these...

is an international precious metals exchange. And they're going to be building that international precious metals exchange. And again, these are not just ideas that they're brainstorming. These are things that they have in place. If you just have a look at the impact and the significance of the Shanghai exchange and how that now is competing directly...

and taking business away directly from the exchanges in the UK and the US. So there's all of these things. I think what we are seeing here, if you put this against the backdrop, there's also a lot of talk about the unit, as it seems to be dubbed, which is the unit of currency, the BRICS. So there are plans in place there to create this common currency.

This isn't something that we haven't seen before. We did it here in Europe. We did it with the euro, right? But the thing is that there's an appetite to have that currency backed by physical, tangible assets, primarily gold. So what we have seen this year is the rally in the gold price is not a...

It's not a speculative rally as such. What I mean by that is obviously central banks that are buying it. But why is it that they're buying it? They're not buying it because we have to hold some of our assets in gold and gold. You know, there's there's there's value to be had here.

It would appear that what's being said is that gold is going to play a fundamentally more important role in the monetary system for these countries. So it's not from an investment point of view. It's from the point of view that this is going to underpin their currency going forward. It's going to be part of that monetary system for the BRICS countries. Now,

If you think about it, if they're kind of letting those messages out now and they're not saying this is definitely going to be 40%, we're going to release a currency, we're going to launch a currency rather and have it 40% backed by gold. If we were to see that, if they were to hear that, you'd see the price of gold skyrocket overnight. They're obviously not there yet. They still got a year or two years, maybe in order to get everything in place. These things don't happen overnight.

But the central banks within these currencies are looking at their reserves and they are putting gold onto their balance sheet now for a specific reason down the line. OK, and that seems to be coming. There have been rumours about this for the last number of years, but that seems to be coming clearer and clearer and clearer. And they probably have not finished. And by that, I mean they probably do not have enough gold

on their balance sheets yet. They don't have enough gold as their reserves yet in order to meet whatever criteria that they have set in order to meet the criteria of this BRICS unit. So we're going to see continued buying, I believe, throughout this year and the next year until those central banks get their gold reserves to a certain level. And that won't happen in isolation because you're also seeing

certain central banks in Europe and elsewhere adding to their gold reserves. So there is this appetite that has arisen over the last couple of years, and it is underpin this rally this year, and it will underpin gold prices for the next couple of years as well. Thank you for that summary. You've obviously tracked it a lot more closely than I have, but I want to test

One thing that I heard from Putin, because you mentioned New World Order, and that can be a term that can mean lots of things for different people. I think when George Bush Sr. uttered the term, it had a different connotation than perhaps when Putin said it, I hope, maybe. But what I've heard Putin say is that this new monetary system that they're proposing or thinking about or planning right now, he said very clearly, and this was before the BRICS conference, I wonder if this was echoed in the BRICS conference,

that it's not going to be under anyone control. It's not like China leads it and we all sort of map into that or Russia leads it. It's that it's going to be decentralized and, and that it can't be based on, um,

like just trusting that the other partner's doing fine things with it. The United States has been abusing its reserve currency role to the extent that we're just printing money like crazy and throwing it out the door and without really having the economic growth to really support that. So fine. Is that what he was talking about? Is like, listen, we want to come up with a new way, but it's really more about individual sovereignty mapping into a system that they can all trust or verify in some way.

Yeah, I suppose you can look at it this way and you can say, okay, well, we've had the US dollar as a reserve currency for so many decades. If we were to look at the success or otherwise of that, and if we were to look at the flaws of that, what would we want to change about it? Well, you'd kind of want to ensure that it wasn't in the hands of just one country because of the risk of that being abused.

You'd want a degree of transparency. You'd want it backed by something that was tangible and physical to a degree so that there was a floor under which it could be manipulated, managed. And I think really what's happening, and you've got to admire the logic on a certain level, which is to say if we want, what they want is...

What they want is not to move away from the dollar. What they want is stability going forward, right? And in order to... And they don't have that stability now. They don't want to be held hostage by somebody being able to seize their assets and take those and hand them to their enemy, right? So they're looking at these things and saying, well, how would we... If we had a blank sheet of paper, how would we actually want to design a reserve currency where so many countries could be involved in it

And we wouldn't just have to trust them, it being a fiat currency, you know, by decree, but that we could actually set certain parameters. And as long as they maintain those parameters, we understand that there's a huge degree of stability in whatever currency unit that is created out of that. So there is a bit of wisdom in the logic.

looking at what has not worked over the last couple of decades and trying to avoid those things. And that's really what I think that this is about. It's about, for them, it's about maintaining stability of their currency and particularly amongst themselves because they're doing so much of their trading amongst themselves and an increasing amount of trading amongst themselves. So they say, right, well, if that's the case, why are we using a currency that is external to the vast majority of our trading and our relationships?

Yeah. It just makes sense on the level. Well, it does. And of course, this will connect. Trust me, I'll get there. But one of the things that sort of emerged in this political cycle as we're recording this, we're right before the U.S. presidential elections, and it's gotten very polemic and fractured and the worst I've ever seen.

But at least one of the demarcation lines is between people who believe entirely different things. And I mean, really fundamental, like these Venn diagrams do not touch, right? And these could be things about like equity and inclusion and diversity, all of that. So if I'm a Putin, if I'm a President Xi, if I'm somebody from the outside peering in, the trend has been for a couple decades now that

Let me give you an example. The United States had diversity targets for the Afghan army. Didn't map really nicely into their culture. It was a force fit. And we said, we're going to keep punishing you until you hit these targets of ours. I think that when you mention that stability, the last thing you want is to be tied to a system of currency where you don't know what the next hurdle is going to be that's going to be imposed on you.

by these people who don't share your cultural values, but insist you share theirs, but they can't even articulate how they got to those or when they arose, right? I think there's been a randomness to it. So when on February 28th, 2022, when the United States weaponized the dollar against Russia and froze its sovereign reserves, I think that was the starting gun for this particular conversation we're having.

Absolutely. Or at least it was the Philip. It was the thing that really gave it its impetus. Because... And this is... When I talk about these things, I'm in no way defending what led to that decision, which ultimately was the invasion of Ukraine. We've got to separate these things out so we can actually analyse them. But at that point in time...

it really put down a marker, you know, or threw up a red flag, whatever the analogy you want to use is, to anybody else that was holding US dollar assets, which said, okay, well, if it can happen to them,

it can happen to any one of us. And it happened to them because of the evasion of Ukraine. But who's the arbiter of what should determine whether your assets get frozen or not? Why would you have that entity external to most of your trading activity? So 100%, that is the major motivation or the start anyway of why we've ended up here.

Yeah, well, and out here in the cheap seats, I didn't understand how that decision got made. I didn't see the congressional open public hearings. I didn't see the debates. I didn't see that Treasury and state and Federal Reserve officials were really chewing on this and looking at the pros and cons. It just got announced out of the State Department one day, right? Yeah, I'm...

It didn't take a genius to say that this thing wouldn't have unintended consequences. So they... In situations like this, they either understood that and took the decision anyway, or they didn't. So one way it's deliberate and the other way it's incompetent. I don't know enough to know which one of those it actually was. But it was...

Externally looking at that, very unwise decision. Sorry, that's an understatement. The most unwise decision, because it has led to massive unintended consequences that is going to directly impact the US economy going forward.

Yeah. And in very easily predictable ways. So this thing happened, and here we are talking about a couple years later, but David, it was like the next day, I'm on FinTwit, and everybody's talking about these unintended consequences that we could all foresee, right? And anybody with a head on their shoulders can say, oh, well, I see what you're trying to do, but here's a lot of things that probably are also going to happen. And now they're happening. And the most predictable of those was, wow, you've just weaponized the dollar. Countries are now disincentivized

to continue holding dollars, okay. I could understand that if you did that and it was a conscious decision you took. If you also had a strong decision for how you're going to defend the dollar anyway,

Instead, we've had the most colossal new deficits being rung up in the interim period, right? A trillion dollars in 100 days, $2.3 trillion of new debt slapped on last fiscal year. Looks like we're on track over the next five months to tack on another one nine. Next five months, just because of reasons, right? And it doesn't seem to be slowing down. So the Fed cuts rates-

Yeah. It doesn't seem to be... Not only does it not seem to be slowing down, it doesn't seem to have the capacity to slow down. Right, right. I think that's the problem here. You've lost control of it, ultimately. We talked about this last month. We talked about the idea of U.S. net interest expense, where we looked at the top four...

budget expenses. You've got the interest payment, 980 billion, nearly a trillion. You've got defence, 940 billion, again, nearly a trillion. And then between Medicaid, Medicare, Social Security, they're about 1.4 and 1.8, so 3.2. So you've got those top four are something like 5.2 trillion. And the revenue coming in

is five trillion. So, they're greater, what you're spending on your top four things are greater than the entire tax revenue that you're taking in. And that's the top four. When you bring in everything else, you're talking, what are you looking at? Seven, eight trillion. That's unsustainable. And the thing about it is, if you look at those top four, you don't have the ability to get them under control.

You don't have the ability to go in and cut your Social Security, your Medicare, Medicaid. You cut your Social Security, what do you do? You actually end up creasing your economy. You push yourselves directly into a recession. And then what does that do? Well, that actually reduces down your tax take.

Because you've got this burgeoning deficit, you've got a growing interest expense. You've got very little ability to control that. And it looks like the Fed has lost control over the long end because what happens, they're cutting rates and yields are going higher. So they've lost their ability to influence treasury markets to the same degree as they have in the past.

We're at a situation in the globe where geopolitical tension is higher than it has been since the Cuban Missile Crisis. So you ain't going to be cutting your defense budget. If anything, that's going to continue to grow. So the capacity to do anything about it is, it's just not there. So we're, this is such an important point because, you know, so the Fed is,

Cut rates gave the so-called kind of an emergency 50 basis point cut there on September 18th. And surprisingly, every single interest rate, except for the shortest of the short end, right, which they can control.

has gone up in interest yield since that moment in time. It was sort of like sell the rumor, buy the rumor, sell the news moment there. So if we just look at this really quickly. So here we see the three-month and yep, the yield has come down a little bit over the past month because that used to be standing at 5.4-ish. Now it's at 4.5. So they did manage to drive the three-month yield down. Everything else, particularly the long end here, we're looking at

The 12-month here, let me get my little laser-y, pointer-y thing out. The 12-month is up 28 basis points. That's 0.28%. A full half a percent is the two-year. 0.56% or 56 basis points is the five-year. 49 basis points or a half a percent. The 10-year is higher. 30-year is higher. Everything's gone the other direction.

this is new behavior for me, David. I don't, this is not what I've seen in past cutting cycles. Sure. Sure. Um, the short end, obviously, you know, because it's only a, because only a short end, no two cut rates that the short end is going to come down. Traditionally, you would expect that, uh, yields on the longer ends would also come down when you, when you cut rates. Um,

The reality is, though, that the bond issuance effectively, okay, you're borrowing money. What are you doing? You're borrowing money against future potential earnings, right? And it's no different for a country government as it is for you or I. If we go to buy a house, we can't pay for the house in cash, so we borrow against our future earnings.

I think what you're seeing now is the realization that there's a debt crisis looming and the ability to continue to fund is significantly disimproved than it has over the last number of years. So what happens then? You see a sell-off in rates. What does that mean? It means, well, okay, I need a higher rate of return in order to take on this risk.

That's ultimately what it is. Maybe you have a couple of the bond vigilantes now who are just saying this is it. The model is broken in the US. Deficits are crazy. The national debt is crazy. The unfunded liabilities is out of control.

you're just shy of a trillion in interest payments. These things, as we've been saying for years, are unsustainable. But it was Keynes who said, you know, markets can stay irrational longer than you can stay solvent. They were, you could look down the line and say, we've got a problem coming. And maybe you were a couple of years younger

too far ahead of your time, which meant that people get this sense of, well, this time it's different because you're saying these things are out of control, but oh, look, they've got more out of control and nothing's happened yet. And then again and again and again and again and again. It does get to a tipping point at one stage. It becomes unsustainable at some point. And these things aren't happening in a vacuum.

They're happening against the backdrop of the geopolitical tension. They're happening against the backdrop of division in the US. They're happening against the backdrop of the BRICS situation. So, you know, the ability to fund long term is huge.

so much impacted by the development in the BRICS because now you had a whole block of nations that would be buying US treasuries that potentially will have an alternate that is more stable where they will not have the same foreign exchange risk that they would in US treasuries. You're seeing a situation where

geopolitical tension, an increase of that, as you say, what does that mean? It's going to be a massive increase in defence spending, as well as the destabilising effect of a hot war, whether it's in the Middle East or whether it's actually on the continent of Europe.

the destabilizing effect of that on the global economy and what that will mean. And then, as I was talking about, is the division in the US. Those things do not bode well in and of themselves. So I'm saying this thing is not happening in a vacuum. It's happening against the backdrop of all of this

going on. Increase in geopolitical tension, increase in division, the bricks, and then not even to mention the downturn in the Chinese economy as well. There's a

There's an old story, I'm sure you've heard it, about the kind of frog and the pot of boiling water that if you throw a frog into a pot of boiling water, he'll jump straight out. But if you put him into a pot of cold water and turn the heat up gradually till it comes to a boil, he'll still stay there until his skin falls off. Now, I don't know whether that's true and I'm not going to go out and actually test it, but that's what it feels like at this moment in time. We would only have to go back prior to the invasion of Ukraine

and ask ourselves,

What do you think will happen to financial markets if there was a war on the continent of Europe, there is increasing tension and we're on the precipice of a war between Israel and Iran, that there is a massive trading bloc which has 40 plus percent of global population that are going to launch their own currency backed by precious metals and division in the US?

you'd say, where do you think gold prices would be under all of that? You'd say, oh, I'd say probably $5,000, $8,000 an ounce. Mm-hmm.

Well, so can we talk about the cross currents then? Because so the typical model, which you would know better than I, because of all your time working in the financial system is the risk on risk off, right? So, so risk on, we buy equities, risk off, we buy treasury. So on one model, we're seeing equities been bill approved. They continue to march higher. That's risk on. Maybe the treasuries are signaling risk off. However,

Against that backdrop, we have this, which is one of my preferred measures of liquidity in the system has been Bitcoin. It's been very reliable. It's saying here we're seeing that Bitcoin is rising in U.S. dollar terms at the same time the U.S. Treasury yield is rising. So if Treasury yields are risk off and Bitcoin is risk on.

Gold seems to be a risk-off model, and as well we could throw oil into this mix, and oil is clearly signaling nearly catastrophic recession, the way you can't get a bid right now and just get slammed over and over again. How do we begin to make sense of all these cross-currents? Is it risk-on, risk-off, or is that the wrong model? It's now we have to look at these backdrop factors, and now we can start to map this in, because this is kind of new behavior for me. I don't have an easy model for what I'm seeing. Yeah.

Yeah, well, I suppose those models worked over the last couple of decades when geopolitical tension was lower, when you had more internal harmonious relationships in the US, less division.

you had where global trade was very strong and it was not just very strong, but it was consistent. We were able to, from one year to the next, we were able to kind of predict China was on an ascendancy. There was a good working model there, the ability of the US to issue new debt. There was a market and an appetite for that, a fairly stable market and appetite for that.

Those were all of the... They were the backdrops against the models that you're talking about worked. We've got a lot of... We have a lot of uncertainty at the moment. And that's the word that gets bandied around a lot. And what I mean by that is we're saying there's uncertainty because there's geopolitical tension. There's uncertainty because we don't know what's going on in the US election. But you can actually also... The opposite of uncertainty is certainty, right? And...

As we get, as things develop, we can become quite certain that there will be a war. We can become quite certain that the BRICS will launch a currency and it will be backed by precious metals. We can be quite certain that division in the US is going to get to such a stage where there's going to be societal implications. We can become quite certain. At this moment in time, a lot of that is in flux.

So a lot of the markets we're looking at, the old models don't work and we don't necessarily, because we're in that state of flux and when we get certainty around some things, we'll know, okay, well, it's definitely a risk off.

But it's also going to be complicated by how governments and how central banks respond to this. More than likely, we have seen in times of crisis how central banks respond. They've only got one play. They turn on the printing press.

To what degree do they turn on the printing press will influence what happens in stock markets. It'll influence what's going to happen in Bitcoin. It'll influence what will happen in the precious metals markets and in the bond markets. Depending on what happens geopolitically will determine whether the US dollar is seen as the safe haven. And treasuries are seen as a safe haven.

There's a slight difference between a global reserve currency and a safe haven. In terms of prices, historically, over the last number of decades, it has always been a flight to the dollar. It's considered a flight to quality. Does that model still stand? That's yet to be tested. Why? Because we haven't had a real test of that in decades. We haven't had a real test. You know, we haven't had a global war since the 40s. So those models are yet to be tested. So...

We're in that state of flux at this moment, I believe. And as a result of being in that state of flux, we are getting markets acting in ways that they don't normally. And the correlations that existed previously are starting to break down. That's ultimately, I think, where we're at the moment. Yeah, well, a corollary to uncertainty is lack of trust. So we've had a lot of erosion of trust.

And I see, so I've been on this bandwagon for a long time, so I'm Mr. Low Trust over here, because I don't trust what the Federal Reserve does, right? I don't trust what they say, I trust what they do, right? Yeah. I don't trust that I haven't, there hasn't been an audit of them ever that's quality. They say, oh, we've handed our balance sheet over to somebody and they said the number's tied, but that's not an audit. I mean, transaction level, where did the money go and how did you deploy it kind of thing? It'd be interesting, right? Yeah.

Absolutely. Yeah, we know that they said, oh, for their disaster preparedness after Superstorm Sandy, they got religion. They moved the FOMC New York trading desk from New York to Aurora, Illinois, where it's co-located with the Chicago Mercantile Exchange options and futures pits. Right.

And that was right around the same time when all of my market things started to go a little haywire. And I know that the Chicago Mercantile Exchange, you can still go on their website and they have a central bank preferred incentive program. They're such large volume buyers of CME products that their website lists and they get, David, they get futures pricing and options pricing. I salivate over like really, they get the best deals because they are the highest volume participants.

But they never disclose on any central bank balance sheet when they bought or sold a future or a put on any particular commodity, index, treasury bond, or gold or silver. But we know they do it, right? So it's in that backdrop of lack of transparency. I kind of now have to just sort of like try and peer through the fog and understand what's going on. So...

One way I look at this, I say, look, Bitcoin is going up. Gold is going up. To me, those represent kind of the same story, which is we think there's going to be a lot more printing coming. I could look at them both that way. Yes, absolutely. It's the only play they got in the bag. And you know that it will happen. It's just a case of when and then it's a case of what are the implications, what the implications for the stock market, the bond market, what's the implications for inflation, etc.

The only way that we talked about the debt and the levels of debt and the increasing level of interest payments on those debt, the only thing that they can do is inflate away that debt. It's the only thing.

It's what I call the Fed's, Federal Reserve's Kobayashi Maru. I don't know if you're a Star Trek fan, but the Kobayashi Maru was a test that was given to Starfleet captains. They were put in a certain situation and no matter what they did, the test was designed they were going to fail. And Captain Kirk, he famously, in the canon of Star Trek, beat the Kobayashi Maru.

And the way that he beat it was to reprogram the system. And ultimately, if they continue on the way that they do, using the plays that they've used in the past, there are only a set number of outcomes and neither of these are positive. So ultimately, what you're going to see at a certain stage is the Federal Reserve's Kobayashi Maru

where they effectively reprogram the system. Right. So I saw a little surprise on your face, so I pulled it up. I typed it in. This is coming straight off of the CME website, right? Very easy to find. The Central Bank Incentive Program.

Right there. For everybody who doesn't know, the Chicago Mercantile Exchange is where you trade the most highly levered products. Those are futures and options. Could be puts and calls on indexes. You can buy E-minis. You can buy maxis. You can buy gold, silver, sell, all that stuff. But it goes all the way down. Look at this. Standard customer rates. The central is the CBIP. They get a...

38% savings. I'm like, David, why does a central bank need a 38% savings? They print money out of thin air. Why do they get a savings? Why do they get an incentive program? Yes. But Bitcoin futures, it's right there. They're in it. Central banks have access to Bitcoin futures and it's in such a volume. They're like, look, we'll give you a 3%. We'll give you a little taste. Isn't that something?

That is scary. It's right there. Shocking. So at any rate, that's one of these backdrops because we don't know what our central banks are doing. They don't disclose it. They have unlimited firepower, so they're busy doing whatever they're doing. Yeah. And very tricky investing environment, I think.

It's a tricky investment, yeah. I mean, the opacity is incredible here, which leads to a lot of speculation. And it is a tricky investing environment. And if you think about what we're talking about, the bond market, and the implications for the bond market will mean that the traditional 60-40 equities bond portfolio is...

is not the thing that's going to carry you on into the future the way it has performed over the last couple of decades. There is a paradigm shift here. And it's a paradigm shift not just because of how the US or the Federal Reserve has managed the monetary system over the last number of years, but there's a paradigm shift because of the kind of secondary implications of how it's been managed. And that's where you've seen the rise of the BRICS.

If there's secondary implications because of the geopolitical tension. So we are in that state of flux. I do believe that we are in a paradigm shift. The old rules don't apply. They don't apply during periods. Everybody has a fight plan until they get punched in the face. We're looking at geopolitically

We're looking at a situation that we have not seen since the 40s, the late 30s, early 40s. There is a higher chance of a global, a world war than we have had in a long time. And it's kicking off already. All it needs is for some of these dots to be joined up. Israel and Iran are firing missiles at each other.

And they don't, for most people who don't realize, they don't have a border with each other. They're firing these missiles over other countries. Israel has, you know, that there's incursions into Lebanon. It's destabilizing in the Middle East. And you've got a situation where Russia and China will come to the aid of Iran if things get worse.

If things increase, you know, so we've got that, we've got a new, we've got a new axis developing there. These are very, these are very, very dangerous times. You know, and if you were to ask, if you were an investor in the mid thirties, you know, knowing what's coming down the tracks, how would you be investing? Would you think that the models of the previous decade were going to fit with what comes in the following decade? You know, investing through

Is it really investing? It's protecting your wealth. We're going through such a period of flux that this is about wealth preservation, wealth protection. If you come out the other side healthy and still hanging on to your wealth, there may be opportunities for you. But between now and then, it's very much about wealth preservation.

Absolutely. And for me, this is for, I've been a gold and silver investor since like around 2000. And I've only added to my position since then. The only time I sell silver, I do sell it, is when a niece, a nephew, somebody doesn't have any and they're kind of interested. And so I'll bust out the big old thing of junk silver and say, have at it, you know, and sell it to them below spot, right? Just to get them started. Because I'm kind of a dealer that way, you know, get hooked. Yeah.

But you've got to teach them. You can't just give it to them for free. They have to understand the value of it. But I'll give a deal, you know, right there. But otherwise, I've just been adding and adding. And part of the reason for that is that I truly believe in the old adage. I think it was Jesse Livermore, but I might have this wrong, who said, find the trend that is wrong and bet against it.

I'm convinced that the trend has been, the thing I'm betting against is that the United States has been in sort of, they say nothing fails like success. So the United States has been in the driver's seat for so long, I don't think it understands what happens, that that's not a possibility. Of course it is. History changes all the time. Is a big geopolitical realignment going to happen in my lifetime? Maybe, maybe not. Don't know. But I'm betting against that trend, which is,

They've been running a system. And here's my... You and I were talking about this before we hit record, which is that... I can't pull it up right now, but if I gave me a minute, I could. But I have a chart that somebody put together that said, look, if I bought silver...

and sold silver in two separate time periods. Period one, at the beginning of the open of the US market, which is driven by the paper's futures market, which now has a central bank preferred program, which we know about, right? And I sold it at the end of that market. So that's from 8:30 till, when is that? Four o'clock? That's your period.

Silver over the last 20 years from where you started would be worth today 11 cents per ounce. Whereas if you held it in time period two, which is the other time period, soon as the U.S. market closes, while the rest of the world is buying or selling, and you held it from there till the overnight when the U.S. market opens and sold then, silver today is worth $373 an ounce.

So here's what it looks like to me. I see this over and over again. This is not a market to me. This is silver. This is today. This is a one day market. We're looking at a one minute candle. I have my cursor right here at 830 at the open of the U.S. market. I think you can see it's kind of flat all through here. But the very second the U.S. market opens, volume comes racing in and it gets sold. That's what we do.

this david i see this pattern between eight and ten this has been happening for months now okay and let me connect that to something jesse colombo puts this chart up and he says okay

This way over here, if you can't see it, this is August of 2021, August of 2022, August of 2023, August of 2024. These are the non-swap dealer positions. These are the bullion banks. And you see sometimes they go, they sell some of their paper silver. Sometimes they buy, sometimes they sell. Here's a little more selling. But you see when the price goes down, they're covering all their shorts and they're buying long here, right?

But basically they go up and down. Well, starting here where silver was at 23 an ounce during its entire rise to 33 an ounce, they have been doing nothing but piling on shorts, 200 million ounces, paper ounces of shorts.

So this is the trend I bet against. I think these guys and gals, they've had their way for a long time. What normally happens, how this resolves, you know better than I. 2.30 in the morning, there's a massive, big, crushing dump of cell orders that just rip through everything. You wake up, there's blood in the streets, people panic out, and then they do this. They close their shorts out, and off we go. That's been the model for a long time.

I think this is going to have to break at some point. I really do. And I know people have been saying that for a long time. Well, there's a couple of lenses to look at that through. So if you look to the left of that chart, those red lines, that as they build up their shorts, what happens to the price next? Look at that. Falls. Each time. Each time. Up until the last time. Each time. Build up the shorts. Falls. Build up the shorts. Falls. Each time. Right? Yep.

Now, again, if you look back to the left-hand side of the chart, the way to read that is, well, they've made money each time. They've built up a short position, it's driven the market lower, they've squared up, they've made money. And even if you look at the black lines on the top of that, they start to go long. What happens when they get a cumulative long position? What happens? Make money. Make money. Make money. Right? So if you have a system that works that cleanly over time because you are...

You can call it manipulation, but you're the ape in the room, right? You've got the deep pockets. You have the ability to take the large position sizes because this is not necessarily more buyers than sellers or more sellers than buyers as the phrase normally goes. This is to do with the size of those buyers and the size of those sellers. They have the ability, if they're on the sell side, to overwhelm all the buyers.

to just hit every bid that there is all the way down till they exhaust them. And not only they exhaust them, they scare them. They scare them to death by going long. And then what do they do? They buy up the market again. Yeah. All right. But there's something that just dawned on me that I don't think anybody has spoken about when we talk about this trend of selling during US hours and buying during Asian hours.

that if we think about it, what that actually means is there's a huge appetite in Asia for silver. They buy a lot of silver. So what happens every day in the U.S. markets? The U.S. markets make silver cheaper for the Asians to buy every day. So they come in and go, thank you, U.S. markets. I love a bit of that.

Well, this is the opportunity, right? I love it. They've been giving us cheaper silver for a long time. And before we move on that, these awesome charts come from Jesse Colombo. He's at the bubble bubble here. Um, I follow his work. It's good stuff. And of course, also TF metals, um, follow, follow that as well. Uh, it,

Because this is an awesome chart, because you're right, you can see the pattern for years. And we could show this pattern going back many, many more years. It's just a three-year window here. But you're right, the ups and downs, these guys are just ringing the cash register. But it stopped working here, and that's worth noting. It has stopped, yeah. But...

The pattern has been there for so long and the trading strategy has been there for so long that when this starts happening, the initial reaction is, oh, we've got to just add on to our shorts. And then happens a bit more. Oh, if we do more, we'll do more. We'll do more. There is always a point where there is a tipping point on these things. We don't know what it is. We don't know. There may be a market event or there might be a bank failure or there can be something.

that will be that tipping point. We don't know what that is. We don't know how deep the pockets are. We don't know how much appetite for risk that they actually have. But the reality is that if metal prices continue to go higher at some stage, something breaks for them. Yeah.

It just hasn't broken yet, and we know it hasn't broken yet because they're still adding on to their shorts. Well, they're playing a paper game, and it's very fancy, and I'm sure it makes a lot of sense, but India's playing a different game. They're playing a physical game. So I'm a fundamentalist in this regard, so I read stuff, and India's talking about how they have...

solar is going to play more and more of a role, at least over the next five to seven years. So that requires a lot of silver. I was shocked. You and I talked about this. I still haven't figured out how to make sense of this, but the fact that in January of 2024, this year,

India somehow bought 2,700 tons of silver from the UAE. And I didn't even know the UAE was a player in the silver market until I read that. I mean, it was like such a shocking amount because that's basically 110% of world mine output in one month, you know, for that month of January went to one country from one other country. I couldn't make sense of the numbers. I'd never seen anything like it. And it was just,

in some, you know, international business newspaper as if it was just like a thing you said, you know. Mm-hmm.

Yeah, I mean, there's massive appetite for... There is massive appetite for silver and a growing appetite for silver. I'm always conscious when I talk about these. I'm passionate about talking about these things, but I'm also conscious that people look and say, well, you know, he's a bullion dealer, so he's always going to be bullish on these things. I own gold and silver myself, so I really believe in these things. There is a massive appetite for silver, particularly in the East. There's massive...

applications for silver and a growing list of applications for silver, not least of which is this, the environmental angle to it, the greening of the electrical grid effectively. Solar panels, that's going to be a massive demand factor

over the next number of years. The interesting thing when we look at the paper market versus the physical market, because effectively that's what we're talking about, because no matter how cheap or how expensive it is, paper silver can never be used in a solar panel. You need the physical stuff. I have always been of the belief for many years that we will actually see a break in the paper market when we see the margins on physical silver increase.

Because what that, they will only increase, it won't be out of greed, it'll be a supply demand. They will increase because of the demand for the physical. Because paper silver does not reflect.

Only the physical does. Are you tracking that at the 1,000-ounce bar? That would be the premiums there? You would see that there, yeah. I mean, the 1,000-ounce bars are the industrial-sized bars. You can buy them as an investor. They're not very attractive. They're quite large. They're not very invisible. They're very heavy. So they're not good for investors like yourself or myself. Okay.

But in terms of where you will see that disconnect happening and that increase in the margins of those, it will be on those 1,000 ounce bars. So when you see the premiums on those things going up over time, that's when you know that it's going to be a disconnect between the physical silver market and the paper silver market. Until that point, there is enough physical silver to meet with demand side.

We also got to remember as well that there's a massive amount of, you know, we talk about the ratio of physical silver to paper silver. We got to remember that there is effectively an unlimited ability to create contracts in the futures market, as long as there's somebody on the far side of it. Okay, so an unlimited ability to create derivatives. That does not require a...

ounce of physical silver to back those things because the vast majority of those things are cash settled. And to put that in perspective, I'm quite sure that a lot of people that are listening to this now will actually have their own spread betting accounts and will bet on the price of silver going up.

That's literally the same thing as these. That's a derivative contract. There is no physical ounce of silver that backs that and there never will be. There's somebody else that's taking your trade. You'll never be able to physically settle that for an ounce of silver.

So the existence of that as fantastic amount of liquidity to the market, which has been great for the silver for all futures markets over the years. But the extent to which that has grown now has meant, has allowed these large apes, large whales, whatever you want to call them, in to be able to overwhelm the market on the buy side or the sell side whenever it is that they want.

That's the challenge. That's the thing that has gotten out of control. So these talks about saying, well, there's never going to be enough physical silver to back all of the paper silver. That's not the intention for the vast majority of those paper silver ounces. They are literally just effectively contracts for difference. That's what you're entering into there that will be cash settled. So therefore, if we look to, right, well, you can trade those at spot all day long, but the reality is you can't get an ounce of silver for that.

That's what we're talking about here. So when those thousand ounce bars from an industrial perspective start to command a higher premium, that's when we're going to see, I believe, that's where we're going to see the disconnect between the paper and the physical market.

Well, and again, these games can continue until they can't. And then we have to just, you know, what will happen? You and I both, well, maybe you think different. My trust is so low, I think we're going to see another Hunt Brothers kind of thing. The system will do whatever it has to do to protect the big players because they let them ring the cash register, but when they really get in trouble, they change the rules, right? We saw this most recently with the London Metal Exchange on the nickel contracts, which was one of the most egregious things I'd ever seen.

There were 5,933 contracts that were long and got that story right.

There was one big player that was over-concentrated, was a Chinese firm, got caught with its pants down. And instead of letting that firm go down and then have to dip into their own capital to make up the shortfalls, which is what an exchange is supposed to do, is manage that appropriately. They just broke the rules and said, we're invalidating those contracts and zeroing them out. Right. Lots of lawsuits followed and all of that. But it was not how the game is supposed to work.

What's your faith that if the paper market breaks for silver, the game will be played fairly? Remember, it says...

If we see a similar situation to what you're talking about there, yes, there will be moves made to, I'm going to use the term right that ship, but it's not really, there will be to compensate, to fix it. But what that does, as you said, it erodes trust. The...

the, the, the reliance, the credibility, the integrity that an exchange will have post that will be a fraction of what it has prior to that event. Yeah. And what you will see then is, I mean, we've got the, we've got the BRICS countries talking about, uh, an international precious metals exchange. For this sort of a reason, I bet too, right? Yeah. So, uh,

You know, and you can even see that the Shanghai exchange, there's a premium coming out of the Shanghai exchange because of the demand for metal locally. So it's more reflective of real market dynamics. So maybe a BRICS, International Precious Metals Exchange, is set up

More from a perspective of fairness than what we have at the moment. To avoid, again, look at, you know, they take the same mentality and say, well, look at what the problems with the reserve currencies, what can we do differently to ensure stability going forward? Why would they not take the same attitude towards an international precious metals exchange?

Well, exactly. And this is getting to the heart of actually why I hold so much of my wealth. And again, I'm irresponsibly long. Both gold and silver have been for a long time. And it connects back to this other thing that I investigated heavily, which was around this concept of something called the great taking, which is that the legal machinery to legally take people's assets has been installed. Now, whether the trigger gets pulled or not, you know, a lot of people say it couldn't, it wouldn't.

But still, it sits there. And so the question is, again, rather than wonder and speculate about just how fair the system's going to be in a moment of crisis, I'm just going to go with everything I've seen for the past 15 years, 20 years and go.

Probably not as fair as I'd like it to be. And I just want my stuff out of the system as much as I can. And that's where GoldCore steps in and other places. Listen, everybody should have gold and silver, in my opinion, in their hot little hands, your insurance basket, right? Whatever that means to you, right? You just want to make sure you always have that. Okay, it's somewhere you can access it.

safely store that. But for a lot of people, you want to spread your risk out a little bit, or you don't want to hold it all yourself, or you want to hold it in different jurisdictions, which is my main thing. So I don't even know how the U.S. experiment's going to go. I got a little uncertainty about what's going to happen over the next few months and years here, right? So those are my reasons for

having internationally secured vaulted storage, which is really code speak for out of the system. It's not a bank account. It's not in a bank. It's not subject to any of those great taking rules. There's not no legal machinery I found where they can reach in and just grab that, you know, um,

based on anything that's on the books that I understand. Yeah, indeed. And I bring this back to my concept of the Fed's Kobayashi Maru. It's a no-win situation. So they're just left with one choice and one choice is to reprogram the system. So what does that mean? Well, that could be the great taking. It could be a new world order. It could be a new monetary system. We don't know. And it's impossible to pinpoint. So what's the best way is to not play the game, to step out of the game.

Step out of the system. Precious metals is an excellent way for you to step out of the system. It's a physical, tangible asset. You can hold it in your hand. You can store it safely in a jurisdiction that you do not live in. It gives you that ability to hedge that jurisdictional and that geographic risk.

You're not talking about putting everything at a distance, but at least some. It's an insurance, it's like an insurance contract against jurisdictional risk. As we see, we are seeing an increase in division in the States. We don't know what that means and how that will play out. So there is wisdom to not holding everything within that jurisdiction, spread it out. It's a risk mitigation tool. That's ultimately what it is.

So many people over the years have looked at it and kind of gone, oh, well, you know, the gold price hasn't done anything or hasn't performed this year as well as my stocks have performed or my bond portfolio has performed. This is a risk mitigation tool that is to protect you against uncertainty. And what have we got now? We've got growing uncertainty.

So, yeah, having precious metals outside of your jurisdiction that you can tap into, you can access the liquidity of that at a very short notice. You'll be able to sell down and have your dollars returned to you, or yours returned to you, or sterling returned to you within a very short space of time. We're talking, you know, a day or two. That's important in this scenario.

not having all your eggs in one jurisdictional basket. If you were to say this five years ago, when we were saying it five years ago or ten years ago, people would have looked at you like you had two heads. But these things are becoming real now.

And what's the term you use? You're long. You're long, gold and silver. Irresponsibly long. Irresponsibly long, gold and silver. Yeah. Now, we don't... That's obviously your personal choice and you have done your research and you have got your...

on the pulse of the market, not just on the market, but on geopolitics as well. You understand that. So that's why you're irresponsibly long gold and silver. We don't recommend other people that...

aren't following the market as closely as you to be irresponsibly long, but everybody should have some gold and silver because that is the thing that is going to protect you in these times. Well, to be fair to myself, my first big purchase of gold, it was $293 an ounce. So I'm very close to a 10 bagger on that. That was now in 2000, just late 2000. However, I

So that's a long play. But when I just put it into a spreadsheet and I asked the question, who did better me or the S and P I beat the S and P with that as 8.9% compounded for 20 years, right? That's it's not bad. And by the way, I actually think all I really did was kept pace with true inflation, honest inflation. That's it. You know, that's it. Uh,

Now, you will get people that will comment and say you're not factoring in dividend yield on the S&P there, but that wasn't why you... That's not why you bought it. Correct. Nominally, yeah, you have kept pace with that, but it has given you all of the benefits. There's a...

But my point was it started out as this much of a piece of my pie. Yeah. And through my own, it became this much. It became bigger. Yes. That's not your fault. It was responsible and it became irresponsible at some point. I just couldn't find a reason to sell it. You know, Rick rule who I've interviewed on my channel a number of times. And I'm quite sure you're very familiar with your community. It's very familiar with. He always comes out with some great lines.

And one of the things that he said is that having gold in his portfolio allows him to take greater risks with the rest of his portfolio. He sees it as that bedrock because he knows that he will always have that and always hold that. And the other thing he says as well is that he doesn't buy gold because it's going to $3,000 an ounce. He buys gold because he fears it's going to $9,000 or $10,000 an ounce.

And that might sound kind of a bit strange, but the reality is he's basically saying, what will the world look like if gold is at $10,000 an ounce? I won't be dancing victory jigs, I'm pretty sure. That's the thing, isn't it? That's the thing. You know, a lot of people buy gold and they hope that it doesn't go higher. So it's not an...

It's not, it's not, it can be an, it can be an investment as a speculative investment where you buy it because you think the price is going higher. But ultimately what it's meant to be is an insurance policy against uncertainty. It's that physical, tangible thing that is highly liquid that you have in your portfolio that will come into its own in times of need. Okay.

And that's with all of these various backdrops and this and that. And by the way, I love silver because I understand its industrial uses. I understand the true fundamentals. I understand that there's been a supply-demand shortfall on the supply side relative to demand for five out of six years, and this will probably make it six out of seven this coming year. And because they're not opening new base metal mines because...

So most people don't know this. There are a few pure place silver mines you can get into, but not that many relative to the 70% that comes from base metal mining. I'm talking copper, zinc.

those base metals. And the last analysis that I got from Goldman Sachs or JP Morgan, one of their commodity desks looked at it and said, copper would need to be $35,000 a ton to justify opening a new mine. And currently it's at nine or 10,000, right? So nobody's open and very few new mines are being opened. So, you know. And that's a moving scale as well, because we've still got those inflationary pressures.

We saw Newmont come out with their results there with the gold price significantly higher than previously recorded. And inflationary pressures really squeezed the margin for them on that. So, yeah, it's an interesting time. 70% of silver supply

is mined as a byproduct. So it means that you're mining copper, you're mining zinc, and you also happen to be mining silver. Yeah. So it's a very interesting market. The underlying fundamentals really, really, really do support higher silver prices. Silver is a monetary metal in the same way, but not to the extent that gold is viewed as

but it has a massive industrial play.

So there is a strong speculative investment case for silver going forward, particularly as we say with the rise of solar. With all of the other applications that it has, it has applications, it's antibacterial, antimicrobial properties heavily used in medical industry. They are forever finding new uses for silver. So there's a huge, in terms of investment cases, a huge investment case for silver prices to go higher.

Oh, absolutely. And by the way, so I like to endeavor to separate this out. People often say, how do you feel about gold and silver? As if it's a one word thing. They're two separate words. Okay. Yes. My gold, let's be clear. I believe JP Morgan, the original, the OG back in early 1900 said, gold is money. Everything else is credit.

And I agree with that. I think gold has a role and there is a non-zero chance, this is the optionality price of gold, that it will be remonetized, maybe through the unit of the BRICS, maybe through some other things, but it has an option value built into it. And of course, we've all seen the silly things, like if we divide total known monetary gold by M2, you get these wackadoodle numbers, right? You know, big five digit things. Yes.

I'm not counting on that, but it has a non-zero option value that I think has been priced at zero, and I don't understand why, so that's one issue. Silver's an industrial metal, and the fact that I'm long silver, David, tells you that I'm optimistic, because I know there's going to be an industrial use for it in the future, right? Silver's a very optimistic play for me, because...

You know, if we get into one of those big shooting wars that breaks down our economies, you know, silver demand will probably collapse, you know, for a variety of reasons. But I don't think that, you know, I really think long term. There is military applications in it as well, unfortunately. Unfortunately, yeah. So that'll underpin some of the market, but definitely we'll have, you know, the industrial market.

Again, depends which way these things go. And that probably explains why, as a last comment, I also heard from the BRICS, Putin said that they are restarting their strategic silver supply as a nation. Did you hear that too? Yes, yes.

Yeah. So again, another aspect of the kind of fundamentals underpinning it, underpinning the investment case. Yep. All right. Well, David Russell of GoldCore, thank you so much for your time again. Really, I always look forward to these conversations. You're so welcome. Likewise, Chris. Let me know if any nine-digit orders come through. I definitely will. All right.