China Just Did The UNTHINKABLE to GOLD (Every Investor Should Watch This)

[00:00:00]China just did something that will impact you greatly if you hold gold, silver, have a 401k, or any sort of retirement plan. They brought back the gold standard. So, in the 1970s, Richard Nixon took the US dollar off of the gold standard, which set the dollar on a path to its own destruction. Now, China is bringing it back, but not for the US dollar. Actually, the machine they built is designed to collapse the US dollar.

[00:00:21]So, if your savings are in dollars or your retirement is in stocks and bonds, you need to know what China just turned on because it is absolutely massive. So, today I'm breaking down what this change means and what I'm doing with my own money because of it. So, to understand what China switched on last week, you need to understand why half of the planet wants an exit from the dollar in the first place, and they do. So, here's how the dollar system actually works. If you're a country, you sell the world your oil, your shoes, your phones, your your whatever, and you get paid in US dollars. Then, you take those dollars and park them in US government debt because the US used to be the safest entity in the world to lend your money to. And also, they paid pretty good interest. So, the whole world's savings ended up funding America's borrowing because America would print the money, buy stuff with it, and then whoever they bought it from would just give them the money back as a loan. It's an amazing system for the US. That system's been running since 1944, but there are cracks in the system, and they started to appear in 2022 when Russia invaded Ukraine because then America and Europe froze about 300 billion dollars of Russia's reserves, and every central bank learned the same lesson on that day. If your national savings sit in dollars inside of Western banks, they aren't really your money. They're an IOU that can be canceled at any moment that Washington decides it doesn't like you anymore. Think about it like this.

[00:01:39]Imagine your bank could freeze your account whenever they didn't like you. I mean, they they probably can, really.

[00:01:44]But, what would happen? You'd stay polite, sure, but the day some bank opens across the street that won't freeze your money, you'll move your money there, right? And that's where China comes in. China sits on the biggest pile of foreign reserves in human history, and a massive chunk of those reserves are in US dollars and US treasuries. In 2022, the Americans showed them exactly what happens to a pile like that if things ever turn nasty. They just get switched off. They could just take your money away. So, China asked the obvious question, "What can we hold that nobody can switch off?"

[00:02:15]And the answer to that, as you know, is gold because gold has been money for 5,000 years. Nobody can freeze gold sitting in your own vault and nobody can print gold, which is why every central bank on Earth has been a net buyer of gold for 16 years straight. But China have taken it a step further now. They built a system where gold works as a money between countries, where you can settle trade with it, store it safely, borrow against it. This never existed and that's what China finished building just last week. So, what they built can be broken down into four pieces.

[00:02:47]Actually, before I break it down into four pieces, real quick, I've written a free guide on how you can retire by 2036. It's linked below. It's free.

[00:02:54]After you're done watching this video, click that link or scan the QR code on screen and get the guide. You also get signed up to my free weekly newsletter, which I think you will love. Anyway, onto the four pieces of this machine that China is building. Piece one, Hong Kong just launched a central clearing house for physical gold. The Hong Kong Precious Metals Central Clearing Company, it's a long name, with the Bank of China running the main vaults for it.

[00:03:17]Piece two is called Delivery Connect. It plugs Hong Kong's vaults directly into Shanghai's gold exchange, the biggest physical gold market in the world. Gold and payments now move across both markets as one system. Piece three is storage. Hong Kong holds about 200 tons of gold today, right now, and the official target is over 2,000 tons within the next three years, which is massive, a 10x. Piece four, Beijing lifted the offshore yuan pool in Hong Kong from 200 billion to 500 billion yuan. So, what does all of this mean?

[00:03:46]What does the machine actually do? And what does it mean for your gold and silver because, you know, that's the the part. First, let's talk about what it does on a global scale. Say you're an oil producer, a country that produces oil, and you sell to China. You get paid in yuan, and your finance minister goes, "Hang on, what do we do with a mountain of yuan? We don't exactly trust Beijing.

[00:04:05]No offense, Beijing." China now allows you to swap it for gold bars whenever you like. Real gold bars in a vault in Hong Kong with your name on them, plugged into a network of vaults being built across the BRICS countries. They are calling it the gold corridor. And in this gold corridor, you can use those bars as collateral. Park your gold, borrow yuan against it, build your power plants, and the whole chain never touches a dollar, a treasury, or a Swift account. At this point, you're probably thinking, "It's the gold standard coming back." And it it kind of is, but it kind of isn't. But really, it kind of is. The yuan stays as the default, but gold is what makes other countries willing to hold it at all because Beijing knows better than anyone that nobody trusts the yuan. So, they stuck gold behind it.

[00:04:50]The one asset that everyone actually trusts. And do they have the gold to back this system up? Yeah, of course they do. China's central bank has bought gold for 20 months in a row. China claims to hold 2,346 tons of gold, but analysts at Bloomberg and the World Gold Council say it's more than that. So, once you count the state banks and the sovereign funds, it holds somewhere between 3,500 to 5,000 tons of gold, roughly double the official story that they put out. But this isn't just a China story, by the way. For the first time since 1996, foreign central banks hold more of their reserves in gold than in US Treasuries.

[00:05:25]For example, France pulled out 129 tons of its gold from the New York Fed and shipped it back home just recently.

[00:05:31]India cut the share of its gold stored abroad from 55% to 22%.

[00:05:35]Meanwhile, BRICS and aligned countries are increasing their share of global gold reserves, aiming to push control of global gold towards 65 to 70% by the end of the year. It's officially being framed as as of a dedollarization strategy for BRICS nations. So, everybody wants their metal back inside their own borders where nobody can freeze it. And the other side of the trade tells the same story. China has cut its US Treasury pile from 1.32 trillion in 2013 to about 680 billion, the lowest since 2008. You're seeing the same move everywhere you look right now.

[00:06:06]Sell the IOUs and buy the metal back.

[00:06:08]Now, some of you are going to say, "Nick, hang on. The dollar's been strong all year. Gold's down about 28% from its highs and Trump keeps telling everyone that America is winning." And yeah, that's true, but this has happened so many times throughout history. They need to win an election, so they pump the dollar, pump the stock market, and make everything feel good just for a little while. But, they can only do that for so long, and it seems the whole world is preparing for dedollarization right now, which means the fundamentals are pointing towards higher gold and higher silver prices over the long term. For example, JP Morgan, this is the bank that paid $920 million in fines for manipulating precious metal markets. I always like to remind people of that.

[00:06:46]They now hold more physical gold and silver than any point in their history.

[00:06:50]And speaking of silver, because we've just been speaking about gold for the most part, is silver going to go along for the ride in this whole gold corridor thing? That's a good question. In my opinion, silver is the more aggressive move for investors. It's like gold, but on steroids. Now, China is the biggest player in silver, so they tie into this, too. They refine 60 to 70% of the world's silver supply. And on January 1st this year, they brought in export licensing, meaning that only 44 state-approved companies in China can ship refined silver out of the country.

[00:07:21]So, they control most of the world's supply, and they just started restricting it this year. At the same time, their buying went absolutely vertical. In March, China imported over 800 tons of silver, which is 173% above the 10-year average for that time of year. Now, part of that is industrial, they need it for solar panels, etc., >> [snorts] >> but But all adds up, and the West are desperate for silver because it's in your phone, it's in your car, it's also in your solar panels on your neighbor's roof, and every data center being built right now needs silver. The West needs the exact metal that China just gated, and that should result in higher prices in theory at least. But my big question is why are they buying up so much silver? Like I said, industrial is definitely one aspect, but they bought up tons and tons of gold before they launched this gold corridor. Are they going to launch a silver corridor? Are they going to implement silver as a secondary metal in this ecosystem?

[00:08:12]Probably not, but it is worth considering and thinking about and looking out for. Either way, China is buying a lot of silver, and that's good for silver holders. And if gold goes flying, silver is just going to follow anyway because it always does. Silver always follows gold. So I'm bullish on gold, and I'm bullish on silver, and I'm bearish on the US dollar. But you guys probably know that if you watch these videos. That being said, the dollar still makes up 50% of global reserves, which is pretty high. It's down from 72% in 2001, but still it's the biggest reserve asset by miles. The closest behind it is the euro, and that's only 20%. So nobody serious is arguing that the dollar dies tomorrow. But remember that example I gave you about the bank that can freeze your money, and then across the street a bank opens that can't? Well, China just opened that bank with the gold corridor. Of course, everyone won't move their money there overnight because countries move slow, but they are going to start moving their money there. And what China is building with gold in Hong Kong is the modern version of this thing called the London gold pool. I want to talk about the London gold pool for a bit. So what is the London gold pool? Let me explain. In 1961, the dollar is pegged to gold at $35 an ounce, and the price keeps trying to push higher. So America and seven European countries set up something called the London gold pool. One big coordinated fund pooling their gold and dumping it into the market every time price twitched above $35. They were trying to suppress the price, and it worked. For 6 years straight, it worked.

[00:09:34]Price barely moved. Everyone relaxed, and the papers called it stability. Then France did the math, decided that the game was rigged, and asked for their gold back in 1967. Buyers started turning up at the counter faster than the pool could sell gold. So, by March of 1968, it was over. They had to close the London gold market for 2 weeks just to stop the bleeding, and the pool was dead. And by 1980, gold hit $850 an ounce, up from $35, a 24x over 12 years.

[00:10:01]In other words, the system looked calm right up until the gold pressure that had been building underneath finally blew the doors off, and the people holding gold, not dollars, are the ones who ended up walking away with loads of money. So, when someone tells me that the dollar system has decades left because it looks stable today, I just point out that February 1968, it looked kind of stable, too. And just to make this clear, I'm bullish on gold and silver and bearish on the dollar. I've already said that because I think we're back in that kind of moment in history.

[00:10:30]The dollar still dominates today, but China has just built a new gold and yuan bank across the street, and history says that once enough people start walking through that door, the old system has to defend itself, and eventually it's going to break. When that happens, I'd much rather be holding a metal like gold, silver, and maybe even copper than the US dollar. Now, you might ask, does the dollar actually need to defend itself?

[00:10:49]And yeah, it has to because it's literally under attack. Every country that settles in yuan and gold is one less buyer of US Treasuries, and America desperately needs those buyers because it's sitting on roughly $40 trillion of debt, and it already spends more on interest than on its military, $1 trillion a year. Fewer buyers means America pays more to borrow, so they print more, the dollar weakens, and even more countries head for the exit. Also, the US spends $2 trillion more per year than it earns. So, if nobody wants to lend them that $2 trillion, they are completely screwed. This is why July 7th will be looked at as the day the exit door officially opened for the US dollar. Now, who are the people that are going to be hit the hardest? Is it going to be you? Well, the people hit the hardest are those sitting in dollars, which, if you have money sat in the bank, is probably you. And look, I'm not looking about money to buy your groceries this month or next month or any emergency savings you need quick access to. I have those, too. I mean long-term savings, because they aren't your savings. Your money buys a bit less every single year, and any interest you earn is probably lost to inflation. So, $1 saved in 1971 lost roughly 87% of its buying power by today. That's what being on the wrong side of this looks like.

[00:11:57]So, what am I doing about it personally?

[00:11:59]About 30% of my portfolio is in metals, mostly physical gold and silver, and I'm not selling an ounce of it. But, here's what I take from this, three lessons.

[00:12:07]Lesson one, that's two. Lesson one, China's entire system settles in real physical bars.

[00:12:12]The people designing the next monetary system clearly don't trust paper claims on metal, and and neither do I. It's why I hold physical and why I don't go for leverage metal products. If you hold a gold ETF, for example, you own a paper claim on metal sitting in someone else's vault. And you know, the dirty little secret of the market is that that same bar can be promised to more than one person. So, your bar that you have with an ETF might belong to 10 different people. It works fine until everyone starts asking for the bar at once.

[00:12:38]Lesson two is there is no price target for gold. Gold is simply a hedge against inflation for us holders, and for China and other governments around the world, it's the thing that makes the yuan worth holding now. But, none of these governments are staring at a chart thinking, "When's the best time to dump my gold for profit?" Because what are they dumping it for? Fiat that's being debased day by day? US Treasuries? No, they don't want that. China is the first to move towards this gold system, but more countries will follow. Gold is making the greatest comeback in its history, and it's becoming clear that you don't trade gold for money, because gold is the money. Third lesson is timing. So, Trump's whole strong dollar machine only needs to last until the midterms, so he can win the election.

[00:13:18]But, the machine that China has built is going to run for decades, and you can guess at which one outlives the other.

[00:13:24]Whatever you do, make sure that you can wait. The buyers on the other side of this are central banks and states and they can sit in a position for decades without blinking. So, it's plausible that gold doesn't go up this year or next year, although I think it probably will, but we might need to wait just like the central banks. Not decades though. But, like I just said to you, you don't trade gold for money anyway.

[00:13:43]Gold is the money. And look, I could be wrong. I've been wrong many times before in my career and maybe Washington pulls a rabbit out of the hat and fixes all of this. There are three things that will tell me that I've got this wrong. If China's central bank stops buying gold, that's one thing. That that would not be good. If Hong Kong's vaults stay empty instead of hitting that 2,000-ton target that they talked about. And the other thing is if the dollar's share of global reserves stops falling and starts holding. Remember how I said that the dollar share of reserves was at 71% in the 2000s and is now at 56%? Well, if that stops falling, holds, or even goes up, that wouldn't really be good for this because it indicates that people are buying the dollar again and want to hold dollars. So, any of those happening will tell you that I was probably wrong.

[00:14:25]But, right now, all three are pointing in the same direction. By the way, if you're worried about everything that's changing in the world right now and you're trying to get your portfolio in order, check out my free guide on how to retire by 2046. It's a quick guide. It's free. There's a link to it below. Pop your email in and it's yours and you also get signed up to my free weekly newsletter, which I'm sure you'll love.

[00:14:42]I'll see you in the next one.