Who’s Buying All The Gold? (Uncut) 02-23-2025

Who’s Buying All The Gold? | Clive Thompson

Or it could be that there’s a major player in the market, like a central bank, who’s quietly acquired a lot of futures in the past, and now is surprising the market by taking delivery of more than usual futures instead of rolling them, and simultaneously, because it can’t get delivery of all these bars in the spot month, is simultaneously buying more futures because they want to acquire a lot of gold in a hurry. This is Kaiser Johnson with Liberty in Finance, and these are the Miles Franklin Weekly Specials for February 10th through February 17th, 2025, while supplies last. Backdated Silver Austrian Philharmonics at just $2.85 over spot, and Pre-65 Junk Silver Dimes and Quarters are at the lowest price in years at just $1.49 over spot.

Pre-65 Junk Half Dollars are just $1.69 over spot. To order our specials or any of the many other options we have available, call us at 1-888-81-LIBERTY. That’s 1-888-815-4237.

We’re available after hours and on weekends, and we look forward to speaking with you. Hey everyone, this is Elijah K. Johnson with Liberty in Finance, and back with us today is our good friend Clive Thompson, a retired wealth manager. Clive, thank you so much for joining us today.

Good evening, Elijah, and thank you for having me on your show. Well, it’s great to have you back on, especially as we’re seeing so many exciting things happening in the gold market, gold reaching new all-time highs as we speak. You know, talk here in the U.S. about auditing the Fort Knox gold reserves, we’re seeing outflows from London, we’re seeing outflows from the COMEX, huge outflows.

I guess to kind of start this all off, you’ve been paying attention to inflation and commodity prices. How do those two factors play into what’s happening right now? Well, let me start off by just showing to your viewers what commodity prices are doing. I’m looking here at the – it’ll come on your screen in a second – at the CRB index.

There you are. I think you can see that now. So, what you see here is the Commodity Research Bureau, it’s called the Thomson Reuters Core Commodity CRB Index, and it’s showing the commodity index, the major commodities which are covered under the Consumer Price Index at the end of the day, they have risen by 18% over the last year.

There’s quite a lag from commodities into the consumer prices, but it’s only a question of time before that will affect consumer prices, and consumer prices will start to rise. What I’m going to show you on the next slide is the monthly inflation rates. That’s the inflation rate for just one month, not for the full year, and you can see that the inflation rate was coming down from 0.5% right through to October, and to June, this is from January 23 through to October 24, we had a fall in inflation, when it actually went negative in the month of June 24, and then from July 24, we can see that inflation starts to rise.

It’s not in July, it’s 0.2, August 0.2, September 0.2, or for the month, October 0.2, November 0.3, December 0.4, and January 0.5, that’s inflation for the month. So what we have, looking at the next slide, is a trend now as core inflation starts to come off the bottom and rise, which means this hope of getting to 2% inflation isn’t going to happen. Inflation rates are heading higher, and I think the market can see that, and it certainly makes people think about discussing, at least, inflation hedges.

Now you wanted to talk about what’s going on in the gold market and gold prices. So I’ll start off by showing you a very interesting chart. This chart, which we’re looking at here, shows you the near-dated futures contract minus the spot price of gold.

So the near-dated gold future minus the spot price of gold. So what happens when you have, so typically these futures contracts, they run for two months, and then they get to right down to the spot month, and the premium of the future gets to zero. So when we’re two months away, normally the price of the futures reflects the spot price plus interest for two months.

That’s called the carry cost. And then every day, it goes down a bit, down a bit, down a bit, until spot equals the future. Then we have the new futures contract, and it starts over again.

So you can see these multiple triangle shapes. But if you look at the one where we get far right to the current contract, which happens to be the February contract, you can see the pattern is broken. There’s something.

It’s all over the place. It’s gone. It’s like very chaotic.

It’s all over the place. There is no normal pattern, and that means that something very strange is going on in the futures market. And we can see a little bit what’s going on if I look at the next slide, which shows you the number of delivery notices per month going back all the way back to December last year, December 23, that is.

Very few contracts, gold futures contracts, actually get to be delivered because usually they get closed out. The buyers and the sellers close their contract, and then they roll it into a future month. And we have major delivery months and minor delivery months.

We’ll ignore the minor delivery months, which aren’t so important, but the major delivery months run February, April, June, August, October, December, and back to February. Now, if you look at this chart, you can see that month after month, we typically never have more. Mostly, we don’t have more than 30,000 contracts delivered or delivery notices, as they call them.

The highest was in June, when it was 30,000. But go back a year ago to February 2024, there were 20,000 delivery notices. This February, a year later, there’s more than three times as many.

So far, and the month’s not over yet, there’s 73,624 delivery notices, basically meaning a lot of people are taking the gold out of COMEX rather than rolling the contract into a futures month. So the question, which I don’t have an absolute answer for, but we’ll play with that a little bit, is why are people taking delivery of their gold at the moment? What’s going on here? So I’ll just look a little bit on the next slide with the actual numbers. On the left-hand side, you can see the actual hard numbers for the COMEX gold delivery.

And you can see it’s up 255% as of yesterday. And the silver delivery is 235% higher than usual on the right-hand side. And I’ll come back to stop sharing for a minute now.

So before we discuss what’s going on there, talk about what’s going on in London. A lot of the gold dealers, and these would be companies, hedge funds, banks, and others who play the COMEX market, would normally go short the future. So two months out, three months, they’re shorted.

But they’re fully covered because they hold gold, or at least some of the gold, in London. Why do they hold in London? Because that’s a great place to hold your gold and lease it out. And the people who’ve shorted gold actually have no worries in normal times because they think, we’ll get to the current month, and I’ll just roll it over into the future month.

And nobody will ever ask for delivery. Never happens, or almost never happens, except it is happening this time. But they’ve got the gold in London.

So the normal way of thinking is, well, if I have to deliver, I’ll just ship the gold from London, convert the 400-ounce bars into 100-ounce bars. And within two days, I’ll be able to deliver the gold in New York, except there’s a hiccup. The Bank of England and the LBMA are facing a large number of requests for delivery of gold bars to New York.

And there’s a large backlog. The backlog could be somewhere in the region of four to eight weeks now, which means that those people who are short on New York, they may be fully covered because they got the gold. But the problem is, it’s not in the right shape or size.

It’s not 100-gram bars, and it’s not in New York. It’s in London. They can’t get it to New York in time.

So what are they being forced to do? They’re being forced to buy back the contract that they shorted and roll it out for a future date by shorting the future. Now, normally, when that happens, you’d think that the contango would go to a backwardation. In other words, an unusual situation.

You’d think the spot month would be higher than the future month because people would be buying the spot month and selling the future month because they can’t get the gold. They have no choice. But that’s not happening.

Something completely opposite of what we’re expecting is happening. The futures month is going to a premium to the spot month over and above what we would expect. So we’re seeing the futures month, the contango, as it’s known, instead of trading at, let’s say, $2 or $3 over spot for the February delivery, and there’s only a few days to go in February, we’re seeing $10 or $15 over spot, giving rise to a potentially extremely high return for those who do have gold bars to hold the spot in New York and sell the future.

But that should normalize. Normally, that’s arbitraged away within minutes. Why is that consistently higher than it should be? Well, what that means is there’s a player in the market somewhere who’s not only taking delivery of the spot.

He’s also, whoever it is, we don’t know, buying the futures and pushing the futures up to an unreasonable premium over and above the spot, which makes no sense. So it might become clear down the line what’s happening. It could be people who are in the know say, hey, there’s a lot of shorts out there.

They can’t get their hands on the gold. We’re going to squeeze them. And we’re going to buy spot and buy future, push the price of gold up and up to make them pay.

It could be that going on. Or it could be that there’s a major player in the market like a central bank who’s quietly acquired a lot of futures in the past and now is surprising the market by taking delivery of more than usual futures instead of rolling them and simultaneously, because it can’t get delivery of all these bars in the spot month, is simultaneously buying more futures because they want to acquire a lot of gold in a hurry. So let’s ask the question.

I’ll ask you a question, Elijah. I think we’ll discuss it. But who do you think these players or a player might be who’s potentially interested in getting their hands on the gold? It’s been speculated that it might be the US government if they’re scrambling to, you know, if there’s not enough gold in Fort Knox and they’re scrambling to do it before the audit.

But that’s the that’s the only, I guess, main player that I’ve heard people speculate about. Well, that’s I mean, I’ve read that speculation, too. That could be that they’re trying to replace the bars which have been lent out or stolen or which aren’t real or who knows what.

It’s a possibility. Or it could be another central bank or central banks trying to acquire a position before it becomes apparent that they are in a hurry. Now, last year, there was something like 27 central banks acquired gold.

They increased their gold holdings. And when you look down the list, with the exception of one, which is Poland, none of those central banks are the best friends with the USA. So over the last year or two, we’ve seen the United States weaponize the dollar, basically saying your bank balances are frozen.

And not only that, we’re going to pay your bank balances to your enemy. So when you weaponize somebody’s dollars, it makes those people who are not the best friends with the United States think, well, do I really want to hold all these dollars? We haven’t done anything wrong yet. But who knows how we’re going to feel in a year or two? We have to have a plan B. And there could be a generalized move.

I think, well, there is a generalized move by many central banks now to start acquiring some gold at the expense of treasuries. And we see that in particular with China, where over the last year or two, 85% of the increase of China’s reserves has been represented by the rise in the value of their gold holdings through two things. One, they’ve been purchasing gold.

And that’s been ongoing. And secondly, the price of gold has been rising. But they continue to buy despite the gold price being at an all-time record.

So reading between the lines, they don’t really care what the gold price is, record or not record. They want more of it. So even though almost all of the increase in their reserves is represented by gold, they still want more because the amount of gold they hold per citizen is very small compared with that of the United States.

So it could well be a central buyer trying to hurry up, a central bank buyer like China, for example, trying to hurry up and buy gold. But of course, the question would be, why would they buy in New York when they can buy in London? Well, perhaps they’re buying in London, too. We don’t know.

I suppose when you’re in a hurry, you buy wherever you can get it. Why do you think it’s all of a sudden? Because it seems like the weaponization of the dollar happened a couple of years ago. And over the last couple of years, it’s happened a bit more.

But it seems all of a sudden, especially this year, that we’re seeing all these weird movements of gold from London to COMEX. You mentioned how the COMEX futures price at the beginning of this interview, the price is all out of whack and hasn’t been following this pattern. So it seems like in the last month or two, something major shifting is happening.

And it doesn’t seem to correlate with necessarily just the dollar weaponization. Well, of course, we’ve had Mr. Trump’s election. And he’s seen as a bit of a wild card.

You don’t know what he’s going to do tomorrow. So that has increased the level of uncertainty, not only for investors generally, but also for central banks. They don’t know when he opens his mouth tomorrow, what might happen.

Maybe one of the catalysts for the rise in gold prices in New York, over and above elsewhere, was the threat of tariffs. Now, there’s no reason why he would need to put tariffs on gold. I mean, the US gold mining industry isn’t being dumped on.

There’s no country in the world shipping their gold to America at half price and dumping on America. I mean, they may be shipping their cars, or their iPhones, or their electronic goods and dumping that way, or their steel, who knows. But there’s no way they’re dumping gold, because the gold gets sold in the United States at exactly the same price as every other country.

There’s no industry in the United States which needs to be protected. If they were to stop gold imports or put tariffs on gold imports, first of all, those countries that have got gold to sell would sell it somewhere else. It’s easy to sell everywhere.

And secondly, it wouldn’t help the American gold mining industry, because they’re not going to suddenly start opening a ton of new mines. And even if they do, it would take decades for that to come on stream. It’s not a necessary new industry which needs to be protected.

There really is no need to protect America or Americans from foreign gold miners. So I don’t think there’s a reason to put tariff on gold unless they just want to raise revenue for the American government. That’s another story.

But that could have been the fear that tariffs would come in might have been one of the reasons why which sparked off this initial flurry of gold buying. And then once the flurry starts, it can become self-fulfilling, because people say, OK, they might not put tariffs on, but the price is rising. I better get some, because you want to jump on a moving train before it gets away from you.

And I think to a very small extent, I think some investment managers are starting to look at whether they should have a little bit of gold in the portfolios. I’ve been in Switzerland for 40-odd years. When I first arrived in Switzerland, we traditionally had 5% gold in every portfolio.

That’s discretionary portfolio. By the time we got to the about 2000, from about 2000 to 2010 or thereabouts, the gold price was the decade, sorry, 2010 through to 2020-ish. The gold price went nowhere in that decade.

So little by little, the gold started to vanish from the portfolios. Our asset allocators, the people who tell you as an investment manager how much gold you should have in a portfolio, they started to say, we want more in equities. We want more in hedge funds.

We want more in customized products. We want more in this and that and the other. Where should we take it? Oh, we’ll take it from the gold.

Gold’s doing nothing. So little by little, that gold exposure went down to zero. Now, in Switzerland, it’s started to go back up again.

Some banks have even put gold as their most preferred asset already. Most preferred means they’ll have 3% or 5%. Some banks haven’t done that yet.

I don’t know how it is in the rest of the world, but I think there’s going to be, with the rise in gold price, people will be inserting gold as an experiment into specimen portfolios, backtesting and working out the Sharpe ratio. That’s a ratio which measures risk and reward, gets improved by a little bit of gold in the portfolio. So I think as they do this maths, they will start to say, ah, it now makes sense to have gold in the portfolio.

So I think that could be just starting, but it’s got a long way to go. Now, right now, at least on the retail side, it doesn’t seem like kind of bubble territory because we’re seeing premiums really being slashed right now. Buyback premiums and purchase premiums of one ounce coins and bars and all that.

But when you mentioned how it’s kind of a runway train, in a sense, if the price is going up, then everyone piles in. And it seems like some of that may be happening on the futures market and the COMEX and all of that. So your perspective on where we are, where we might go from here, is it a bit overbought right now? You look at the chart, and it’s just going straight up, it seems like.

But your take on the price right now? First of all, I think retail investors as a group are sellers. But the gold price is still going up, which definitely tells me that there’s something bigger afoot than retail investors. Retail investors are not in the market.

They’re sellers. And whoever is in the market, I believe it most likely is central banks. I mean, there could be some big players.

But I think it’s not the man in the street yet. We don’t have the mania that we have in the Bank 7, where every Tom, Dick, and Harry is talking to his friends over dinner about how much money he made in NVIDIA. You don’t go to dinner parties and hear someone say, hey, I bought some gold two weeks ago, and look, it’s up $10.

That’s not happening. But you’ve still got people talking about how clever they were to buy the technology stocks. That’s the conversation for those who are talking about investments.

They’re talking about either Bitcoin, or they’re talking about the Bank 7. So I don’t think gold is in the conversation for the man in the street yet. I think it will be. We’re a long way from that, or some way from that.

But I think it’s coming because the gold price itself is starting to rise. But what I’d like to do, if I may, is show you another slide which shows you roughly where we are in the gold cycle. And this is the gold price year by year going all the way back to 1970 from January through to December.

And on the far left-hand side, this is all in percentage terms, by the way, on the far left-hand side, you see in dark blue, where I’m moving my mouse, I think you can see that, the price of gold this year in percentage terms. As you can see, although it’s towards the top of the pack, it’s by no means the highest ever performance. It’s well within the realms of normality, historically, going back over the years.

There were plenty of years, historically, when gold did something similar to what we’re seeing this year. One can hardly say that it’s the best performance ever, at least not since the 1st of January. So if you look at the way the gold price has developed over the years, you can see that we could still, if we just stayed within the pack of what’s happened year by year, we could still see the gold price appreciating substantially for the rest of this year.

I was earlier this year saying, back in January, saying I think we’ll hit $3,000. Well, we got a lot faster than that now. And I think the chances of us getting to $3,000 are quite high.

We’re almost on top of it now, got about $60, $70 to go. But when I said that, I think we were maybe a couple of hundred away for about $2,600 at the start of the year. No, I mean, it’s crazy to look at that chart, where even last year when we had gold go up 30%, 40% or so, I mean, it’s right along where gold has performed in previous years.

So it’s nothing dramatic. It looks like maybe 1979 was the most dramatic of those years there on that chart. But it is interesting.

78 was a really good year. Yeah, no, 79, 79 was the best, wasn’t it? 125% of the year. Yeah, exactly.

So, I mean, you can definitely see how well gold can perform. And it doesn’t, as you’re saying, it doesn’t seem like any of the signs are showing that this is bubble territory right now. Not at all.

And I think the other thing, which is perhaps worth saying, is gold miners, gold miners as a collection still remain very significantly below the peaks seen a few years ago. And I will just show you a chart, a long-term chart on that, where you can see, let’s go back to screen share. Now, what you’re looking at here is going back to 2008, the performance of the two ETFs called GDX and GDXJ.

That’s the gold mining ETF of the major companies, GDX, and the gold mining ETF of the juniors, GDXJ. It’s all in percentage terms from 2008, compared with the gold price at the top in red. Now, you can see that since 2008, the gold price is up nearly 300%.

It’s more than 275%. Whereas the GDX and the GDXJ, which are the gold mining indices, are still in negative territory. They’re below where they were in 2008, despite the fact the gold price is nearly triple what it was.

So for example, the GDXJ is down 50% from 2008, and the GDX looks like it’s down about 10%, 12% since 2008. So relatively speaking, we’re not seeing any participation in the gold shares market, except maybe we are. Because now I’m going to turn to the current year, 2025, and you can see that in the current year, while gold is heading higher, and it’s up about 12%, 13% now, you can see the GDX and GDXJ has started, at least in the current year, to outperform gold.

We’ve been waiting for years and years for this to happen. And at last, now we’ve got the GDXJ up about 23%, and the GDX up about 25% compared with gold up about 12%, 13%. So at long last, for those who’ve been, I suppose, very disappointed with gold mining shares, we’re starting to see a degree of outperformance in these mining stocks.

So but they’ve got a long way. Even though they’re outperforming this year, by historical standards, they’ve got a long way to go. And I’ve done a bit of a study on a few of them, Barrick Gold, Newmont, and more recently, Harmony Gold in South Africa.

The analysts are underestimating at the moment the increase in earnings per share that we’re going to see in the current year and next year. And that’s based on the fact that most of these gold mining companies have hedged part of their portfolio, typically 50% of their portfolio of their gold. They hedged it for the future.

They sold it forward and or they’ve got caps and collars, which limit their upside, but also limit their downside. And half, they tend to let run and get exposed to the full blast of the gold mining market. But based on everything that can be known, the gold they’re selling this year will be being sold for a substantially higher price than last year.

And their costs have not increased by so much. The net result of that is we can expect to see profits of many gold mining companies increasing in the current year by more than 100% and sometimes by several hundred percent. And because of the lagged effect due to the hedging, that will happen.

And assuming we stay at 2,900 for the gold price, that will be happening again next year, another 100% or 200% or 300% increase in the profits on this year’s Greek result. Now, when you look at the forecast from the analysts, yes, they are showing substantial increases in the expected profits. And every month or two which goes by, you see that forecast being increased.

So each analyst goes a little bit higher than the other. But they all stay within the pack. The pack’s there.

And the one at the bottom moves his level to the top, and then the one at the bottom. So they’re biding on top of each other, raising the forecast. But the actual number which will come out is up here.

And it’ll take some time before the analyst forecasts the likely outcome. So to my mind, gold mining stocks are, if they’re reflecting what the analysts are forecasting, they’re underestimating what will actually happen. And the ones I looked at are fairly cheap.

The one I looked at today, Harmony Gold, is on a peer issue of about 7. And that’s going to drop to about 4 based on the price of gold rising. Now, that’s not a recommendation to buy any particular stock. But I’m saying as a generality, the sector is a very cheap sector compared with the rest of the market, the gold mining sector.

And I think the same would apply to the silver mining sector. It’s relatively cheap compared with other stocks you can buy. It’s worth a look.

And it’s a very small sector of the market. So if and when even a little bit of money starts to find its way into that sector, it can really take off. As we are seeing already happening with the sector now being up 20-something percent compared with gold up about 13%.

So it looks like it’s starting, but it’s got a long way to go if that continues. But my personal view is one, we’re seeing some movement into the sector now. And I think that can only accelerate as people start to realize that one, the multiples are low.

And two, those forecasts being made by the analysts are constantly being increased. Well, Clive, we really appreciate your insights today into the gold sector. I think there’s a lot of crazy things going on in the gold sector, and especially when it comes to the mining sector, it’s crazy to hear those valuations as well.

If people are interested in continuing to look at your work, they can go to your LinkedIn page and read your articles that you post, I think, probably more than once a week there. And we’ll put a link in the description. Are there any last thoughts you’d like to share with our viewers? Well, yes.

I mean, obviously, we’re talking about gold. I’d like to stress that nobody in their right mind should have 100% of their assets or even a very substantial proportion exposed to one asset class, and that would include gold. So the amount of gold which is right for each person will vary according to the person.

It could vary from a very small amount to a little bit more. But the minute you get very large percentage exposure to anything, you are taking extra risk. So my message is, even if you feel very bullish about it, don’t put all the eggs in one basket.

Fantastic. Well, Clyde, thank you so much for your time today. You have a fantastic night over there in Switzerland.

So thank you so much and God bless. Thank you very much, Elijah. Bye bye now.

This is Kaiser Johnson with Liberty & Finance, and these are the Miles Franklin Weekly Specials for February 10th through February 17th, 2025, while supplies last. Backdated Silver Austrian Philharmonics at just $2.85 over spot, and Pre-65 Junk Silver Dimes and Quarters are at the lowest price in years at just $1.49 over spot. Pre-65 Junk Half Dollars are just $1.69 over spot.

To order our specials or any of the many other options we have available, call us at 1-888-81-LIBERTY. That’s 1-888-815-4237. We’re available after hours and on weekends, and we look forward to speaking with you.