Gold as Geopolitical Weapon (Uncut) 03-29-2025

Gold as Geopolitical Weapon, Here Is What’s Really Happening Globally | Jeffrey Christian

Kitco News special coverage of PDAC is brought to you by Gold Mining, Uranium Energy Core and Uranium Royalty Core. Hey everyone, welcome back to Kitco News coverage of PDAC 2025 from Toronto. I’m Jeremy Safran.

Now today we have some major developments to unpack in the world of geopolitics and precious metals. Despite leaving the White House without a deal, Ukraine’s President Volodymyr Zelensky said he still is ready to sign a U.S.-Ukraine minerals agreement. But tensions have been heating up after a blow-up meeting with U.S. President Donald Trump and Vice President J.D. Vance at the White House.

We’re now learning that Moscow has also proposed a deal to the Trump administration that would grant the United States some ownership of rare earth minerals and other valuable metals in parts of Ukraine controlled by the Russian forces. Now that according to a new report by NBC. And speaking of Russia, the country’s gold reserves took a sharp hit at the end of last year, partly due to record high interest rates imposed by its central bank to cool the economy.

But it doesn’t end there. My next guest argues that Russia’s use of gold reserves to finance its war effort is just the tip of the iceberg, masking of course broader central bank activities. Joining me now to help us understand how gold is being wielded as a powerful geopolitical tool is Jeffrey Christian, managing partner of CPN Group.

Great to see you Jeffrey. Nice to have you back at Kitco News. Jeremy, it’s great to see you in person.

Yeah, in person. It’s always nice. Fifteen years we’ve been covering this conference, if you can believe it, over here at Kitco.

And we’ve seen a huge, huge difference in gold price through those 15 years, haven’t we? I want to talk to you about the big picture here. You mentioned, as I mentioned off the top of the intro, that gold is being used as a geopolitical metal, is a weapon almost. It’s almost been weaponized when it comes to war.

Can you talk a little bit about what’s happening here with the strategic gold reserves that are being used to fund this? Well, I wouldn’t say that gold’s being weaponized or used in war in any particular way. I mean, you know, when Henry V attacked France in 1415, he borrowed gold from all the barons. Yeah, under extortion, but yeah.

What you’re seeing is that Russia is using its gold. When it invaded Ukraine in February of 2022, a lot of its foreign exchange assets were frozen. So it had some foreign exchange, about a third of it, maybe a hundred billion dollars in yuan in China, and then it had about 78 million ounces of gold that it had in Moscow.

And most of its other foreign exchange was frozen and is pretty much likely not to come back to them. So over the last three years, they have been financing their government and their war effort with gold. So if you look at their data, you’ll see the month-to-month fluctuations, sharp month-to-month fluctuations in the central bank gold.

Some months they’re buying half a million or a million ounces in the domestic market. Other months they’re selling a half a million or a million or one, you know, in January they sold 1.6 million ounces because they need foreign currency. So they’re relying on their gold to keep their economy afloat, to keep their government afloat, and to keep the war effort financed.

Interesting. Okay. Do you know how much it sold? And we got to get into obviously why.

I mean, it’s just to keep it going. But if you looked into those numbers, is it just when they have cash, they buy, when they don’t, they sell? That’s exactly it. Yeah.

So it’s been fluctuating month-to-month. And as I said, January was a big month. They sold 1.6 million ounces.

Wow. Yeah. What have you been seeing in terms of the Russia and China? They’ve been holding more than their official reserve websites.

Have you been seeing any anything on the gold front? Well, the Chinese Central Bank, the People’s Bank of China, has gold reserves and they report what they have. And they’ve reported what they’ve had since 1979, pretty accurately. Now, other parts of the government have strategic gold reserves or investment reserves.

In December of 2007, the China Investment Corp was created as a sovereign wealth fund, and half a trillion dollars was transferred from the People’s Bank of China to the CIC. December 2007, as the world was shaking apart, CIC was charged with, okay, here’s half a trillion dollars, go forth and invest. So they sat on it because the world was falling apart.

Ultimately, they did buy a significant amount of gold. They bought high and then they ultimately sold it or they gave it to the People’s Bank of China to sell for them. People’s Bank of China was holding it and the Chinese government and the People’s Bank of China made a change in their views toward gold from being a small and insignificant part of their monetary reserves to being a small but important part of their reserves.

And they took that gold that the CIC had asked them to sell and they said, we’re just buying it and adding it to our reserves. So there was about a 14 million ounce jump in the PBOC gold. And they’ve basically been adding to their gold ever since.

The Chinese policy is the gold in China stays in China. And if you have gold that you can’t find a buyer for within China, you ask the PBOC to find that buyer for you. So there are claims out there that obviously Russia and China may be holding more than their official reserves.

Any thoughts on this? Well, gold, the Russian government, yeah, if you want me to tell you. CPM group always had this table in our reports that and we had estimates of 65 to 67 million ounces of gold that the Soviet government owned. And in 1988-89, Soviet Union joined the IMF.

When you join the IMF, you have to report your monetary reserves, including gold. So they reported that they had 12.9 million ounces of gold in their monetary reserves. Now, we worked with various government agencies within the Soviet Union and then Russia after the Soviet Union collapsed.

And this was the Soviet Union. We said, you know, whoa, I guess we have to change our table or stop publishing. And they said, no, don’t change your table.

These are our monetary reserves. The other gold is non-monetary strategic reserves. When the Soviet Union collapsed three years later in 1991, and you had 15 independent governments, those other 14 states said, give us our share of the gold.

The Russian Central Bank gave them their pro rata portion of the 12.9 million ounces. When the Ukraine and other governments said, hey, wait a second, we, you know, we understand from CPM that there’s like 67 million ounces. The Russian Central Bank basically said, we’ve given you our portion, your portion of the monetary reserves.

If you want your portion of the other reserves, go talk to the Red Army. Yeah. And it’s interesting because you talk about the weaponization, I hate that term, but you talk about the use of gold in wartime.

The Central Bank’s gold reserves are being used to finance the war effort. There’s been no indication that the Russian army has used any of its gold to support the war effort. It’s saying this is the government’s war.

We didn’t want to go there. We didn’t think this was a wise idea. You want to squander your national resources, you do that.

But given the way the war is going, we the generals may want that 65 million ounces of gold. Yeah. I wonder if they’ll be calling for it, huh? They’ve got it.

Let’s talk a little bit about this notable flow of gold coming from the Europe, specifically in London over to the US, repatriation, of course, many attributing it to the era of Trump’s tariffs, some possible stability there. Do you think there’s more to the story? Oh, there’s a lot more to the story. The tariffs are just an addition to the bigger story and to some extent an effort to explain it.

The reality is that gold demand has been much stronger in the United States and Canada than it has been in Europe. So investors have been buying more gold here than in Europe and fabricators have been using more gold in jewelry and electronics and other things. So there was a greater demand for gold in the United States, and that led to a widening in the price spread and an arbitrage opportunity came where you could buy gold in London and ship it to New York.

That was the first step. At the same time, you had the Polish Central Bank buy about 2 million ounces of gold and one it stored at the New York Fed, as opposed to the Bank of England or within Poland. In other words, they followed the German policy, let’s keep the gold as far away from Russia as possible.

So all of a sudden there was a demand for another 2 million ounces in London, in New York, that widened the arbitrage opportunity further. Then traders and speculators saw that arbitrage and they came in and they were taking advantage of it. And then Trump started talking about tariffs and people were saying, OK, the demand is greater in New York anyway.

We’re shipping gold to New York. There could be tariffs on that gold and silver. So let’s just get that gold and silver into New York.

So then you saw a surge. Now, that’s what happened. So the tariffs are really like the third component as to why that metal was moving.

There is an enormous amount of gold in England and in Europe that the London market has a call on. There’s an agreement between London and Zurich markets so that they can access the hundreds of millions of ounces in Switzerland. So there’s no shortage of gold or silver in London.

And the evidence of that is that the New York price has risen further and faster and higher than the London price. If there were a shortage of gold or silver in London, the London price would rise faster, opening a reverse arbitrage and you’d see gold and silver moving back to London. Until that happens, there’s no indication that there’s a shortage of good delivery available, non-hypothecated gold and silver in London.

Yeah. We hear from airplanes, right? They’re filled with bullion at the moment coming over with gold. So who’s moving it? I mean, who could the buyer be? If we’re talking about retail investors coming back to the market, we want to repatriate.

It seems like it’s a bigger move than this. Well, you know, it’s the major wholesalers, you know, the bullion banks and trading companies that trade gold and silver in large volumes. They supply the wholesale investor dealers who supply the retail dealers.

So, you know, there’s this chain. You don’t see the small retail coin dealers buying gold in London and shipping it, not to any great extent. It’s really the wholesaler.

Okay. So there’s no, you know, there’s this growing distrust among investors about the security of that, the gold that’s being held in the London vaults. Why move them, if that’s what it’s creating? I don’t understand.

If you’re creating more instability in the market by repatriating gold over to the U.S., why are they doing that? They’re not creating more instability in the market. This is a mistrust, I guess, is what I should say. Well, the problem with gold and silver is that there are people who have, believe all sorts of conspiracies and they believe them and nothing that you can say or do, you can’t teach them how the market works.

There’s nothing you can do to cause conspiracy theorists to stop believing their conspiracies. So anything that happens that they don’t understand, it must be a conspiracy. Yeah.

But let’s start with that speculation and talking about the Fort Knox mystery, gold re-evaluation. We’re seeing that trend in the U.S. There’s been calls for this new audit, as you know, in the U.S. gold reserves. What’s the transparency like there? Why is this still an issue? Why not just open it up? It’s not an issue in the Treasury, except for the top level that’s been appointed by Trump.

It’s not an issue at the Fed or among central banks. It’s well documented. The metal is there.

There was a bar by bar audit between like 2000 and 2008, where they measured and weighed and inspected every bar, like 7,000 bars of gold. And they took spot at sample assays and they had an independent assay lab assay the gold. And they checked the bars numbers against the bar list that they had in 1971.

And they did this. It took about eight years and tens of millions of dollars. And then they resealed the bars.

Talk about resealing in a second. And they resealed the vaults that the bars were in. And they said, OK, we’ve done this.

And when Ron Paul, who for 20 years was a House of Representatives congressman, saying, oh, we need to audit the government. In addition to that deep dive, every year KPMG does an independent audit to make sure that it’s in. And I should stop here and talk about the sealing.

The gold bars are stored in drums. The drums are sealed. There’s a seal on it that’s signed.

If the signature hasn’t been broken, the drum hasn’t been opened. Right now, you know, they forge the signature. You can always find things.

Yeah. Do you think an audit will happen? I mean, we know the U.S. President Donald Trump’s called for one. Of course, Elon Musk.

They even said they’re going to live stream. OK, those vault those sealed drums get put in vaults and the vaults get sealed and signed. And then the vaults are within the depository.

So that’s there. Now, the annual audits by KPMG, they look and they say, OK, these seals haven’t been broken. We don’t need to open them up and check every bar.

And that happens every year. The seals have not been broken since that deep audit. Right now, go to the motives for the current speculation.

Trump and Musk are trying to raise suspicion about some nefarious deep state government that’s out to destroy America. Anything they can do that feeds into that paranoid suspicion of true believers, they will do. So trans operations on youth.

There have been six kids in the United States who have had trans operations. But it’s a big national deal because they have stoked that fear. Gold.

Oh, is the gold even there? And even if it is there, because I’m a doubting Thomas, I can stick my hand in Jesus’s finger in Jesus’s hand and still not believe that he’s down from from from the cross and alive. You know, you can say, oh, well, look, you know, those the drums are there. Here are the bars.

I’m going to hit you in the head with a 400 ounce bar. Maybe you’ll believe it’s real. There’s nothing you can do to stop them.

That’s their cottage industry. Let’s stoke fear. Right.

And there’s nothing you can do to assuage the true believers because they truly believe this. There are some analysts that think that, you know, obviously revaluing gold would address the debt problem. Is there any? No, there’s bullshit.

That’s total nonsense. The gold there today is valued on the book at forty two dollars. Everybody knows that it’s worth two thousand nine hundred and sixty dollars today and two thousand eight hundred and sixty dollars today.

Everybody knows that at today’s price, the 261 million ounces is worth eight hundred billion dollars. Right. We have thirty six trillion dollars in debt.

Yeah. Now, if the U.S. government, which has 261 million ounces, the largest trash stash of gold in the world, said, hey, we’re going to start selling some of this to pay down our debt. The price is not going to stay at twenty eight hundred.

You’re going to see a massive decline in the price of gold because. So let’s shoot ourselves on the foot and tell people we’re going to sell our gold. Right.

You know, that’s like that’s like there used to be people who thought that the Chinese government would sell the dollar. The Chinese government has more dollars than anybody else. They are the last people who want to see the dollar fall.

It’s like nonsense. It just defies logic. But people believe it anyway.

Right. So the trend of central banks won’t go away this year. Revaluing the U.S. gold will do nothing for the deal.

The gold represents eight hundred billion dollars. It represents about five months of current account deficits. It represents about two percent of our debt.

Yeah. It’s meaningless to the fiscal inappropriateness of the U.S. government. I need your gold outlook for this year.

Where are we going? I know it’s your favorite question of the day, Jeff, but obviously we don’t anticipate central bank demand going down this year. What are your thoughts? Well, first off, central bank gold on purchases on that basis were half last year what they were the year before. And we saw for in January, we saw negative.

We saw net sales by central banks because Russia sold one point six million ounces and all the other central banks, about eight of them bought about eight hundred thousand ounces. So you actually had negative central bank purchases in January. And we expect and there’s there are two reasons for that.

One is central banks are busy with other stuff that’s a lot more important, more important. Central banks don’t think in ounces, they think in dollars and think in terms of percentages of their monetary reserves. As the gold price went from two thousand one hundred dollars at the start of twenty twenty four to two thousand six hundred and sixty two dollars at the start of this year.

Central banks saying I want to buy two million ounces, two million dollars worth of gold is going to be buying 30 percent less gold. Right. So they’re buying less gold, but they’re spending the same amount of money.

So that’s where looking at twenty twenty five, we think the central banks will continue to be price sensitive and they will focus on buying gold when they can. But they have a lot of other issues. Their currencies have been very weak against the U.S. dollar.

So that’s demanded a lot of central bank attention in the foreign exchange departments, which handles the gold, too. So we don’t see that there. The key is going to be investment demand.

And the key to investment demand is this enormous level of anxiety and uncertainty and fear, for want of a better word, about the economic and political environment. You cut a trillion dollars from the U.S. federal government spending. That’s a five percent decline in GDP.

That’s a big decline. That’s like what we saw in 2008, 2009. Yeah.

So there’s a lot of fear, not just in the U.S., but around the world. And that has been stoking investment demand. You saw investment demand go from 12 million ounces in 2018, 2019 to about 20 million ounces, 2022, 2023 to about 32 million ounces last year.

It could top 40 million ounces this year. If it tops 40 million ounces, the price of gold goes over three thousand dollars, at least on an intraday basis. And on an annual average basis, you’ll see another record.

We do think that you may be in the late stages of the cyclical increase and you could see the price topping out over the course of this year and next year. But we have multiple economic scenarios. And if the economy and the political environment got better, you could see gold prices come off.

Within the context of our main scenario, where we have record gold prices, we wouldn’t be surprised to see the price plateau second and third quarters, maybe weaken a little bit. Not a lot, because that anxiety is not going away because the problems are not going away. And then start rising again in the last four months of this year into next year.

Okay. So in that complex landscape that you just talked about, which is what do investors do? What’s your advice for them getting in the gold market? Well, they should buy on the dips if they haven’t bought. Most of our clients own gold.

And we’ve been telling them, if you are savvy enough, keep your physical gold because the long-term secular increase in gold prices that started in 2002 remains in place. And all of the economic and political problems that have fed that and caused the gold price to go from 250 to 3000, all of those problems are there, if not worse. So that’s in place.

So hold your gold if you own it. Buy on the dips if you don’t. And with the people who do own it, like our clients who pay us for advice, we’re structuring hedges for them so that they can buy a put, protect themselves from a downward move, pay for it with a call spread so that they don’t give up the upside and in fact, have the potential to gain even more on the upside should the gold price rise above certain levels that have never been seen before in the history of mankind.

If an investor doesn’t feel comfortable with options, then we’re saying, well, you can do what some of our clients did in 2011 with silver. You can sell your silver when you see $49 or gold when you see $3,100. When you see it topping out and you think it’s topping out, you can sell it and look to repurchase it when the price comes back off.

Right. Yeah. No, by the dip, as you mentioned, I have to ask you, in this current environment, in the gold price, in the gold, the entire market itself, if you were to sum it up in one sentence, what would it be? The gold and silver markets right now are overrun with misinformation that is feeding into people who either see gold and silver as a religion, or are clouded by fears and suspicions and conspiracy theories.

And the rational people, the smart money that they talk about, is in gold, and is trying to deal with its gold and silver holdings, rationally in an irrational market. Quite the sentence. All right, Chuck and Christian, thanks.

Thanks so much, my friend. I’m Gerry Sappin. For all of us here at PDAC coverage, we’re with Kitcom News.

We’ve been here 15 years. We’re gonna have some great interviews coming up all week long. So don’t forget to hit the subscribe button.

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