China has taken gold fully public. In 2023, we wrote a detailed explanation on how gold was being taken public by China’s government. As of last week, we now have an update on that process. China is no longer taking gold public, it has taken gold fully public. Welcome to the Morning Markets and Metals with Vince Lanci. Where each morning, Vince brings you the financial and precious metals news to get you ready for your day. And now, here’s Vince. Good morning, everyone. I’m Vince Lancey, and this is the Morning Market Rundown. Alright, the topic today, China has taken gold public.

As opposed to, China is taking gold public, which was the title of a post that we did in 2023, identifying the trends and processes that would come to fruition. And the final one, final, close to final one, has been enacted as recently as last week. And we’ll get into that in a second with regards to gold ownership by its citizens. We’ll also touch on the most recent note that Michael Oliver sent out regarding silver. Alright, starting with the markets. 10-year-olds are 464, up almost 3. The dollar is 10831. Up 4, the S&P 500 is 6076.

Down 8, the VIX is 1526. Up 15 basis points, gold is 2744. Down 12, weakening in the last hour or two. Silver, 3027. Down 50, same thing there. 425 for copper. WTI, 7660. Up 15, natural gas, 395. Down 4, Bitcoin, down 2,000. That’s 2%. Palladium, 991. Platinum, 947. It’s a big spread there. Up 10 and down 3. Gold, silver, above 90 now, something to be aware of. Soybeans, 1056. Up 2, corn, 478. Up 1 and wheat, 561. Down 1. Corn’s up like 20%, I think, in the last six months. I slept on that. I missed that totally.

Alright, here we go. China has taken gold public. You’re going to want to focus on this one. Sorry, I think. Here’s the front page, tariff reality check, weaker US dollar on deck with higher gold and silver prices. That’s a podcast we did on effect of post-inauguration analysis. We actually did an interview with Tom Podjevic at Palisades, which will be out today, tomorrow, the next day. I’m not sure of his scheduling, but it was on this topic, and among other things, precious metals related, and he asked some good questions. Malley, Caesar, 3 tons. That’s a couple, that’s a week old, and the press still hasn’t talked about it, except maybe Reuters mentioned it, and then the gold fix PM from yesterday.

Alright, discussion. China has taken gold fully public. In 2023, we wrote a detailed explanation on how gold was being taken public by China’s government. As of last week, we now have an update on that process. China is no longer taking gold public. It has taken gold fully public, at least domestically. That will be the subject of this conversation. We’ll start off with a video sent to Chinese citizens as shared with us by Eric Young. We’ll have his link there and what have you to the original source, starting with a quote by him describing the video itself.

He says, here is a Chinese expert explaining to you how one can open an account at the Shanghai Gold Exchange and the two types of SGE accounts that are available. Basically, if you are a small investor, your annual physical gold withdrawal upper limit from the SGE is 5 million renminbi or yuan worth of physical. And we’ve gone through this video a couple times. There’s some good captions. We also had it translated and lip synced so the guys actually speak English. We’re not going to play it right now. Actually, we’ll play a little bit of it.

But just to give you an idea, this is like a how-to. This is an explanation. This is an educational piece for Chinese citizens. So I’m not sure if the sound is going to come through here. Let’s give it a try. It’s already divided into two types. One is for engaging in the gold industry. Our account types are divided into two. One is for gold. My account types are divided into two. One is for engaging in the gold industry, where we need physical gold, I am a general taxpayer, and I need to withdraw gold, which can be accompanied by a special VAT invoice for input tax deduction.

This type is stricter. It requires you to provide sales invoices for six consecutive months with a special VAT invoice. In other words, you really need to be engaged in this industry, selling gold for six months, along with the six months of tax declaration forms and other relevant documents. A trading account with relaxed conditions is available. Small-scale taxpayers, such as LLCs and individual businesses, can open accounts outside the gold industry. The purpose of the video is to educate people, the people, how they can participate in the gold and silver market. And there are two types of accounts he goes through there.

But it gets kind of, you know, he’s basically alleviating fears. It’s not a marketing piece. And he basically says, if you want to buy physical, it’s physical. No leverage, no futures. You’ve got to have this amount of money in your account to do it. If you want to buy futures, you can use leverage, but you don’t have expectations of taking deliveries. I think he’s trying to drive home the difference in the accounts before the deluge hits. You don’t want ignorant investors. And there is evidence that this was a problem in 23, late 23, August through October of 23, when they tried to launch this the first time.

So I think they’re getting ahead of the curve on that. Okay. So the video… I’m sorry, I’m looking at my notes here. Okay. The desired result, as Eric notes, is the ability for a Chinese citizen with gold in account controlled by the PBOC to actually physically take delivery of said gold right now. The implications for this are globally reaching. But before we get into that, let’s do a quick background on what China has done since 2023 to bring us to this point, because it’s important. China’s not tactically oriented. They’re strategically oriented.

And that means if there’s a problem with your strategy, you either have to have a tactic to get around it, or you move the calendar. And I’m going, you’re going to see that they’re unbending in their strategy since this started. All right, so China, let’s start with this. China holds even more gold through its people. This is part of a post that we did before, but we’re updating it. The PBOC, when asked how much gold it holds, repeated its position that in addition to its direct holdings, China holds gold through its people.

That was in July of 2015. Westerners will look at that, myself included, when I first read it and say, oh, that means they’re going to confiscate it. No, it’s a nationalistic statement that China’s people trust the government in that respect. And we’ll get into why that’s true in a minute. All right, so based on events surrounding, this is the background and the path that they laid out. If China says they’re going to do something, they do it, okay? Based on events surrounding the events, the BRICS summits in South Africa, and this year in Russia, it has become clear China has an increased and very publicly stated appetite for gold.

The appetite had been consistent in 23 at the nation state level, for sure. While bigger than normal, it is not news to most. This is an updated chart reflecting their official buying, their official gold buying. However, Chinese policies governing gold ownership by citizens were also changed in 23. And again, very recently this year, permissions facilitating physical gold purchasing by citizens electronically were put in place back then. And there is ample evidence that people are buying gold. You can see that with the price. Even more strangely to the Western gaze, China’s state controlled press is extolling the virtues of owning gold now.

In early 24, we were alerted by a mutual that China was connecting their people’s R&B bank accounts with the ability to purchase physical gold directly. It was either Eric or Buy or David Lee, I’m not sure, but we dug into it. And there was a very nice story that just nobody cared about except people like us in precious metals. And the headline of the story, which will include the link to that, was not too early for that, was China sends ripples through the global gold bullion market and no one notices. That was the title and we went with it.

The quote from that article was, the PBOC opened the facility for citizens to convert R&B cash savings held in the public’s own bank accounts to be converted into physical gold at the click of a button. Checking, savings, bullion. You’ll never see that in the US, right? Okay, therefore, these purchases constitute real bullion held in the name of each client’s personal account rather than unallocated a bullion. So not only are you allowed to just take your savings and buy bullion with it, you’re allowed to margin the bullion, you’re allowed to borrow against the money.

This is culturally what they do. They’re big on real assets, right? And they’re also big on leveraging real assets with loans all for them. Real estate is a big example of that. Now, this was a big, huge deal because prior to this era, China had frowned on its citizens’ zoning goal because to own gold is to rebel against the government. I’m a Chinese citizen, I’m worried about the government’s stability, I’ll hoard some gold. And China was like, no, we don’t want that. And they were restricting. Ownership capital controls were very big. And that was also during a time when China was very neo Keynesian in its mindset.

It was definitely on board with everything that the US was doing for a long period of time. And even after the great financial crisis, China was a big fan of how Obama protected their treasury holdings and therefore they continued to not promote gold to its citizenship. But boom, that’s over. All right. So the quote I just gave you that went into effect in 2024. Now, as you have seen in the accompanying video, the video on top, China is permitting its citizens to actually take physical delivery of the gold they bought in that account.

So we will have more to say about that in context of the 2023-24 actions that will be, we think, very helpful in understanding the China way of doing things in a special podcast today or tomorrow. For now, we want to focus on the annual, the sum total implications of their actions in combination. The net effect is something discussed in this space several times. China has much more gold on its balance sheet than it that is currently shown. In 2016, when studying their market structure, we read a comment by a Chinese PBOC official. That was intriguing.

And that’s the comment about China owns gold through its people. Where did this idea come from was what we asked ourselves back then. And we thought initially, probably like most Americans, again, that it was, okay, well, they can confiscate it anytime they need it, which is true. But you can do that in the US. We’ve already done that in the US. But why would they, why would they say that? And that was the culture was changing. You know, they’re, they’re a gold oriented culture to begin with. But why would they encourage their citizens to own it when it had been a source of a symbol of problems in their government? Okay, well, the idea came from the picture you see on your screen.

It was rooted in the 1998 Asian currency contagion. We used to call it, we call the Asian contagion. When the Southeastern Asian financial crisis hit in 1998, people in Taiwan, South Korea, and Hong Kong all enthusiastically donated gold to support their countries to whether that crisis ends, rid themselves of the IMF. So the choice was we have a crisis, we can borrow money from the Western IMF, or we can just take gold from our citizens, not take, we can accept gold from our citizens. And this picture, the caption is, Chinese, I’m sorry, Korean citizens participating in the gold collecting campaign.

English translation of the text on the screen is a gold gathering campaign showing the will of the Korean people to overcome the IMF. It’s a big deal. So one of our mainland sources believes, this was I think by believes the top leaders of the Chinese Communist Party paid close attention to this, and concluded their own people they took, they took notes, you know, could also be counted on to exhibit that kind of national support as well. This was at the forefront of their thinking as they decided since then to liberalize gold ownership among their own people, starting in 2001.

For perspective, at the beginning of World War One, in 2014, German citizens did the same thing as the Koreans, Taiwanese and Hong Kong people did by donating their gold to the country, and they received an iron ring in return. The iron ring said something like, I’m donating my gold for iron to help our nation. It just, you know, nationalism goes a long way. People are proud of China. I mean, you know, 50 years ago, these guys were eating, you know, bark tree salad, and they were six inches shorter. They’ve come a long way, and they’re proud of how they got there.

Alright, so taking together in combination with every single action China does, China has democratized, I’ll leave that up there while I read this, China has democratized gold and silver ownership using nationalistic principles and an existential need to minimize economic threats from the U.S. in anticipation of multipolar trade where the Western hegemony may weaken chaotically. That’s the word, chaotically. So there are many ways to frame what China has done, depending on what part of the world you come from. Democratizing gold ownership, that’s something a Democrat would say, even though they wouldn’t say it.

Taking gold public, well that’s something I would say. Buying the people’s gold, that’s something a Marxist or a Malice would say, the people’s gold, you know, that type of thing. Decentralization of money, that’s a Bitcoin statement, right? Nationalist, populist pride, that’s something a person who’s familiar with what Trump is doing would say. So there’s a million different ways to do it, but you know, but no matter how you slice it, there is no rule for American bonds or U.S. dollars in those statements, right? Do not expect these people to ever loan the U.S.

money again. There is only one way that will happen, that’s through economic coercion, and our ability to execute that on China is long gone without physical force. Michael Oliver’s comment, I’m going to let you read that. I’m running a little bit late today, and I will include that at the bottom in premium, but there’s his comment on gold. It’s rather wry, and I’m just going to read what I said about it to add, whereas once upon a time, the press would follow gold’s new highs with derision and proclaim the dollar correlation gods would soon put gold in its place.

Now, that having failed to materialize for over two years, the legacy media must blithely ignore it and hope it just goes away, but it will not. The lack of proper media interest is a confirmation, as Michael is reminding us of. That this market is nowhere near being overbought. You know, mainstream media denial is only the first step in a precious metals bull market. Then he has some comments about silver there. We need to get above $31.90, which we’re a long way off in the March contract today, but I’m sure that that number will move next week, and I’ll be paying attention to what his numbers are after that.

News analysis, boom, that’s what we have, right? Market news, House Republicans are in talks over raising the cap for state and local tax deductions. That’s part of the no taxes, higher tariffs concept, and we’re going to do a final market look, look, right? So gold’s down 15. There’s the daily. Gold looks very bad on the day, but it looks completely normal. You know, look. I’ll draw a little line for you here. Go ahead and go to 2716, and you just shouldn’t blink an eye today. All right. And that’s another $20 lower, and it could do that.

Silver doesn’t look as good in terms of a trend line, but I don’t really care about trend lines in silver right now. I care about support at 2890 and resistance. Now, this is my number. It’s 3072, and it’s more or less, I’d say, 15 cents lower than Michael’s number on his analysis. I look at the market to break through it, and then I want to get long. He probably looks for the market to break through the higher level, and then that would confirm, you know, for example, my level, and both levels are relevant.

So it’s Thursday. Let’s see what happens on Friday. I would say that we could have another leg lower if the market gets below where it is right now. Okay. Another five cents lower could get you easily another 30 or 40 cents lower. That’s the way I’m looking at it. I want to look at copper based on this. Okay. So someone’s buying copper in this area. That’s good. So if copper cracks, silver will crack. Okay. Copper is your lead for silver today. That’s just how I’m looking at it. All right. I’m Vince. Have a great day.

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