➡ Due to fear and uncertainty in Japan, people are moving their money from yen to other currencies and gold, indicating a lack of trust in traditional safe havens. This is happening because of changes in the government and the belief that Japan’s currency will devalue. The same situation is starting to occur in other countries, leading to a global shift towards investing in gold and other metals. This trend is a result of growing skepticism about the ability of any currency to withstand current economic challenges.
➡ The current financial situation is similar to the 1997 Asian crisis, with people losing faith in institutions and turning to gold. This is due to the realization that there’s no easy solution to the economic problems we’re facing. Meanwhile, companies like Nvidia are being criticized for lending money to clients to buy their products, creating a circular flow of money. This could lead to a shift in investments from AI to gold and mining stocks, as people become more cautious about the stability of the tech sector.

When the fear in Japan gets big enough, the people that are taking their money out of the yen, they don’t just put it in dollars. They say, you know what? I’m going to take my money out of the yen and put it into another currency. But then they realize that this isn’t just a Japanese problem, it’s a global problem. So they’ll put less money in dollars and they’ll put some money in gold. Welcome to the Morning Markets and Metals with Vince Lancey. 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, it’s 5.45 Eastern Time. I’m on the road and headed back today, so I’ll be in communicado most of the day. But I wanted to share just the morning, part of the morning routine, to give you a perspective on what’s going on. The market behavior itself is all good news. So let’s run through that very quickly. Gold’s up $52 at 39.38 at spot. Silver is up 59 cents at 48.56 spot. So that’s up 1.35 and 1.25% respectively. I can run through the whole laundry list and tell you that the high in silver on the day was 39.47 at spot.

Now, staying with the financials to give you some context. The first thing you’ll notice is that the dollar is significantly stronger, up 76 basis points. And the second thing you’ll notice if you’re thinking like a trader is, why is the dollar up? And gold and silver and oil actually up as well. And it’s because this is the epicenter of today’s move is Japan. So in Japan, due to the election changes, the change in government due to the election, capital is for one reason or another thinking that Japan is more likely to debase, more likely to accelerate in its debasement of its currency.

And so several things are happening in Japan at the same time that all tie in with gold indirectly. Gold’s a beneficiary of it. So let’s start with that. Japanese stocks are extremely strong, up about 5%, depending on how you measure it. Japanese bonds are a lot weaker with the yields spiking and the yen is also weak. So why is gold up if the yen is down? Well, this is the beginning of true capital flight that’s mistrusting of safe havens that are not gold or silver. So mechanically what’s happening is, domestic people in Japan are taking their money out of cash and putting it into stocks.

They’re taking their money out of bonds and putting it into stocks. That has essentially no effect on the yen. Foreign investors are taking their money out of yen and they’re either doing that by using the yen to buy Japanese stocks or converting the yen to dollars or another currency. The conversion to dollars historically is bearish for gold. The dollar is stronger and gold, which is a neo Keynesian slave, to the dollar correlation drops. But what’s happening now is, and this has happened many times for moments for 30-minute windows in the past and that is when the fear in Japan gets big enough, the people that are taking their money out of the yen, they don’t just put it in dollars.

They say, you know what, I want to take my money out of the yen and put it into another currency. But then they realize that this isn’t just a Japanese problem, it’s a global problem. So they’ll put less money in dollars and they’ll put some money in gold. They’ll put some money in other currencies, whatever. But the point is, there’s a growing number of people that are skeptical on the ability of any fiat currency to withstand what’s going on in Japan. What’s going on in Japan has already started to happen in the UK and it’s starting to spread.

And so you’re in a situation now where the dollar is stronger because people are selling the yen to buy dollars. But they’re not selling the yen to only buy dollars. They’re selling the yen to buy gold too. And you are, this is quite literally the manifestation of what you’ve been concerned about or thinking about, you know, these past 30 years. And that is the manifestation that the markets are slowly starting to realize there is no Santa Claus and speaking financially about it, the markets are saying, wait a minute, there is too much debt.

We understand that now and we recognize the only way out of the debt is to either bond yields have to go up because the bond yields have to compensate us more for the debt to take the risk of borrowing or the currency has to weaken its buying power to compensate for the low yields, right? And the way to hedge both of those is to take your money out of the bond market, take your money out of the currency itself and put your money in the companies that use the currency to make more money because the theory is, and the theory is largely true in normal and market environments, is that if the currency is being debased, then you can raise the prices on your goods that you’re selling.

So the Japanese manufacturer will have more money that he’s making because people have more money to spend from inflation. So if the yen is weaker, he’ll just raise the price in yen. That’s a normal environment. In a bad environment, and we’re not there yet for Japan, at least Japan’s mentality, they realize that the companies can’t raise prices fast enough to offset the debasement of the currency and people don’t have the money to actually spend because it’s all being steered by the government into where they want it to go and the companies end up suffering.

But that’s another conversation. So in sum, what’s happening in Japan is framed as Japanese because of the new election, because the government’s probably not going to play well with the Neo-Keynesian governments, with the other G7s. You have a conservative prime minister coming in. And that means an acceleration of revealing that we have a problem here. That means higher yields and long-term bonds for the Japanese. That means they may have to go back to yield curve control. It depends on how they do it. I’m not sure if they want to go back to that or try something different, something that I’m not familiar with.

But the world is seeing a slow-motion contagion. What happened in the UK is happening in Japan. And if it’s happening in Japan, it’s probably going to happen in every G7 currency to one extent or another. You can’t spend more, borrow more, and expect your economy to do the same with that inflation. If you stop spending, you’ll have a deflationary collapse. The deflationary collapse will be most noticed in stocks. So you’ve got to keep the pump in stocks up. That, in the past, worked in every government in the G7 because people believed it would work.

And so gold only benefited marginally. But the belief is fading. And as the belief fades, more and more people are turning to metals. Now, in Japan, that’s the financial relationship of what’s going on. Japan itself, you’re starting to see more and more headlines about Japanese dealers running out of metal. And that’s been happening since July. We wrote about that. But it’s going to get more headlines now. So these are realities that you’ve already been apprised of. And they’re now becoming front page because people are ready to think about them. So I guess the moral of the story here is you were right.

It just has to get to a certain point for other people to see that you were right about something. And sometimes that point doesn’t come for years. But it’s starting to happen now. The choice for the world, the Western world, and probably the world by virtue of that is either we spend less or we debase the currency. So if you want to have the quality of life that you have, you either have to spend less, which means you don’t have the standard of living you have. You downsize to a smaller TV.

You tighten your belt because more of your money is going to be spent on defense. More of your money is going to be spent on social safety nets from all the immigrants. And you learn to do without. You get put on a budget. But governments can’t do without. Governments can’t ask their people to go on a budget because they’ve coddled them and spoiled them and those people don’t have the psychological stamina to hold it together being told to do without. Essentially, in the West, we’re spoiled. And the fallout of that is when you have a spoiled West that’s been told, trust the nanny state, and you have a nanny state that desires to be in power more than anything else, then they will never vote for austerity.

They never vote for tightening your belt or being responsible. They just vote for throwing more money at the problem, which is exactly what happened in the 70s until all of business took its money out of business and put it in gold. And then capitalism itself was crumbling in the late 70s and that’s when the austerity happened. Essentially, as long as you can stay in power, you will keep doing what you do and that’s all they know how to do. But anyway, diatribe over. So all the things that you’ve been thinking intuitively or maybe quantifying mathematically are happening now.

And they’re happening because the tide can’t be stemmed anymore and it’s going to increase rather than decrease. If you’re looking for an analog, behaviorally, this is like the 1997, 1998 Asian contagion. Now, that was a deflationary currency crisis, but the Asians in general flocked to gold. And although we didn’t feel it in the West at all, it was pretty much localized. But this is a continuation of what happened in the UK and the market in the past. When Japan had a problem like this, the US would backstop it. We would backstop it by opening lines of credit for them.

We would buy yen. These are all things that we’re probably going to do again, but is Jerome Powell really that interested or is he interested in saving America? Fortress America is the mentality. Whether Powell says it or not, he understands that the problems going on off our shores might be too big for him to stem and he has to make sure he says what he has going on here, whether you like him or not. That’s just a mindset. Anyway, so gold and silver are off. Someone’s going to cap the rally at some point.

I don’t know who, I don’t know when, I don’t know where, but you’re witnessing in real time, I mean, to put it really simple, you’re witnessing in real time the spreading of the loss of faith in our institutions to fix what’s wrong, a growing realization that there’s no way out of this except through it. And by going through it, that either means spending less or printing more. Anyway, so this rally is real. There are going to be moments where it gets slammed. You just can’t worry about that anymore.

The only thing, the only wild card or the metal sign I’m thinking about is what will American miners do? And I think American miners might get caught in a downdraft because if stocks sell off. While this is all going on in the U.S., banks are now starting to finally admit that companies like Nvidia or specifically Nvidia are loading money to their biggest clients to buy their finished goods from Nvidia. So here’s a million dollars, buy a million dollars in goods from me. And the circular nature of that or, it’s not a Ponzi, it’s, oh, there’s another word for it.

I can’t remember. There was, I forget the name of it, but there were a couple companies. There was like a daisy chain or a Ponzi scheme or a chain letter concept. And well, basically people are starting to see that. And Goldman is very pointedly pointing that out. And mind you, they’ve known about this for years. People who understand this sector know that Nvidia’s been financing its customers. Think about that. I’m going to give you money to buy stuff from me. So when you do that as a company, right, for me to look at Nvidia’s earnings, I have to then look at their customers’ revenues.

So if the customer has to borrow money to buy chips, to build products, who’s buying their products? And then you start to see how the circle completes. So it goes from Nvidia to OpenAI, to a computer company to OpenAI. And it becomes apparent that to at least a big extent, this is a circle of money moving around. It’s a daisy chain, meaning the money’s never in one place. It’s in all places on everyone’s books at the same time. Debt is equity, if you will. Anyway, the reason this is relevant to gold is because you’re seeing, and this is not gold, but this is about gold.

You’re seeing that American banks are willing to now criticize the AI model openly. And that’s a bad, bad thing if you’re long AI stocks. That means that people are going to start thinking that the margin, maybe I don’t want to put so much money into AI. Maybe I’ll put some into miners. So Goldman has been at the forefront of the gold run. Now, I have a history with Goldman as a counterparty to their trades, and I’ve come to understand that they’re very ahead of the curve when it comes to trading. They don’t necessarily tell their customers that.

And what we’ve endeavored to give you here, I hate that word because I think Hillary said that, what we’ve tried to give you here is a look through their trading desk’s ideas. What their trading desk is doing and what their biggest clients are doing are not what’s in most of their reports. Right now, their trading desk is saying, we’re concerned about this, we’re concerned about that. And that means Goldman is probably no longer long in video stock as a company. Their clients are, but they’re not, and their big traders are getting out of their position.

So when they’re out, you start to see them get short. Now, where have I seen this before? In gold. In early 23, Goldman started writing on their trading desk, and I informed readers that, you know, Goldman’s starting to mention gold now, and they rarely do that. So if they’re mentioning gold, that means their clients are interested in gold. If their clients are interested in gold, then they see that someone is exposed and can really get hurt if we rally. And sure enough, Goldman got long and basically ran in a couple other bullion banks that were late to admit it.

Goldman’s not a market maker in bullion, so they don’t have to be a seller when it rallies. They could be a buyer when it rallies. Goldman doesn’t play that role. Goldman likes to run in people who play that role. So I’m seeing that begin to unfold in video with Goldman now. So is Goldman putting a lot of position short in video? Possibly. But bringing this back to gold, it damages the psychology of Americans who have believed in the Santa Claus that is NVIDIA. And so at the margin, ten out of ten people put money in NVIDIA, and now nine out of ten people put money in NVIDIA.

Now eight out of ten. So that’s going to go into mining stocks, it’s going to go into gold, it’s going to go into SLV, it’s going to go into GLD. It won’t go into physical, and that’s what the government wants. It wants it to stay in exchange traded items. That’s why they created ETFs for Bitcoin. Because if Bitcoin ever had a chance of doing anything to undermine US money, they wanted to make sure they controlled it. So that’s it. Those are your reasons, that’s your framework for what’s going on.

It’s the biggest, biggest, biggest picture that we all know, manifesting for a moment in a window to exactly show you that the world is now starting to be aware and be afraid of the things that you have been talking about for decades and we have been spreading the word about over the last four and a half years. Have a great morning and have a great day. Well, thanks for watching this morning’s Markets and Metals with Vince Lancey. We sure appreciate you tuning in and starting your day with us here.

Hope you enjoyed the show, and we’ll see you again tomorrow. Please note that this video is not intended as legal, licensed, financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching. [tr:trw].

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