➡ The article discusses the potential for a significant increase in gold prices due to three key factors: the ongoing trade war with China, the implementation of Basel III regulations on July 1st, and a recent surge in gold prices. It suggests that these factors could lead to a shift in the market, possibly resulting in an economic reset similar to what happened in 1971. The author advises caution when investing in this market, recommending the use of options to manage risk. The article concludes by reminding readers to consult with a financial advisor before making any decisions.

The COMEX is a global entity. It’s a supernatural thing that exists to carry everyone in the world’s gold in one place, at least their interest. And we are de-globalizing. I believe that the brand is already being shut down. Welcome to the Morning Markets and Metals with Vince Lancy. Where each morning Vince brings you the financial and precious metals news to get you ready for your day. And now, here’s Vince. Section five, bank behavior, collateral crisis, and early warnings. Let’s keep building on this. Banks are losing money, at least in COMEX trading they are.

We don’t have all the data yet, but it’s clear they’re losing money trading against China. They’re likely making it up elsewhere. But in gold futures, they’re under pressure and open interest continues to fall. And it’s falling by them buying, not by funds buying. This ties back to something we’ve talked about before, a coming crisis in collateral. Back in 22, after the war started, Zoltan Pozar issued a warning, subtle, dense, but critical. He said a commodity crisis was coming, not because of price, but because of physical collateral or a lack thereof. His argument, the physical assets that back the financialization of Western markets were beginning to dry up.

And as they disappear, the leverage structure collapses with them. That was the big picture. In a follow-up report, he described the potential unwinding of the gold rehypothecation trade itself. That is gold that’s lent, relent, and pledged as collateral multiple times across institutions. It wasn’t the headline of his work. He focused mostly on energy and oil in that report, but the gold price stuck out to us and to others. Zoltan never discussed that topic in his analysis again. Still, the warning was there. It came, it was public, and now we believe it’s playing out.

Section 6, regime change or terminal decline. Let’s bring this back to the original fork in the road. Two things may be happening simultaneously. The open interest decline, contextualized by global macro events and the structural Venn diagram we laid out earlier, suggest at least a regime change on the exchange. But more likely, we’re seeing the slow death of COMEX gold contract in its current form. Why? Because of mandated leverage reduction under Basel III. Changes in bank behavior, the divergence between volatility and open interest, price and open interest, and the price trajectory decoupled from contract participation.

Could this eventually turn into a rebirth? Yeah, sure, I can. But futures exchanges live and breathe leverage. Without it, they don’t function as we know them. And COMEX is not preparing for reinvention. It’s preparing for diminishment or worse, exit. Here’s where it gets time sensitive. There may be a deadline baked into all this. That deadline could be July 1st, Basel III implementation. Look at the aggressiveness of short covering happening now. The big players may already be preparing for that cutoff. You know, return to the Venn diagram, the four circles, Basel III, Trump tariffs, swap dealer behavior, and the U.S.

gold repatriation are converging or focusing in on something. We could be in the early to mid stages of a full on gold reprising event, an explosion driven by a single repeating signal. The world doesn’t trust contracts promising gold. It wants gold. Basel III mandates you want to trade it, you have to own it. China mandates will take gold, not treasuries. And now the U.S. is repatriating its gold, demanding its own physical. So when you stack all this together, yes, it’s dangerous to predict price. But if we’re looking for analogs, oh, we’re going to give you an analog now, because this comes down to how do you express your opinion when you have one.

The last two real bull markets and gold sold prices go roughly eight times from the base. And as Michael Oliver notes, there is no historical analog for what we’re seeing now. So stop watching price, even though we’ll come back to it. Stop watching price, watch behavior. Behavior says unless peace breaks out, we’re heading into a crisis of collateral. Actually strike that. We’re already in it. This is a very crisis pose I pointed to in 22 in both his original note and the follow up. And now it’s showing up in open interest, exchange flows and pricing behavior.

And Trump’s policy when you think about it. Section seven, GLD, domestic control and the quiet shutdown of COMEX. Let’s pivot to something that may have been hiding in plain sight. GLD, a while back in another separate conversation with Tom Luwango, we talked about something that’s only become more relevant. GLD, the ETF is the ideal tool if you want to domesticate the gold trade. Why? Because it’s regulated by the SEC. It’s US based. It’s not a futures contract. You just got JP Morgan to be a key part of it. Right? And GLD investors don’t hold the goal.

They hold a claim on goal, a derivative with embedded optionality. If you want to contain capital, if you want to use implicit capital controls, if you want to keep US investors in the system, GLD is a better outlet than COMEX. Meanwhile, COMEX futures, that’s global. It’s exposed. It’s something you might need to quietly kill off because once the world realizes they can’t get physical out of COMEX, what happens? You kill the brand. Not to mention that the COMEX is a global entity. It’s a super national thing that exists to carry everyone in the world’s gold in one place, at least their interest.

And we are de-globalizing. I believe that the brand is already being shut down, not with a press release, not with a headline, but with a quiet procedural throttling, the kind the US government specializes in, the kind of governments that are democratic, specialize in worldwide. How does that work? They don’t say no to delivery. They just say, sure, give us 90 days. They delay. They deter. It’s what’s happening at the LBMA. It’s heavy. And so the big players, the people who matter are clinging to physical gold like there’s no tomorrow. And honestly, I’m one of them, not a big player, but I’m clinging like there’s no tomorrow.

Section eight, positioning, discipline, and the two paths for COMEX. Just be clear. This isn’t a trade for me. It’s not a tactical play. It is intergenerational wealth, my physical holdings. I’m not selling any of my physical gold, probably ever. That said, I may still get along with futures. I will still get along with futures. I will get along with GLD because both will track price and yes, there’s risk, but that risk I’m willing to take with a portion of my net worth to sum up the current signal. Gold open interest is on a steep, unrelenting decline.

Maybe it won’t be so unrelenting, but there’s definitely a bias lower now. Price is on a steep, unrelenting rise. This divergence is not normal, not even within the bounds of a healthy short-covering rally. This is a manifestation of Basel III implementation risk playing out in real time. Specifically, it’s hitting over leveraged short players. That’s banks. Not because they don’t have the money, because they don’t have the gold who must now, they must now cover or prepare for physical delivery. And there’s something no one’s talking about, at least not yet. And they may not.

Last month, someone tried to take delivery and they were told they couldn’t. They tried to squeeze the market. The effort failed, but the fact that they even tried tells you something. Well, it tells you everything. We’ve seen these types of short squeezes before, usually in oil, and they last two or three days, kind of like leaning on a wall to see if it’s wet. And if the wall collapses, you do it every month. So the decline in open interest, paired with the rising of price, is at the most basic level, a sign of stress.

Stress in the gold market, sure. But more specifically, stress on COMEX, stress on the players, stress on the contract. So now we arrive at the fork, the COMEX fork. Put a fork in and it’s done, I guess, right? Path one, COMEX survives, a new regime emerges, the banks finish covering their shorts and flip long biased players based on Asian flows, not based on Western selling. Path two, COMEX takes a permanent hit because Basel III doesn’t just prohibit leverage today, it prohibits leverage going forward. So what’s more likely? Well, they’re not coming back with leverage.

They’re just not coming back. We may be witnessing the beginning of the end of the COMEX metals contracts as viable global benchmarks. If it dies, it won’t die in a press release. It’ll die the same way all Western institutions die quietly. No announcement, no admission, just fade into irrelevance, I should say. Section nine, global leverage, regional pricing and gold’s re-pricing setup. Let’s take this all, I’ve spent enough time on the micro and the market structure. Let’s take this all out to the things people are beginning to talk about now. Let’s zoom out, macro lens and beyond.

While we’re deleveraging in the West, the East is financializing. We’re repatriating supply trade chains. They already have them. They’re rebuilding the financial layer on top of gold, not debt though. Leverage trading in China and across Asia is growing, but here’s the twist. The leverage is structurally long gold, not short it. Now combine that with Basel III’s implications in the West, what do you get? A recipe for much higher gold prices, not a forecast, but it is the setup and that setup is accelerating into a hard calendar deadline, July 1st. Three unresolved threads are tightening at once.

One, the trade war with China with Trump’s deadline potentially overlapping. He has a deadline too and his deadline is based on his approval rating or how low stocks go before Powell helps him or the midterm congressman and they say, you know what, we’re not behind this anymore, right? Second, the Basel III rollout, that’s July 1st, locking in capital ratio changes and leverage restrictions. Three, an enormous rally in gold. We just had that and we’re continuing to have it driven by short covering from the core tenants of COMEX, core tenants, the bullion banks are the core tenants, the market makers, the liquidity providers, signaling possibly their exit ramp.

So let’s be blunt. If you’re JP Morgan, wouldn’t you rather hold your gold in GLD? GLD is protected by US regulatory infrastructure. The COMEX contract, just let it die slowly. This isn’t new. I said this in conversation again with Tom over a year ago, but now it’s playing out. JP Morgan keeps adding to their GLD vault. It’s closer in hand. It’s easier to control. It’s under domestic regulatory control. It’s playing out. You know, that’s the goal you can’t touch. So where does that leave us? Well, back to my physical position to start. I stand by it.

I’ve made it. I’m not moving it. What happens next? I’ll be watching the CFTC Commitment of Traders report. And I just, parenthetically speaking, I just looked at it before rerecording this and it continues the trend. So here’s a final tactical trading thought before I go big picture again. 8,000 gold. It’s not crazy. If the system breaks, that’s just what every pricing looks like. The flip side, the shorts cover quietly. If Trump cuts a deal, this could turn into a buy the rumor, sell the news event on a massive scale, but that’s not the base case.

We’re not looking at a short term trade. We’re looking at a phase transition in the market. And if you’re playing this market without understanding that you’re either going to be too early, too greedy, or just wrong. So don’t be naked long. You know, this is advice that I’m not giving. This is advice to myself. I’m not going to be naked long going into July. I’m going to use options. I’m going to stay risk defined. And above all, the possibility that both things are happening. A regime change and a funeral. You know, maybe it’s not a Venn diagram.

Maybe it’s more like arrows converging on the middle. Now we made this up before we recording because that’s what it finally started to look like to us. Arrows converging on the middle or forces converging on an event or a big picture event. So our four Venn diagram pieces where the Basel three and game restated. Second one, COMEX bank Exodus. Open interest is dropping significantly. Three, China trade war ongoing with its own deadline built in Trump’s popularity. And four, even the US gold is returning. All these things converge on multiple things. And I guess it’s the reset, you know, what kind of reset? Well, an economic reset, it happens every so often.

It happened in 1971 when the Keynesianism was born and now call it neo Austrianism, call it multipolar mercantilism. But it means a soft target of eight thousand dollar gold. It means more movement towards US dollar hegemonic death. It means China’s pricing power taking over in the gold supply chain. It means a new world order. We have to share the stage or get kicked off it all together the way things are going. I’m Vince. Thank you. Well, thanks for watching this morning’s Markets and Metals with Vince Lancy. 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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