Vince Lanci: A Look Inside Chinas Gold Rush | Arcadia Economics
Summary
Transcript
Weighing as little as 1 gram, the beans and other forms of gold jewelry are increasingly viewed as the safest investment bet for young Chinese in an era of economic uncertainty. It’s part of a larger consumer trend, of all things gold, from bullion to beans and bracelets, that has gripped the mainland. Welcome to the morning markets and metals with Vince Lancey where each morning Vince brings do the financial and precious metals news to get you ready for your day.
And now, here is Vince. Good morning. I’m Vince Lancey and this is the market rundown. Let’s get going. This is going to be a good one. All right. Today we’re going to talk about gold beans, all about them. And we’ll look at some market driving news as well. Maybe gold beans are driving the market. Anyway. First let’s check with the markets. We’ll put a chart up for that.
The SP is down 23 at 51 27 after a very nice day yesterday. The VIX is 1477. Volatility is creeping higher in anticipation of the FOMC. So people pile into volatility. How the outcome is, we don’t know, but that’s preparation for the FOMC. Gold is down about $5 at 21 55. Silver is 24 94, down $0. 09. Copper is down almost five cents at four spot five. Bitcoin.
Two days in a row it’s down like this, right? 63,268, down over 6%. Interesting. Ethereum, down 7%. Just 7%. Store value, palladium down $28. 02. 6%. That’s $1,005. Platinum is trading $902, down $10, down 1%. So on the commodity side, everything is weaker, including oil, which is 82 45, down $0. 17. But we also had a really good run, though. Natural gas, 172 up almost a percent, which is basically a penny and a half to two pennies.
Grains are mixed. Soy is unchanged. On the negative side, 1181. Corn is 428, up a little bit. And wheat is up two cent at 547. Okay, so, sleepy day so far? Well, stocks are a little bit weaker, but nothing crazy. You can see the chart there. We’re going to talk about that whole trading range. I said that we’re in and it looks like we’re actually in it. All right, so let’s get to the headline, gold beans.
These are the stories we put out yesterday and today. The top center story there is a replica of the Bloomberg story on gold beans. We have that there for you. Click on it. That’s free to all. There’s a premium section at the bottom, but you can get the whole story there. We’re going to go through that as well. All right, so here we go. Gold beans under market commentary.
I’m going to read a little bit from that story and then I’m going to give you a perspective. You’re not going to get anywhere else. Now, whether it’s accurate or not is a different story, but you’re not going to get it anywhere else because they don’t think like this. They can’t think like this because they’re just anyway. With China’s deflation at its worst in 15 years, a volatile stock market and bank interest rates too low for her liking, 18 year old Tina Hong is placing her financial security in gold beans weighing as little as 1 gram.
The beans and other forms of gold jewelry are increasingly viewed as the safest investment bet for young Chinese in an era of economic uncertainty. It’s part of a larger consumer trend, of all things gold, from bullion to beans and bracelets, that has gripped the mainland. Another nice picture of the beans there. It’s basically impossible to lose money from buying gold, reasoned Hong, a college freshman studying computer science in Fujian province who in January began buying gold beans because of their relatively low cost of about 600 yuan, $83 per gram.
She has more than 2 grams of the beans and will continue buying them as long as costs are lower than international gold prices, she said. Next China gold rush another excerpt a lack of faith in traditional investments has fueled this new China gold rush. Young people are skipping, quote, pleasurable consumption and instead purchasing, quote, asset style jewelry, end quote, such as gold beans for adornment and investment, said Nikos Cavallis, managing director at the London based consultancy Metals Focus Limited.
However, he cautions that it makes no sense to invest in gold beans or other gold items because their price is often 10% to 30% higher than the commodity spot price. Investors would be better served by parking money in gold ETFs, he said. Wow, there is a lot going on here, and I have a lot of the more intense analysis in the premium section at the bottom continues at bottom.
But I want to touch on a couple of quick things on this just from these sections. You’ll enjoy this. I think this is a little bit fun. All right. With China’s deflation at its worst in 15 years, remember, this is written by a mainstream media outlet, an american mainstream media outlet. The first thing I want you to notice is starting at the big picture, then narrowing it down, is that the chinese press is putting out stuff and the american press is being made to react to.
So we, you know, the american press, which is not very positive on gold as an investment, is now having to counter China saying invest in gold. Right? So how do you do that? Well, it’s the whole fud thing, right? So China’s deflation is at its worst in 15 years. That’s actually true. And you don’t buy gold because of deflation. You buy it because of inflation. Right. Well, if you’re worried about the economy, you put money in a safe haven.
So buying gold for deflation or a slow economy is like a stagflationary hedge. So it’s not crazy. But they’re right. You’re buying gold for deflation, which, by the way, truly is a comment on anxiety about their economy if you’re an outsider in America looking in. Right. Okay. 18 year old Tina Ham, she’s not very old. She’s not very sophisticated. She’s not very smart. See how that works in an era of economic certainty? I mean, this stuff just.
I love this stuff, okay? That has gripped the mail. It’s all part of a larger consumer trend for all things gold. Okay? Truth. That’s, by the way, China’s PR pushing gold on people, which I discuss in detail in the premium section about why they’re doing that. This is really big picture stuff here in a little gold beam. Now it’s basically impossible to lose money from buying gold. Now that’s just ridiculous to say, right? But they’re going to make sure that they put that in there because it’s an 18 year old saying it’s impossible to lose money in gold.
And so as westerners who’ve seen a lot of bubbles, we’re like, oh no, this is the top in gold. You know what? It could be for now. But that statement is not why gold is going to go down. If it goes down, it’s because China’s economy really is in trouble. All right, I’m sorry, guys, but this is the line of all lines. A lack of faith in traditional investments has fueled this new China gold rush.
I’m sorry, traditional investment? I thought gold was the original traditional investment and silver alongside of it. What’s a traditional investment? A piece of paper? Do these people not see Exeter’s pyramid? The point is they know what you know, but they can’t say that young people are skipping pleasurable consumption. Yeah, that’s right. The Chinese have a saving culture, okay? A return to Confucianism. They’re not consuming and we want them to consume again.
That’s covered in premium, but that’s the whole point. The point is they’re saving, not consuming. And by the way, we need to save more. China really does need to save less, okay? Because one of the reasons their economy is sputtering is because they’re scared to death of their government. So their know it’s a matter of trust. And the growth in trust will allow money to go out into things like ETFs and stocks.
And China needs to do that. But not today. It makes no sense. I mean, I can’t even get into this. All right, so let me give you the meta take. I could go down a couple of rabbit holes here that I think would be very pleasurable. I’ll just go down one. Why gold? You know, the price of gold in China is higher than the price of gold in the rest of the world.
And so there have been smuggling operations of gold from Hong Kong to mainland China. People strapping gold bars to themselves, people inserting bars into places that aren’t really where things are supposed to go, and going into China and removing them and selling them. So black market gold smuggling, no different than an episode of Miami Vice where people are swallowing condoms and I’m dating myself and going into Miami on an airplane with condoms in their stomach and then passing them and selling the drugs.
It’s like an episode, I’m sure. All right, so why beans? Well, if you strap gold to yourself, you’re going to get caught, because China is pretty good at that. If you’re inserting gold bars into nether, you know, you probably will get caught. You also could die. I don’t know. Who knows? It’s not something I really do. However, thinking about the drug smugglers. Gold beans are small. They’re like pills.
How many of those can you eat before you go to the bathroom 8 hours later? Well, what do you have? You’re defecating gold, right? And you’d get these gold beans, and you say, what am I going to do with these things? Melt them down and make jewelry out of them? Yeah, you could do that, or you could say, you know what? Screw it. I’ll sell them in little vials as gold beans.
They’ll be cool, right? And because they’re smaller, you can appeal to a less wealthy demographic. So your 18 year olds are buying them. So they become a status symbol for 18 year olds. They become like the latest Pokemon. All right? And you’re selling them individually, so there’s a higher markup. You’re not selling an ounce of gold for $2,000. You sell one 20th of an ounce of gold for $500.
See, so there’s a lot. This is capitalism, okay? This is what happens. Smugglers have figured out how to get gold into China without getting caught, and that is to take a lot of gold beans as pills. And now they’re going, all right, well, let’s market them anyway. That’s the gold bean story, the one that’s at least interesting to me anyway. There’s a lot more on that in the more serious stuff at the bottom.
But let’s go to the news. Actually, I’ll show you what that is right at the bottom. You could see it in the post. China’s cold beans teach Gen Z to save. That’s that story. Click on that, you’ll be able to see the story. And the premium stuff is attached to that. But let’s go to the news market. News bank of Japan carried out a widely telegraphed and dovish exit from NERP, YCC, and ETF J ReiT.
Buying it expects to maintain an accommodative monetary environment. For the time being, the whole news item is footnoted. Japan is letting inflation float higher. They’re not discouraging it, but they’re doing it carefully. So by abandoning YCC, you should see their bonds drop and their currency strengthen. I don’t think that happened yet, but I think that’s because the market was expecting it. The proof of that is, before this announcement came out, their unions renegotiated for pay raises as high as 12%.
It’s all inflationary. Okay, next, Apple is in talks to build Google’s Gemini artificial intelligence engine into the iPhone, setting the stage for a blockbuster agreement that would shake up the AI industry. The two companies are in active negotiations to let Apple license eT. So, you know, there you go. Nvidia on Monday announced a new generation of artificial intelligence chips and software for running AI models. The new AI graphics processors are named Blackwell and are expected to ship later this year.
I had an interview with Tom Luongo yesterday, and we were discussing bitcoin in the context of the chip. So that’s something that’s on my mind. More power is going to be used. Actress and singer Selena Gomez. I did not look this up, but it just popped into my feed. Selena Gomez has hired advisors to weigh offers for her cosmetics company, rare beauty, valued at $2 billion, rare beauty brought on the bankers to field interest from firms looking to invest in or acquire the company.
Bankers have met with potential suitors, but Gomez has not. Either way, Gomez, 31, expects to remain involved with her business. Of course, geopolitics let me just try and summarize this for you. Netanyahu met with Biden. That’s standard operating procedure. Israeli procedure, said Netanyahu, narrowed the mandate of the negotiating delegation. That might be significant. It sounds very plain, but that might be significant. I’m not sure what it means.
The third one here is like, it’s become standard operating procedure every day. It’s like we shot down some drones. It’s like skirmishes constantly. We’re tolerating all this because there’s an election coming up. The EU drafted a law to send russian central bank profits to Ukraine. While the plane could raise the euro. Could raise euro. €3 billion a year for Ukraine. And the EU aims to get the funds to Ukraine as soon as July.
Wow. Okay. So Europe, which ultimately has to get along with Russia, will not ever get along with Russia if they do that. Data on deck today, housing starts, fomc interest rate decision is tomorrow. That’s the big deal. Quick look at the chart. Look, gold is doing what I said it would do. And that happens once in a while. Right? So the market makers are down here and they’re up here.
Well, there’s a buying down here and there’s selling up here. I don’t know where this selling is up here, but it’s roughly in that area. So this selling is basically producer related selling or macro fund selling. And this is discretionary fund buying. So we’ve tested it. We haven’t literally tested it five days in a row, but we’ve tried it. The first day market closed, bought the second day market closed, week, third day market closed week, fourth day closed.
Bounce, bounce up. So if you take these two, look at this technically, take these two days together, that’s an unchanged day, essentially, that tested the lows. Take these two days together, that’s a down day. That tested the lows. Bouncing off the lows. Bouncing off the lows. I think this market wants to pierce that area. And upon piercing that area, we will get a much bigger move. Not necessarily lower.
So it’s about the fomc silver. Silver is, well, less interesting, at least. I can’t quantify it as well. But we’re still in that whole thing. It’s like we’re below here. Below here. You should be flat to short. Now, what does that mean? It means you should be short until we get above there. Because if we get above there, it could really rip. I don’t know where to, but it could really rip.
And that’s something to keep in mind. Bitcoin, I want to look at bitcoin again? There you go. I mean, the buying isn’t going away. Maybe it’s been told to be more patient and let the market come to it. I don’t know. Oil? A tarred run, right? I mean, there’s so many reasons for this to go up, but I want to leave you with this little meta observation. Remember last year when oil was rallying? Remember last year, OPEC was calling us manipulators, and we were calling OPEC gougers.
Well, here’s oil at $82, and nobody’s saying boo. Why are they saying. Why are they not saying boo? Not saying boo? Because it’s an election year and we’re getting along with OPEC again. Somehow something’s going on back there. Anyway, I’m Vince. That’s all for now, everyone. Have a good day. Thanks for watching this morning’s markets and metals update with Vince Lancey, brought to you each day by Miles Franklin precious metals, where this week pre 1933 $20 gold liberty coins are only $65 over spot per coin.
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