The Gold Reset Already Happened and Almost Nobody Noticed | Willem Middelkoop

Willem Middelkoop says the monetary reset isn't coming. It's already underway, quietly, in the accounting. He also argues China is now the dominant force in the gold market, buying on every dip while the West still trades paper.

Kitco's Jeremy Szafron sits down with Willem Middelkoop, author of "The Big Reset" and founder of the Commodity Discovery Fund, for a wide-ranging hour on why both Washington and Beijing may want a cheaper gold price, the state gold buyers that don't show up in official numbers, gold overtaking US Treasuries as the world's top reserve asset, the move of price discovery to Shanghai, China's shift from paper to physical, silver's path to a possible $500, and where the gold miners go from here.

This interview was recorded July 27, 2026.

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Transcript

SPEAKER_00 0:00

It's not just the Chinese central bank buying all this physical gold. We have uh two uh two more very important uh government institutions who are also hoarding gold.

SPEAKER_03 0:13

Gold has obviously had a wild year, a record above $5,500 in January January, a brutal sell-off into the spring, and now it's grinding here around $4,000. Now, the story you usually hear is quite simple. China is dumping dollars, hoarding gold, and the price is going to the moon. Now, my next guest thinks that that story is wrong in both directions, and and he'll kind of tell you something a little bit stranger that right now both Washington and Beijing quietly want a cheaper gold price. And that's the real monetary reset. It isn't coming through the price at all, that it's already happening quietly in the accounting. Now he's been early on calls. The consensus only came to around later. So when Villem Middlecoat says that the system is being rebuilt in plain sight, it's worth an hour. Stay with me.

SPEAKER_02 0:58

Kitco News in Focus with Jeremy Saffron.

SPEAKER_03 1:01

All right, welcome back. I'm Jeremy Saffron. My guest is one of the most contrarian macro voices in this space. He runs a large commodity fund, and he also wrote The Big Reset. And he's got a habit of making big calls well before the consensus. Willem Middlekope joining me now for the Netherlands. Uh, Willem, good to see you. Oh, great to be back. I guess I should say good to see you again. Now we cross paths down in Florida at Rick Rule's Symposium, and we had hoped to sit down there before I lost my voice. So I'm glad we finally get to do this. And honestly, the the timing worked out because July wrote, rewrote, I guess, half of this story. And I and I want to get into miners later because I know that's your world, but first, let's talk about the system because you're kind of making a claim about it right now that I've never really heard anyone put to you. I mean, you've said both Washington and Beijing want a low gold price right now. Washington, I think people get, but walk me through China. Why why would a country that's supposedly hoarding gold kind of want the price down?

SPEAKER_00 1:57

Well, yeah, before I answer that question more in detail, let me first revisit the general thesis of the big reset. Because people often ask me, what do you mean uh with a big reset, the monetary reset? Well, let's uh let's go back to the main thesis. The main thesis was that gold would make a comeback in the world's uh well monetary system, and um uh in the process it would be revalued, and and and the reason for that is that uh it was my position that central banks would start to invest more in gold, just like in the old days, and they would scale back their investments in US treasuries. Well, we've seen that uh evolving in the last few years. But to come back to your question, uh we know that China is a very active buyer on dips. We know that in copper, we know that in oil, but the same goes for gold. And if you look at the latest numbers coming from China, China invested more than 150 tons of gold, they bought more than 150 tons of gold just in one month in June this year. And that shows that uh they like lower prices, they like this correction. I think this correction is almost over. And if you look at the numbers coming from China, this uh this huge demand for gold and also for silver, both the gold and silver demands coming from China is let's say 150%, 200% higher than we've seen last year. So they're very active buyers now.

SPEAKER_03 3:36

Yeah, yeah. And to your to your point, I mean, I get the the data, the official reserve numbers showed the buying pattern that you're describing. I mean, China's central bank added nearly uh or barely two tons in January and February when gold was near its highs, and then close to 38 tons from from March through June as the price broke. So, I mean, does that support your argument? Or or could it just be kind of that you know, buying the dip rather than you know, the repeatable policy rule?

SPEAKER_00 4:02

Well, it's both. Uh it's it's buying the dip. Uh, you know, uh they take advantage of the lower prices now. But if you look at the more uh general and the broader pattern, uh then I would like to point out to a recent report by the Deutsche Bank. And the Deutsche Bank, uh, that that report it almost read like an executive summary of the big reset because the Deutsche Bank said that central banks are now the main driver of the gold price. Central banks are, let's say, hoarding physical gold, and it's not just China. You could say every central bank east of Germany is buying gold, and the Western central banks stopped selling gold a few years back and are repatriating gold out of the US uh system. And this is uh causing a lot of stress in the physical gold and silver markets. We've seen huge outflow from the COMEX out of the CME system. So gold is moving from west to east, and more important, I think the price discovery mechanism uh has moved from uh, let's say, Chicago, where COMEX future trading, to Shanghai, because Shanghai has uh developed uh quite liquid uh gold markets, and and that's more a physical market than uh just paper trading with with gold futures uh like we've seen in Chicago.

SPEAKER_03 5:27

Yeah, yeah, you're correct. It's not just China. I mean, Poland was actually the largest official buyer in Q1. I mean, they added 31 tons. I gotta ask you, I mean, you brought up revaluation, and we'll we'll kind of get more into that, but you know, that marks up obviously the asset side of a central bank's balance sheet without actually creating spendable cash. Does that genuinely kind of reset the monetary system or are governments just dressing up their books?

SPEAKER_00 5:49

Well, um that then uh I would like to um uh go back and revisit that that Deutsche Bank uh report on the gold buying by uh central banks. Um uh Deutsche Bank also made clear that um uh if you look at the gold holdings of world central banks, um uh now all their um gold reserves of world central banks is is is now now like 30% of their total assets. And Financial Times concluded that gold has replaced US treasuries as world's top reserve asset. And and Deutsche Bank came to the conclusion that this trend that central banks are adding to their gold reserves uh could continue, and the Deutsche Bank is actually predicting that gold could um could go up and be 40-50 percent of uh world central bank assets. And and and um they also um uh gave a number where could gold go if central banks keep increasing their gold reserves. Deutsche Bank said that gold could easily go north of uh $10,000, and they said uh it could reach $14,000, $15,000 in the process.

SPEAKER_03 7:08

Now, go back to June for me for a second, Willow, because it as at the end of June, I mean China's official reported numbers, I think, were 2,346 tons of gold, up from roughly 2,330 uh 13 tons at the end of March. But you've long suggested that the state actually controls much more. Now, obviously, I've asked the World Gold Council about this, and they've said that they try their best to use what's reported to come up with their numbers, but give me your best estimate here. I mean, that kind of one number.

SPEAKER_00 7:37

Well, I've got a very nice story uh to tell on that point because um uh the big reset was uh translated and published uh by Remin University Press uh Academic Press in Beijing. And when I was there in I think it was 2015 for the introduction of that book, I gave a small presentation for a Chinese uh monetary institute, and I explained all the gold buying by the Chinese central bank, but then uh one of the officials uh present in that room uh he uh he corrected me and he said, Well, uh, it's not just the Chinese central bank buying all this physical gold, we have uh two uh two more very important uh government institutions who are also hoarding gold. So uh I think that that also explains why the numbers of the World Gold Council and other publications don't show the two the total demand. And if you look at total uh fiscal gold demand coming from, let's say, the Silk Road countries, uh so let's say the Asian countries like India and China, they've accumulated over 50,000 tons of gold since the great financial crisis of 2008, and that's an awful lot.

SPEAKER_03 8:55

So an anecdote from the book launch is kind of I mean, we can't name names, but those two government officials referred to is it SAFE, is it the CIC reality?

SPEAKER_00 9:05

Wow, uh I'm impressed uh by by your uh by your knowledge, man. And and actually uh the central banker, the former central banker who corrected me at that point, he used to be the Chinese guy. He was the first Chinese guy, Chinese central banker uh who was on the board of the IMF. So that that's uh quite a reliable source.

SPEAKER_03 9:28

Interesting. Uh it's that's a that's an interesting. I mean, you because you again, I mean, you've you brought this book to chart. You've argued that the big reset has kind of stopped being a forecast, it it become the present, I guess you could call it. But it's not the dramatic kind of overnight blow up everyone keeps waiting for. So, I mean, make make the case. How is gold's monetary role kind of sneaking back in quietly through the books?

SPEAKER_00 9:50

Yeah, because this is uh surprising to most people, because most people always think this is a binary event, a monetary reset. You know, one day on a Saturday or Sunday afternoon we have this IMF press release, and then gold would be revalued to let's say $20,000. But I think a monetary reset is a more gradual process, it's not a binary event. I think we're in the start of this process, so we're in the start of the gold revaluation. And um that that's that's also where Deutsche Bank came um well to the end of their report to the to its conclusion that that we're in this process. We we're in actually the first innings of this process. And don't forget that the main asset for central banks used to be US treasuries. Well, this has been coming down quite a bit. Uh, central banks used to have like, let's say, uh, 60% of their uh of their reserves in US treasuries, and it's down now to uh I think 27. Oh sorry. Uh the foreign holders of US Treasuries, they always own 35% of outstanding US Treasuries. That's down now to only 12%. And it's the total treasury holdings for central banks worldwide, it's uh it's less than 25% of their total financial assets now.

SPEAKER_03 11:21

There's two pieces of arg uh of evidence that I kind of want to test against against your argument because I found them interesting going through the thesis this weekend. I mean, France sold 129 tons of older bars it held in in New York and bought the same amount in Europe. Now, the move obviously crystallized 12.8 billion euros in gains, while France's total gold tonnage stayed exactly the same. That's according to the Banque de France. And and Poland, I mean, it's proposed using the gains from its gold to fund defense through the proposal. Uh, I guess the proposal hasn't become law and parliament hasn't even taken it up. But Willem, I mean, is your reset governments learning to mobilize gold through accounting without changing the quantity they actually own?

SPEAKER_00 12:04

Well, there I think there are two major forces at work. First, we should ask ourselves why are central banks buying all this gold? And that's, I think it's an hatch on their current, let's say, dollar holdings. It's a hatch on the decline of the US empire and the decline of this uh worldwide system centered around the US dollar. Uh, but you also have a different way of accounting. Let's go, uh let's visit the US situation. As you know, the 8,000 tons of gold, uh official gold reserves uh by US government, let's say by the Federal Reserve and the treasuries, it's it's still valued at the historic cost price of uh $42. And if you compare that to the gold reserves, which uh is owned by, let's say, the ECB, European Central Bank, that's marked to market. So the US can still revalue gold to market prices and have a well have a nice paper profit. But I expect when the stress in the financial system gets uh a bit larger, uh I guess in the end we could see a global revaluation of central bank reserves to much higher prices. But for that, we need a very um, well, let's say a new financial crisis which is shaking the system.

SPEAKER_03 13:31

Interesting, yeah. I gotta ask you about the U.S., obviously the largest holder of gold. I mean, how do we explain it? I mean, you they're kind of explicitly opting out. I mean, Secretary Besson has flatly ruled out on record, you know, revaluing U.S. gold, changing that $42 book value requires an act in Congress. Without Washington, I mean, is this routine European kind of balance sheet accounting? Are they just sitting this one out? What are your thoughts?

SPEAKER_00 13:56

Well, uh, for me, and I think for many central bankers, gold is is the anti-dollar. So um uh I I think it's quite uh I can understand why the US uh wants to treat gold like it's just a commodity and uh and and that let's not focus on gold. And and remember that Elon Musk wanted to visit uh the Fort Knox uh vaults to see if all the gold was still there. Well, that story died down. There are many rumors coming from the 1960s that most of the quality gold bars stored in gold knocks were flown out of the US and were used uh in London to uh well suppress the gold price and keep the gold price fixed at $35 per ounce, which was uh that would that was the old Bretton Woods agreement. And we shouldn't forget that central bankers, Western central bankers, joined forces in the 1960s to defend that uh $35 per ounce price and this London gold pool, this uh central bank club uh well it failed in 1968, and and it's so it's no surprise that three years later the US had to take uh the dollar off of the gold standard. So uh I understand why the US doesn't want to revalue gold, doesn't want to point to the real value of gold, but it's not about the US anymore, it's about the rest of the world, and the rest of the world understands the value of gold. And that's why this is so significant. You get a revaluation of gold now by market forces and not because of an IMF conference.

SPEAKER_03 15:44

Yeah, you know, it's funny because I was reading this. Uh you're talking about Washington's kind of, they're very content to treat gold as just another commodity. But I gotta ask you about the that non-monetary gold jumping to the single largest US export by value earlier this year. I mean, does that does that kind of prove that physical market forces are re-monetizing gold right under Treasury's nose?

SPEAKER_00 16:06

Yeah, and it it just happens because there's so much demand out there. So uh you pointed out to this one uh interesting graph showing that uh gold uh is moving uh out of the US in massive numbers, so it makes gold now uh a top uh US export commodity by value. And uh it's it's another sign gold is moving from west to east. Uh if you look at at central bank total, central bank gold demand, this is this will be the fifth year. Uh this will probably be the fifth year where central bank um gold demand is around 1,000 tons uh in just one year. This this all started after the COVID crisis. And these are incredible numbers because 1,000 tons of gold, that's a third of world's gold mine production. And if if we if we revisit China's uh recent demands, uh I explained to you that their demand in June was 150 tons of gold. Well, that's 60% of world gold production ex-China. So China is buying 60% of world gold production now, just what country?

SPEAKER_03 17:23

Interesting. Um, you know, meanwhile, roughly 31 tons of Venezuelan gold is still stock at the Bank of England in a legal dispute. Uh back in March, the U.S. authorized certain Venezuelan gold transactions with payments routed through treasury-controlled accounts. And Interior Secretary Doug Burnham uh said that the U.S. physically received hundreds million dollars of Venezuelan gold. Is custody itself becoming the risk that drives countries to bring their reserves home?

SPEAKER_00 17:52

Well, uh, we all know if you don't uh own the keys to the vault, you you don't own the gold. Uh so it that's we know that the US has weaponized the dollar. We know the US has uh introduced sanctions, we know the US. There's actually a great book um uh written by a former former Treasury official, which calls uh Treasuries War, explaining how the US uses uh uses every trick in the book to um um to use sanctions to marginalize the role of gold to help support the dollar system as long as possible. And everything happening now in the Gulf is is is another sign that there's great stress um in this dollar-centered system. There's great stress around the US petrol dollar, and I'm afraid that the US hasn't reached the point now that the only way for them to continue supporting this dollar system is by well lying, uh stealing, kidnapping leaders they don't want to have regime change, to start uh wars, to start blockades, or whatever. But this is not a sign of strength, this is a sign of weakness.

SPEAKER_03 19:14

Now, I want to kind of come back to the money because there's a there's a story under all of this. I mean, uh everyone kind of throws out the same number to wave off the wand that it's under 3% of global payments on Swift, and and Swift is you know the dominant financial messaging network banks use around the world. Um but a bank plugged directly into China's own system called SIPS or CIPS can exchange payment instructions without ever using Swift. Here's the catch. So public data doesn't tell us much traffic has actually moved over. But um is Swift, you know, is this scoreboard genuinely going to blind to the to the one? Or are people using or treating SIPS exists as a stand-in for real flows? We can't see it. How would you actually measure it?

SPEAKER_00 19:58

Well, another mistake a lot of people make it is um uh to think that that um you need a dollar collapse and then you need, let's say, the Chinese uh Renminbi taking over. But I think um um China is building, let's say, a parallel trading system, a parallel economic system. Most of the trading done within the BRICS uh countries, the bilateral trade is done in other currencies than the US dollars. So we in the West keep trading in US dollars, but a a lot uh an ever-larging part of the US or of the global trade is uh is invoiced in other currencies than the US dollar. And I think the Chinese are very active in building that system. But we shouldn't forget building a new and a parallel system uh it doesn't take years, it might take decades.

SPEAKER_03 20:55

We've got to talk a little bit about uh BRICS. I mean, it's interesting. I mean, they're building that parallel rails. India, which chairs BRICS this year, is kind of said that they're gonna rule out a common currency, focusing instead of these UPI and local currency settlements. If the chair of BRICS itself is actively hitting the brakes on that unified currency, tell me a little bit more about this parallel economic system. Is it is it fragmented?

SPEAKER_00 21:20

I'm not surprised by uh the position of India. We shouldn't forget that you always have countries who play both sides. It's not just India. Look at what Turkey is doing. Turkey is a NATO member, uh Turkey is trying to be friends uh with the US, but Turkey is also trying to be friends with Russia and other countries in the east. So we we know that um um certain countries, uh Saudi Arabia is another example. Saudi Arabia, of course, was at the core of the petrodollar system, the petrodollar agreement from 1974. Well, um, we now know that the Saudi Saudis are good friends with Russia. The Saudis are selling oil to the Chinese in Yuan or Raminbi. So you always have these countries. And this wasn't this was also a fact after the end of the Second World War because France was part of the Bretton Wood agreement in 1944. Russia and China were also present at that conference at the end of the Second World War, but opted out of the new system which was proposed by the US. France joined that system, the new Bretton Wood system, but France was always quite, well, let's say negative on the US as a world's hegemon. And don't forget that the French sent their navy ships to Manhattan to repatriate lots of their gold holdings, which was stored at the New York Fed in Manhattan. So I'm not surprised that India is playing this role.

SPEAKER_03 23:08

You know, you're saying China's gold strategy extends beyond what appears on the central bank kind of balance sheet. So I kind of want to move from who's accumulating it to where China's building the market around it. I mean, this one genuinely surprised me. Just this month, China's biggest lender, ICBC, pulled retail customers direct access to the Shanghai Gold Exchange and not just the risky leveraged products, the plain spot contracts, too. Several big banks did the same. Ordinary Chinese savers can still buy bank bars and save in gold plans, but they've lost direct access to the exchange. So here's the puzzle. I mean, why would a state that spent years pushing its citizens to own gold take gold trading away from them right now?

SPEAKER_00 23:49

Well, it's my understanding that they take uh traders away from a paper uh gold trading system in Asia, and they still allow them to buy just the physical stuff. And in the big reset, which still can be downloaded for free at our website. Um I I quote a Chinese publication, I think this is a publication from 2011-2012, in which the Chinese said they have this program which is called Storing Gold with the People. So they always had this dual strategy, so they wanted their central bank and other uh government-owned institutions to buy lots of physical gold, but they also supported uh the Chinese retail audience to buy as much physical gold as possible. I think China understands in a times of crisis, you can you can just uh order the citizens to uh hand over that gold to the central bank because it's needed. So uh and this also explains why the total uh physical holdings in China and also for the rest of Asia is actually much higher than you can learn from the official World Gold Council numbers pointing to just reserves of the Chinese central bank.

SPEAKER_03 25:13

Yeah, when you when you say China is kind of moving from paper to physical, just talk a little bit about both sides here because uh then China is doing something much larger than accumulating gold. It's trying to replace a Western system built on financial claims with an Asian system in which direct ownership, settlement, and ultimately prices are determined by physical delivery. I mean, what's the end game? Is it uh gold?

SPEAKER_00 25:36

Um I I'm a student of uh monetary history, and if if you study how the uh Western future markets, the American future markets have been developed, this was a huge development, let's say late 1960s, 1970s, and you has understood in the 1970s if you have these liquid future markets where all these paper contracts are trading, then you're in uh charge of the price discovery mechanism, so you can make uh gold oral make the price go up or down, and this was actually used uh to fight um um the Soviet empire in in the 1980s. This has been documented as well that uh presidents uh Reagan and and um Margaret Thatcher they joined forces to have low commodity prices because this was very harmful for the USSR. And this is one of this was one of the reasons why um this led to a collapse of the of the communist blocks so the US understood that these paper trading systems are very beneficial for them. And China, I think, understands that if they uh prevent too much of the speculation on the paper side but just control the physical side, we see that with the rare earth elements as well, and we see that with copper and all the physical reserves they're building and the other commodities. So China understands it's just it's all about owning the physical stuff in the end.

SPEAKER_03 27:13

Uh talk to me a little bit about the endgame, too. I mean, is it a is it a gold-backed currency? Is it a gold-linked kind of trade system or simply control over the benchmark, you know?

SPEAKER_00 27:22

Um even for me, I've been studying this for the last, let's say, two decades. Uh, even for me, it's very hard to predict what will happen next. Uh, because I think the playbook um um run by China, uh, there are only a few people who know exactly what the playbook looks like. And and don't forget, when you have crises like we have now around the Gulf, uh the playbook might uh and the scenarios might change a bit. Um but uh I still believe that we'll have this uh well multipolar world instead of this unipolar world centered around the US dollar. So this BRICS alliance uh will become stronger, and the US uh knows and understands this, and this explains why President Trump has said that every country who wants to trade uh outside the US dollar within the BRICS Alliance will see uh very um massive tariffs. So the US uh feels threatened, and and again, this is not a show of strength uh by the US. I think they're um they're more or less uh backed against the wall uh against the wall.

SPEAKER_03 28:37

That's interesting. If if that you know 50-year regime is now ending, uh then I guess the question is who becomes the marginal price setter? You're talking about the East, and then there's you know Hong Kong in the East, where a new precious metals clearing system began trial operations just this month, Villem. I mean, the city kind of wants more than 2,000 tons of storage capacity within three years. Now, the easy read is that China's building a bypass around London and New York. We've heard those on other channels, but but let's look at uh you know the official participants' list. We've got JP Morgan, we've got Citibank, UBS, HSBC, and it starts on London's good delivery standards, and its benchmark is distributed through Bloomberg and LSEG. So which is it? Is it a breakaway system or is it that kind of bridge connecting the existing market to Asia? And and who's the real customer?

SPEAKER_00 29:24

Well, for me, it's another sign that we're in the early innings of this monetary reset where you have many developments. Um we also had this Embridge project where the BIS, the Bank for International Settlements in Basel, was part of the Embridge project. Uh, and and you might remember that uh the BIS uh sent out a message announcement two years ago that they they didn't want to be involved with the Embridge project any longer because I think uh the Western Central Bank has begun to understand that Embridge is just another tool which China and the BRICS Alliance will use to build a competitive uh system competing with the Swift.

SPEAKER_03 30:16

Now, that's an interesting one, right? I mean, connect those dots without kind of skipping a step. Embridge is a cross-border digital currency settlement project. Hong Kong's new platform, Clears Precious Metals. Talk a little bit about how they're connected. I mean, is gold actually being used as collateral or kind of settlement on Embridge, you think?

SPEAKER_00 30:34

Well, there are several analysts who, of course, have explained that you could have a um uh BRICS trading system where the bilateral trade is uh done in currencies uh who compete with US dollar, and you could have a net settlement where the settlement is done in physical gold. Um we shouldn't forget that many of the fiat currencies are losing their purchasing power. Just look at the Turkish lira. The Turkish lira lost 99% of its purchasing power in the last 25 years. So I think China and and and some other countries in the BRICS Alliance, they they they will um they will like to trade uh and avoid the US dollar, but they won't accept uh some of these weaker currencies. So they'll they will ask for net settlement or even payment in gold. We shouldn't forget what what uh President Putin said after the start of the Ukraine war. He still wanted to supply oil and gas to uh Western Europe, but he said uh we want to be paid uh in gold, in Bitcoin or or in ruble. You know, so it you have all these signs, all these indications, and if you um if you take all these signs into account, it's quite clear, I think, where we're heading. You never know where you will uh exactly arrive, but but but um you know the trends. The trend is obvious.

SPEAKER_03 32:05

And you uh do you look for a specific kind of event that would that would talk about this being underway? I mean a gold kind of traded settled in in digital won, or maybe a a central bank vaulting in Hong Kong, or maybe a sovereign contract priced outside of London?

SPEAKER_00 32:19

Well, I'm curious which country will take out the gold card as as as the first. Because we we shouldn't forget US is also in a position where the US could choose to revalue gold or uh let's say introduce gold-backed sovereign bonds, because we haven't talked much about sovereign bonds. Well, we talked a bit about US treasuries, but if you look at the interest rates, uh we come out of a uh well out of uh let's say uh a few decades where we see declining, where we saw declining interest rates and declining inflation, let's say from 1980 till 2020. And now we are in a totally new environment where interest rates and inflation is is is starting to look uh like uh the start of a new uptrend. And I I'm afraid with sent with interest rates rising now worldwide, we're not that far away from a sovereign debt crisis. And and the US has now reached a national debt of 40 trillion. We're very close to 40 trillion now. This was 10 trillion around uh 2000. And the US needs to roll over uh over 15 trillion of US treasuries every year now, because many of the US treasuries um have a very uh short uh maturity.

SPEAKER_03 33:50

Okay, let's move from that alternative system into China, you know, uh is I guess to the United States. We've got to talk about it because they're the center of the existing one. I mean, if you're saying Washington could reintroduce gold through sovereign bonds, we've talked to, you know, we've had Judy Shelton on the show. But what exactly would that instrument be? I mean, is it a treasury bond? Uh you know, is that what they kind of do here?

SPEAKER_00 34:12

Uh well, uh that that's also very hard to predict, but I'm just pointing to um to the possibility like explained by Judy Shelton, and Judy Shelton, of course, has a very interesting background and is in a much better position to explain this to the market than I am. But even uh Judy Shelton doesn't know what's uh currently being discussed uh within the White House, and and and Scott Bassant, of course, has sent out some mixed signals. But um I think it's important to understand that something needs to be done. We're on an unsustainable path, and we're just one financial crisis away before we will see um major changes coming.

SPEAKER_03 35:06

You know, it's interesting because there's that live campaign to classify gold as a level one high-quality liquid asset. I mean, gold already carries a zero credit risk weight, but it gets no such status, and an unallocated gold can still face an 85% stable funding requirement. So if regulators change that, I mean, what would bank demand actually look like in tons? Which asset do you think gold would replace?

SPEAKER_00 35:30

Well, that's actually what we've seen happening in the last uh five years. And as explained, uh gold has now replaced US treasuries as the world's top reserve assets. Who would have thought 10 years ago this is a huge change? We take it for granted now. Uh and and we shouldn't forget that that um in the old days, let's say 1980, um central bank gold holdings, the gold holdings was almost 70% of their total financial assets. It it declined to around 20%, it's around 30% now, and we could move back up to 40, 50, 60 percent of world's financial assets owned by central banks being just uh physical gold. But you need a gold revaluation and and and we we need more um buying by central bank like we have seen in the last five years. And I think this trend will continue. And let's look at the supply side. Uh you would think that after a tripling of the gold price, world gold production production would uh really jump. But if you look at world gold production, it has been quite stable in the last 10 years. I think we are reaching almost peak gold now in production numbers. If you look at silver, we've seen world peak silver production in 2016. Production has been declining. We see the same with copper. It's very hard to increase the output of all these mines because of many of the old mines they are uh are getting depleted now.

SPEAKER_03 37:16

Let's talk about silver, Willem. And I'll give you credit. I mean, that that triple-digit call was obviously right. Um, you know, you've said since that price discovery for silver is permanently migrating to Shanghai, and we've kind of talked a little bit about this, but make it you know testable for me. Say you're right. Well, what's the signal that you're kind of watching? What would we actually have to see in London or on Comex when that price settles really move to Shanghai?

SPEAKER_00 37:38

Well, what I'm waiting for now, I'm a fund manager. I started the commodity discovery fund in 2008, and I've always said to investors um one day in the not too distant future we'll see physical shortages developing. It could be in gold, it could be in silver. I think silver uh is is is the best candidate because silver is used in the industry, why gold is always stored in vaults. And we know that the physical demand for silver out uh out there is quite large, and there's quite a bit of physical, uh there's quite a bit of stress in the physical silver markets, and that also explains why silver, of course, had this huge run and went up 5x from 20 to 100 in just a few years. But look at palladium, uh, the Chinese are buying a lot of palladium as well. Palladium is a very small market, that's only six million ounces of palladium being produced worldwide. Uh but now look at copper. Uh, we've had we have seen uh quite a number of accidents where large gold mines had a landslide or whatever, or were closed for political reasons, like in Panama. So we lost, let's say, 3% of world copper production in the last few years. And if you look at the last uh production numbers, uh BHP, I think copper production was down 7%, Rio Tinto copper production was down, I think, 9%. Codelco, that's the state mining company in Chile, reported uh uh copper production numbers which were quite a bit lower. So everywhere um we see stress in the physical markets, and I'm just curious in which market we'll see real physical shortages, because we haven't seen that. Of course, we've seen that in the rare earth elements and some of the other, well, let's say small critical metal markets where China is has stopped exporting uh some of these metals. But if you get real shortages in silver or in copper or uranium is another one where you can expect shortages after 2030, and then things start to get very interesting very soon for especially for resource investors like ourselves.

SPEAKER_03 39:57

Yeah, that's an interesting one. And I guess we could kind of connect it to what we were talking about here too. I mean, the physical shortage is not merely your reason to be bullish, it's kind of the mechanism you believe that could break price discovery or paper price discovery. So just if you could, before we get into it, I mean just walk me through that chain. Does an industrial buyer kind of fail to source metal? Is it lease rates, you know, the market backwardation?

SPEAKER_00 40:20

Well, we got so used on uh these uh hyperliquid paper future markets. So we we think there's always supply out there, there's always somebody who wants to sell your contract. But um, if you concentrate on the palladium market, we've seen a shortage of palladium, let's say five, six years ago, it was around 2018, and then we had a sudden jump of palladium prices of 5x just because of the stress in the physical market. And I think people uh don't understand that uh it's so hard to keep increasing the mine output while we keep um we keep seeing uh an ever-increasing um rise of demand for these metals. So one day the system will start to break somewhere. And Robert Friedland, you might be familiar with with that name. He was the guy uh who was responsible for the largest copper discovery in Asia, the largest copper discovery in Africa. And he he's almost uh posting and tweeting on a daily basis to warn people there's an accident waiting to happen out there. So we're on an unsustainable path uh regarding the physical uh supply of some of these metals. We're on an unsustainable path uh regarding the US national debt and worldwide debt. Um, so something has to give, and I'm afraid that we'll see the start of a new financial crisis somewhere in the not too distant future. Because uh, if you look at valuations on stock exchanges, everything points to something um breaking in the not too distant future.

SPEAKER_03 42:18

I gotta ask you about those candidates because you talked about three of them. You talked about silver, copper, palladium. I mean, uh talk to me a little bit about which one you think will first have that genuine physical shortage, uh, kind of when. I mean, you know, I wanted to ask you a little bit about what you thought about this because um all three are interesting metals, as you said, and uranium obviously not being a metal, but you know what I mean? Yeah.

SPEAKER_00 42:40

Uh well, silver is a great candidate because it's a monetary metal and an industrial metal. And and when I do a pitch for new investors, I was point to the perfect storm and developing now for uh resource investors like ourselves, because we're entering this area of shortages. That's that's new. We we never we've never seen that uh worldwide. Shortages in some of these um metals, some of these critical metals. Uh Robert Friedland always points out that we need uh as much copper in the next 25 years as we have produced in the last 2,000 years. So think about that. We need as much copper in the next 25 years as we've produced in the last 2,000 years. Well, the major copper mines are depleting. So, but to come back to that that that that uh perfect storm thesis, so you have the era of shortages started starting, then you have the uh debasement of the currencies, which leads to higher inflation, and and and investors worldwide understand if you have an era of higher inflation, commodities are a safe haven, so you get more and more demand by uh investors for for um Some of these uh hard assets, or many of these hard assets, and then you have the geopolitical tension because when I wrote the big reset in 2013, the East and West were still joining forces, and you could envision a scenario where the East and West would um would work together to move to a next phase for Will's monetary system in a way uh where um huge shocks could be avoided. But in in the epilogue of the big reset, I I wrote about two scenarios when there was an era of cooperation between the east and the west, but another more negative scenario uh was that we would have a an era of confrontation, and I think we're we're clearly in the era of confrontation now where the West isn't aligned with the East anymore, and and we treat China uh as our new enemy. I think I understand why China is an enemy for the US, because um China wants to get rid of uh the dollar as the sole world reserve currency, but for us here in Europe, China is not an enemy. But we're told by the US that China is our new enemy. So that's that's why we're reaching this perfect storm. You have the shortages, you have the fight for commodities for geopolitical reasons, you have the debasement of currency, and this is all playing out very well for resource investors like ourselves. And well, last year um our funds doubled, and and in uh AUM doubled, and I think there's just the start of the new bull market.

SPEAKER_03 45:39

Yeah, yeah. I mean, of course, you run a discovery fund, so this is your world. Uh, here's a fact that kind of stopped me. I mean, the big gold miners still calculate the reserves. The gold they've proven is uh economic to dig up, kind of using gold prices between roughly $1,500 and $2,000 an ounce. Newmont uses, I think, $2,000. Uh Barrick, $1,500, AgNico around $1,600, gold's over $4,000. So, I mean, Willem, if they raise those assumptions, which marginal ounces actually turn into reserves and how much of that upside disappears once you factor in the cost?

SPEAKER_00 46:13

Well, that's why there's so much leverage into the system for uh resource investors like ourselves, because many of the ounces which weren't economic to mine will become economic to mine now. And if you look at if you look at the free cash flow of a company like Newmont, there's almost one billion of free cash flow every month now. And if you look at the free cash flow for gold miners as a whole, it it surpassed the free cash flow of the tax sector. And and of course, all the listed companies in the tax space, which were the market darlings in the last few years, they all have valuations which are 20, 30, 40 times higher than the gold miners. And if you look at the valuation of the gold miners after the huge correction we've seen in the last five months, they came down on average by 40 percent. Uh they're uh at rock bottom valuations again. And I think this explains why this is also very early in this new bull market. People still don't believe it, they they think uh the prices will come will go come down and stay down, like we've seen after the short rally in 2016 or the short rally in 2020. But it it's different now. I think this is the start of a generation new bull market in commodities, and this new bull market will won't take years, it will take decades to play out.

SPEAKER_03 47:41

Yeah, it's been so fascinating watching. I mean, that cash flow. Are they just waiting for it to be proven over a few more quarters? So what do you think they're holding out for?

SPEAKER_00 47:49

Well, um they learned their lessons. Uh, many of the gold miners made some bad investment decisions uh during the bull market, let's say the end the top of the last cycle was 2008 when we started our fund. That was a very bad timing from my side. But um, so they made um uh some bad investments, they lost a lot of money, they had too much debt. So now they are quite conservative. And because they're conservative, they have this huge free cash flow now. They need to start uh putting that cash to work. Uh, you could expect more MA. Uh, of course, many of these gold miners they stopped doing a lot of exploration work themselves, so they will continue to buy good projects from development stage companies, and that's where our arbitrage comes in because we start to invest very early after a new discovery, and then often after three, four, five years, we are able to sell uh our shares to a major who is uh taking over uh the company who made that new discovery. And we've had over 90 uh successful exits since 2008, and we we understand now that big significant discoveries will always be bought out by majors looking for reserves.

SPEAKER_03 49:20

Yeah, do you think the MA cycle has kind of just begun here, or are they still, you know, is this still what you expect majors to do with their growing cash?

SPEAKER_00 49:29

We've seen some very interesting takeovers in the last uh few quarters. Uh, Rupert Gold has been bought out, uh Reunion Gold has been bought out, G2 gold fields. So you could say the best projects are being bought out. Uh, there's still some more available, like Snowline, and there's some more. But but um I'm just back from a fact-finding mission in the Yukon. We simply don't make enough serious new discoveries. Um, look at the world of gold production. Uh, total world by gold production is 100 million ounces every year. Uh, I think we would be very happy as an industry if we can discover 50 million ounces every year. I think we we don't we don't um we haven't been that successful in the last few years. Maybe we discover 20, 30 million ounces every year. So there's a huge gap, and that's why I always come back to that same conclusion that one day we'll get physical shortages. And it's not about gold, because gold isn't needed for the industry, but it's it's about copper, it's about uh all the other critical metals.

SPEAKER_03 50:40

You know, while I have you, because I didn't see you over at Rick Rule. I mean, if majors cannot replace reserves through exploration, does that make these discoveries you're talking about strategically scarce? And and what is what makes them kind of attractive enough to be bought? Is it resource size? Is it grade jurisdiction?

SPEAKER_00 50:56

Well, when a major can make so much money to develop these projects into new mines and have this huge margin, you understand that uh projects um which was discovered, let's say, in the last three, four years, and the company which started uh doing that exploration work was only valued at let's say $50 million before the discovery was made, after the discovery that jumped to half a billion. And then when there's a buyout by a major company, that valuation used to be around 1 billion, but the last few major exits have been done at a valuation of three, four, five, six billion. So the value of these new discoveries is is starting to go up quite a bit. Uh, reunion gold was a great example, was a good uh gold discovery in Latin America. It was bought out by Gmining for 800 million, and then only two, three years later, uh the neighbor next door, G2 Goldfields, who didn't discover more gold than reunion, but was bought out for almost uh what was it, three almost three, four billion? So you see that the the multiples in valuation are getting up.

SPEAKER_03 52:23

Can gold, you know, and I always ask people this because I mean, you know, can gold, these high, this high a price, I mean, can it actually convert enough existing resources into reserves to delay this problem we're talking about? Or does the industry still need entirely new discoveries?

SPEAKER_00 52:39

Um, as explained, um the industry as a whole uh would need to discover 100 million ounces every year just to make up for the ounces being produced. Um but if you do the supply and demand studies, and we've done a lot of them in the last uh decade, and if you look at copper, if you look at uranium, if you look at silver, you all see the same trends, especially after 2030, you see production deficits getting ever larger. So we've seen production deficits in silver for quite a number of years. In copper is just starting. In in uranium, we've seen uh production deficits now for a few years, but after 2030, this will get more severe. And I think the only way to close the gap uh partially is to have ever-increasing higher prices for commodities. So uh exploration companies and other companies are have an incentive to go out drilling, but um our industry has been in a bear market for such a long time that we we simply have a lack of projects, new projects which can be built into new mines because the industry was in such a long and deep bear market for the last 10 years.

SPEAKER_03 54:03

You know, I bigger picture too. I have to ask you this, Willem. Uh, is is Beijing buying ounces in the ground instead of uh you know, ounces in in the vault? I mean, in April, China's CMOC signed a development deal expected to bring more than $1.7 billion into um the Kegrajos, uh, forgive me if I said that wrong, the Gold and Copper Project in Ecuador, uh, roughly 11.5 million ounces of golden reserves, though it still needs years of construction. So, I mean, does Chinese capital crowd your fund out of these assets, or does it create the buyer that finally realizes their value?

SPEAKER_00 54:37

We're very happy with the Chinese because when we have a more difficult project which won't be bought, let's say, by BHP or Rio Tinto, because there's too much, let's say, political uncertainty or whatever. We always know there's a Chinese buyer out there. And we reached the point the last few years that Chinese wanted to buy a lot of these Canadian companies, but then the Canadian government stepped in and and said we don't allow Chinese companies to take out Solaris, to take out other companies. So that's why several of these Canadian-listed companies have moved out of North America and now headquartered in, let's say, Dubai or somewhere else, or in London, or in Switzerland, where they don't have that the risk that the Canadian government is is is um is stopping the takeover of that company by a Chinese company. So and that's that's one more example, or these are more examples of the geopolitical tension which have arrived in the resource markets now. But that's that's I think that's not good for the world as a whole, but it's great for commodity investors like ourselves because you have the competitive tension now for these projects.

SPEAKER_03 56:04

So, you know, I guess it creates a buyer that finally realizes their value.

SPEAKER_00 56:08

Yeah, and that's why the prices are going up. And look at what happened uh around the Gulf. War is inflationary. We haven't talked a lot about inflation. Well, diesel is up just in the last few months, 40%. Natural gas is up 100%, especially in Europe. Sulfur is up 140%. So uh I was I talked about the perfect storm before, and but you you see the perfect storm is is getting better every week because of these geopolitical tensions, uh the rising inflation, uh the extra shortages we see uh happening, the production deficits uh happening in in the world of commodities.

SPEAKER_03 56:51

You know, I want to step out of money for a second because we only have a few minutes left. I've had you for a minute. Our time always goes too fast, my friend. But I wanted to talk to you about the relationship between China and Russia, because earlier this month, President Zelensky, I mean, you wrote something about this just this week as well, and I was reading it, and and uh President Zelensky and said China had warned Moscow in what he called uh almost an ultimatum form that there could not be, you know, not not even be thoughts of using nuclear weapons in in Ukraine. Subsequent reporting indicated senior Chinese officials privately kind of corroborated the message, but but Yijing has never stated that publicly. Now you've called uh China's posture towards Russia colder than it looks. Is is China restraining Russia here or is China managing its own exposure?

SPEAKER_00 57:34

Well, I'm glad you're reading my Substack. I I indeed published a piece on my Substack uh this Saturday where I pointed to uh a possible new scenario where it could be in China's interest um to no longer support Putin or the current strategy by Russia. And we shouldn't forget that Putin Russia is done without China, and China understands this very well. I think China has been using Putin as an angry pit bull barking and screaming against the West so the Chinese can stay silent. But if you look at the history of uh the relations between Russia and China, it's not so hard to envision a future where China would be happy to see another crisis in Russia and they can take everything east of Siberia, including all the commodities which can be found in that part of the world. Um, so when I wrote this article for the Substack, I I wanted to point out that we don't have to be afraid that there will be a nuclear war. Putin will use a nuclear weapon because the Chinese have made quite clear that they don't accept that, and that's also very easy to understand because China just wants to trade with everybody worldwide. China is not interested in World War III, and that's why China is keeping very quiet around the situation in Iran. And China understands that you should never disturb your enemy once while they're making mistakes, and the US has made so many mistakes or are in the process of making so many mistakes in the Gulf that that uh China is is winning um uh by just um well watching this all unfold.

SPEAKER_01 59:43

Yeah.

SPEAKER_03 59:43

What kind of Chinese uh Russia crisis do you think would create that opening for them?

SPEAKER_00 59:52

Well what I've done in that subset article is look for quotes by experts who know a lot more about this stuff than I do. And and and many of them point out that as as soon as it's clear that Putin is not delivering a strong victory for Russia, he will be replaced. Um and and of course there's a risk we'll get an even more hardliner in the Kremlin, but uh as said, uh Russia is finished without Chinese support, and the Chinese will make sure that um Russia will be taken care of.

SPEAKER_03 1:00:44

Interesting.

SPEAKER_00 1:00:45

That's my personal opinion.

SPEAKER_03 1:00:46

Yeah, yeah, yeah. You know, I mean, I wanted to I read that substack, I want to put people over to it. I mean, it's an interesting one to read. You and I, as we just got to it at the last time, we'll have to talk about it next time. But I wanted to kind of bring this all the way down to earth because for somebody watching this who owns a little gold or has been thinking about it, and you know, their eyes are glazing over at central banks and accounting. In one plain sentence, I mean, what should they take away from everything you just laid out? Not a price target, but maybe a takeaway.

SPEAKER_00 1:01:12

Oh, I get this question a lot, uh, also by people who say I don't have that much money and I can't spread my risk over, let's say, 25% in real estate, 25% in gold, 25% in equities, and 25% in Bitcoin, like I often uh uh uh give out as my model portfolio. But everybody can buy a bit of physical silver. Everybody can buy uh a small piece of a Bitcoin. Bitcoin is Bitcoin's in a bear market now. I think uh that that bear market will be over quite soon as well. I'm I'm quite sure that the correction in gold and silver is almost over, and I wouldn't be surprised when silver will jump back to $100 in a very short period of time. So if you buy just a bit of silver, you can do well. Uh, and uh I'm on the record because I gave a presentation at the VRIC in January and in March at the PDAC in Toronto that silver, the the bull market for silver, this bull market for silver won't be over before we see $500 silver, and that's just 5x from the $100 we already reached uh, let's say at the end of last year.

SPEAKER_03 1:02:27

Wow, $500 silver. I hope we can see it. Um go back to, I mean, I know we were talking about silver, but I just the last one, and I keep coming back to it in my head. And just before we let you go, I mean, if you're right and this all ends in uh you know a revaluation of gold, what does China look like the day after? Are they the winner or just the country that got less exposed than everyone else?

SPEAKER_00 1:02:49

Well, if I listen good to your question, it's like the revaluing of gold still has to happen. But like I said, the reevaluation has already started. We shouldn't forget that we had interviews like this when gold was 1300, 1500, 1600. It's people are depressed now because this gold is trading $4,000. So we're in the process already. I think we'll see much higher prices, like Deutsche Bank said: 12,000, 14,000, maybe 15,000, 20,000. I see all these numbers. I don't care. I always said to investors, I don't care. Let's first see $5,000 gold. Well, we've seen that last year, we had a huge win last year. Um I can't predict exactly what will happen, but I know the direction of the trend, and the trend is going up, and that's good for investors.

SPEAKER_03 1:03:50

Yeah, I appreciate your time. Phil and Middle Cup, uh, that was genuinely a different hour, as of course. Uh, thanks for coming on. Uh of course, we'll also put down in in the description your Substack, everybody should read it. You've been doing some fun writing these days.

SPEAKER_00 1:04:03

Uh yes, and I I I'm I'm thinking I'm the only one out there who's actually um being totally honest that I use AI to write some of these uh scenarios, and that's the concept of this new Substack. So it's written by myself and AI.

SPEAKER_03 1:04:21

Yeah, all right. Will appreciate this. Thanks again. Thanks again. And as noted, Willem uh runs a fund invested in mining and exploration companies. His fund and his writings are linked below. Now he says the reset is already here, it's hiding in the account. Tell me in the comments, do you buy that? Is this still a price story to you? Subscribe. We do this every day. I'm Jeremy Saffron for all of us here at Kitco News. Thanks for watching.

SPEAKER_02 1:04:44

Kitco News in Focus with Jeremy Saffron.

SPEAKER_01 1:04:48

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