0:00 In just 9 months, about 10 trillion dollars of gold has evaporated into thin air. The 29th of January, gold hit a record $5,450 an ounce, and on Friday, it crashed to under $4,000. In practical terms, if you took $10,000 into gold at the top, you'd be looking at a $2,600 loss today. My team and I spent the last week in that 4 hours of sleep mode. Our hands were shaking from the black espresso, going line by line through futures reports, central bank filings, Chinese customer data, and Indian bullion prices, simply so you don't have to. In this video, you'll see who sold, who's still buying, and the one number that says gold has rarely been this
0:45 cheap against what the governments owe. Finally, what the Fed's decision today means for gold. But, there's still two dates that I really think you have to keep your eye on. You might be thinking that the way it fell made no sense. Gold falls when interest rates go up, but on Thursday, rates went down, and hard. The 10-year US Treasury yield dropped 17 basis points in a single day. That is a pretty significant move for the bonds, and the textbook signal for gold is to rally. So, what happened? In that same week, China's central bank told the world that it bought more gold in September than in any month of 3 years. And in India, families were queuing at the jewelry counters for the festive season. The biggest buyers on the planet were buying again, and the price still
1:33 crashed meaningfully. So, somebody was dumping gold, and in a hurry, on the exact same day it should have gone up. That's really a mystery to me. So, let us try to explain what happened. In fact, we've seen this movie before. Almost exactly a year ago, on the 21st of October, 2025. Back then, gold dropped 5.5% in a day from a record. That was its worst day since 2020. It sat about $4,000 for weeks while everyone panicked. About 3 months later, it was at $5,400. In 2008, gold fell 30% in the crash and it was back near $1,000 4 months after the bottom. In 2020, it fell 12% in 4 weeks, then made new highs that August.
2:20 Each time, every time, whoever sold in the panic sold to someone who got paid for being patient, except once. In 2013 to be precise, the selling never stopped and gold fell 28% in a year. So, is this another shakeout like last October or is it the start of another long-term bear market? Before we go deep into this, let me give you the most blunt answer I can. Gold didn't exactly break on Thursday. What I think happened is that it got sold for cash by people who had to sell while the buyers who are willing to hold gold for decades simply kept on buying the dip. And if you're watching this from India, stay for chapter eight. Your country owns more gold than anyone on earth and this crash has affected you uniquely. I just wanted to interrupt you
3:05 guys for 10 seconds. We've noticed that 99.9% of you guys are not subscribed and we would truly appreciate it if you guys subscribed. This gives us the motivation to give out free resources every week to YouTube. To see why Thursday was so strange, you need to understand the one rule that moves gold more than anything else. Gold pays nothing, zip. No interest, no dividend, no rent. It is the house guest who never chips in for the bills. So, why would you even want this guest in your house? Holding it has a cost to you. Essentially, it's whatever you could have earned somewhere else safe instead. This is called opportunity cost. The safest place on the planet to park money right now is a US government bond that protects you from inflation called a TIPS. What it
3:51 pays you after inflation is called the real yield. Think of it as what your savings account really pays you once inflation has taken its bite. If the bank pays you 5% and price goes up 3%, you're really just earning 2%. So, gold and the real yield sit on a seesaw. When the real yield goes up, sitting on gold cost you more. So, gold usually falls. When it goes down, gold usually rises. This year that seesaw has been remarkably steady. Gold has lost about 14% for every percentage point in the 10-year yield roll and got it back when the real yield fell. On Thursday, the real yield fell 12 basis points to 2.64%. According to what we think the interest rate rule should be, gold should have gone up about 1.7%,
4:37 but it for some reason fell 2%. So, a rule that has held for the whole year just randomly breaks in an afternoon. When that happens, the answer is usually in who was trading that day. So, let's line up the potential traders. Number one, traders betting on another Fed rate hike. That's who Reuters blames on Friday. In fact, they cited that gold is set for a steep weekly loss after rising oil prices bolster Fed rate hike bets. But on Thursday, the 2-year yield fell, which means traders were betting on fewer hikes. Number two, countries that import oil. When oil spikes, they need dollars to pay the bill. So, they sell whatever they can own, gold included, and then the dollar pumps. By pumps, I
5:22 mean the dollar and the dollar index rise. On Thursday, the dollar index barely moved and the Chinese yuan hit its strongest against the dollar in more than 4 years. That's exactly the opposite of a dollar scramble. If oil importers have been dumping more gold for dollars, the dollar would have been the busiest thing in the markets, but it just sat. Number three, hedge funds and the trend followers. These are the big professional traders, the big boys. America's future regulator, the CFTC, publishes a weekly count of their bets on gold under the label [music] managed money. They bet on gold's price with borrowed money through futures in New York. It's a bit like buying a house with 10% down. A small move in the price makes a big dent in your own money, and the bank
6:08 wants more cash at the moment it goes against you. And about 96% of that cut came from funds closing out their bets on gold going up. Basically, just taking profits. Now, let's compare that with the long-term holders. Gold ETFs are funds that hold real gold and trade like shares. They ended September at a record 4,256 tons, according to the World Gold Council. And after adding 37 tons in a month in which the price fell 8.1, the patient investors basically held and borrowed speculative money left. When we compare this with Thursday, things get clearer. US government bonds rallied, silver fell 5.4%, platinum fell 3.7%, and the Nasdaq fell 2.6%.
6:55 When the safe things go up and everything that's easy to sell goes down at the same time, we know that people need cash and desperately. So, you now might be asking, "Why does gold get sold first?" I want you to think of gold as the world's ATM. It trades in huge size every single day, and it's sitting on a fat two-year gain. So, when a fund gets a margin call, which is the broker demanding more cash because a bet went to gold is the first thing they sell. It's the same reason you'd cash an insurance policy before you sell the house. It's quicker and it hurts less. In fact, the Financial Times said recently that the haven joined the sell-off. So, the sellers' hands were forced, and the forced sellers eventually run out of things to sell.
7:41 The question that really matters for anyone holding gold is whether the long-term buyers are still there. So, who are these long-term buyers? Essentially, they're the buyers that set gold's floor. The central bank and Chinese buyers amongst the largest. The biggest of them is Beijing. China's central bank snapped up 23 tons in September, and 63 tons over the quarter, taking its total to 2,410 tons. So, why are central banks buying this? Well, we need to go back in history and rewind to February 2022 when the West froze the reserves of Russia's Central Bank. When this happened, every central bank on the planet watched and learned the same lesson. Money held inside somebody else's system can be switched off. It's
8:27 like finding out your bank can freeze your account because it doesn't like who you're friends with. The lesson was that gold sitting in your own vault answers to absolutely nobody. But the pace of buying has changed. Goldman Sachs's estimate of what China really buys through London fell from about 48 tons in May to 25 in August, while the number China reports rose from 10 to 20 tons. In simpler terms, Beijing might be showing us more of a smaller pile. Outside China, the buying is also leveled off. A Fed study in September found that central banks stepped up their buying in 2022 and have stayed there without speeding up. The World Gold Council's estimate for the second quarter was 289 tons. That's
9:12 a record second quarter with Russia the only large seller. So, floor buyers are clearly still buying. They've just stopped getting stronger. The buyer who took the gold to $5,000 was private money. And private money is the kind that dips out of a scene whenever it feels like it. Which raises a bigger question. If central banks are happy to keep buying metal that pays nothing, what Do they know that the hedge funds don't? What is gold really for? You've probably been told many times that gold protects you from inflation. The gold peak in January 1980 was $850 an ounce. In today's money, that's about $3,680. So, if your grandparents bought at the top and handed the gold down to you 46 years later, your family would have made
9:57 almost nothing after inflation. So, what is gold for then? It's insurance against the system breaking. Nobody buys home insurance expecting a return. You buy it for the night the house burns down. And the history of gold's price is the history of systems catching on fire. Until 1971, the dollar was tied to gold at $35 an ounce, and foreign governments could swap their dollars for American gold. Then, on the 15th of August, 1971, Richard Nixon went on live television and said, "I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets." Temporarily last 55 years. With nothing tying the dollar down, inflation took off through
10:43 the '70s, and gold went from $35 to $850 by January 1980. That's more than a 24-times gain. Then Paul Volcker's Fed pushed the interest rates to around 20. That's the seesaw effect from earlier. Pushed as far as it can go, the real yield shot up, and gold fell for two decades. Gold then climbed for a decade to about $1,900 in 2011 after the Fed bought trillions of dollars of bonds with newly created money. And in 2013, it got decimated. ETF holders, the ordinary investors from chapter two, sold about 880 tons, while central banks bought about 370 tons. The central banks were buying, and the price fell anyway because the crowd was
11:29 selling more than twice as fast. Keep that one in mind. It's the case that worries me most, and I'll give it some time at the end. Then, in 2022, the textbook broke. The real yield fell from about -1% to where it is now, which on the seesaw should have crushed gold, but gold went from about $1,800 to $4,000 anyway. Why? Because central banks stepped up their buying once Russia's reserves were frozen, and private money piled in on top. The seesaw still pushes gold around day to day, but the level it swings around moved up about $2,000. Gold basically moves when the system changes, and the people who hold it decide how far it goes. So, with dollar back under $4,000, the million-dollar
12:14 question is, is gold cheap? Well, against bonds, it's a little cheap. The real yield peaked at about 2.95% on the 5th of October, its highest since November 2008. And it's fallen 31 basis points since. On the seesaw, that should have lifted gold about 4% on Thursday, but gold fell about 3% instead. That's a seven-point discrepancy, and over the summer it ran about 12 points ahead. So, it's relatively cheap, but it's the kind of gap that the market throws up all the time. Here's the comparison that matters more. When you take all the gold American owes and set it against everything the US government owes, at today's price, gold would cover about 2.6% of that debt. At the 1980 peak, it
13:00 covered about 25. So, measured against what the governments owe, gold has rarely been this cheap. But, whether that matters depends on what happens to the crap ton of debt. So, who's going to deal [music] with it? Remember 2008 and 2020 from the start of the video? Here's exactly what ended both panics. Both times, gold bottomed within weeks of the Fed flooding the world with dollars, cutting rates, and lending cheap dollars to the central banks. So, you'd expect the Fed to ride to the rescue again. Not this time. The Fed is raising rates while oil spiked and the long bonds nurtured around, which I think is a brave way to run the world's reserve currency. In fact, Fed chair Kevin Warsh raised rates from 3.75 to 4% on the 16th of September. And so, today, the 28th of
13:47 October, Warsh officially held the rates. They stayed where September left them, a range of 3.75 to 4%. But, it wasn't unanimous. The vote was 10 to two, and both dissenters, Lisa Cook and Beth Hammack, wanted another hike. Nobody in the room voted to cut. So, you might be asking, does this save gold? Well, I would tell you not on its own. Going into the meeting, futures gave a hold a better than 9 in 10 chance. And when the whole market expects something, the price has already anticipated it. Remember the seesaw. Gold doesn't move on the Fed's rate so much as on the real yield, what a safe bond pays you after inflation. And that depends on what the Fed does next. So, the statement will
14:33 tell you what comes next, but the Fed says the economy is expanding at a strong pace. However, they also say that inflation remains elevated, and the committee will deliver price stability. That's not exactly a Fed getting ready to stop. It's a hawkish hold. Thus, the hiking is not over. Prices in America are still up 3.7% on a year ago. In September, 16 of the 18 officials who sent in forecasts penciled in one or more hikes this year. And there's only one meeting left to do it, the 9th of December. Futures re-priced December straight after the decision, and you can see exactly where the odds sit now on screen. So, for gold, a hold is a stay of execution. It takes one trigger for force selling off
15:20 the table, but it doesn't bring the real yield down. You can see how gold responded. It only moved slightly, but I must tell you, a day's move isn't exactly a full verdict. The next thing I really want to keep my eyes on is the Fed's favorite inflation number, the PCE. That will be out tomorrow on the 29th of October, and if it comes in hot, December gets very, very likely. And so, the seesaw will get pushed the wrong way for gold. So, with the Fed busy hiking, the Treasury stepped in instead. Essentially, the Treasury is doing the Fed's job. On the 19th of August, the Treasury at least doubled its buybacks, using cash to buy long bonds back. It's like a company buying back its own shares to stop the price from sliding, and it holds the yields down, or so
16:06 they'd like to think. So, why does Washington care so much about long bonds? Because the things the government has to pay are piling up. When you add all their obligations, such as interest, entitlements, and veterans' the government actually has to pay 89% of everything it collects in tax. And that figure is growing more than twice as fast as tax receipts. Picture a house where the mortgage, the pension, and the insurance swallow almost every paycheck before anyone has bought groceries, then I think you'll understand the situation the government's in. So, how does any of this reach gold? It's going to be through the cap. If the Treasury holds long yields down while deficits and inflation run hot, bond holders lose money after inflation. And that's what sends the big hedge buyers back into gold. If the fixes just make US bonds
16:52 safer at today's yields, bonds compete with gold and gold loses. So, the next thing I'd look at is the 4th of November when the Treasury says whether the biggest buybacks carry on. And every one of these moves in Washington lands somewhere you might not expect on a family in Mumbai. So, why is India important to this equation? Well, you should look at how much gold India owns. On the World Gold Council's data, Indian households hold about 25,000 tons. When you add up the official gold from America, Germany, Italy, and France, the four biggest nation piles on Earth, you'll only get about 16,000 tons. So, that means Indian families own more gold than all four of those governments put together. Outside India, people see
17:38 wedding jewelry, but inside India, it's the family bank account because you can walk into a lender with a gold chain and walk out with cash that same afternoon. Right now, Indian families are buying for the festival season. In September, Indian buyers could get gold at a discount of $66 an ounce to London's price. By 16th of October, the discount had shrunk to $8. And on Friday, Reuters reported that the cheaper gold had pulled in more buyers around Dussehra. While the hedge funds in New York were dumping gold, families in India were buying it. If you're watching from Mumbai or Delhi right now, the dollar price is only half your story. In dollars, gold is down about a quarter from January's high. In rupees, using the India Bullion and Jewelers Association's price for pure gold, it
18:23 went from 1.76 lakh per 10 g on the 29th of January to 1.41 lakh on Friday. That's a fall of about a fifth. So, why the gap? The price you pay in India is the dollar price times the rupee plus import duty. A dollar cost about 92 rupees in January, and on Friday it was 95. And Reuters reports India has raised its gold import duty from 6 to 15. So, a weaker rupee and bigger duty both cushion the fall. The weaker rupee comes from the same place as everything else in this video, the US interest rates. On Thursday, India's 10-year government bond paid about 7.12% against under 5% on the American yields. When US yields rise, that gap shrinks. Foreign money has less incentive to sit in India, and
19:09 the rupee weakens. Remember the family bank account? This is where it starts to bite. The RBI's own financial stability report says gold loans are now the biggest kind of retail loan outside housing, and has grown 42% in a year since March 2024. Picture a shop owner who borrowed against the family's gold in January to buy stock for the year. On a small loan, the RBI allows at most 85% of gold's value. Gold in rupees has since fallen about a fifth. So, that loan is now bigger than the gold behind it. Depending on the lender, that means a phone call asking for a top up, a part payment, or an auction notice, an auction of the gold. So, India basically sits on both sides of this trade. A nation of buyers paying up
19:56 for the jewelry counter, and a currency that moves with the very US rates that set the gold price. So, you might be asking, TSCS, with all this news, what could potentially make this worse before it gets better? Well, I'd tell you this, another round of force selling. And there's no shortage of things that could start one. The obvious one, in my opinion, is the stock market. Patrick Successor has the S&P 500 about 1% above the level where some estimates say trend following funds start selling and Alphabet and Amazon both report in Fed week. If stocks crack, funds get margin calls and you already know what they sell first. Then of course, the elephant in the room, oil. It sits under all of this. Brent crude hit its highest since March this week at about $113 on Thursday and about
20:43 $116 on Friday after Saudi air defenses intercepted a drone aimed at Aramco's Shaybah field. We've seen this before. In March, the oil spike turned energy importers into sellers of whatever they owned to raise dollars. Gold lost about 12% that month. It's worse since 2013 as funds deleveraged and importers like Turkey sold into the scramble. But there's still one thing that keeps me up at night. And it's the case study I told you to keep in mind, 2013. ETF holders kept buying into this fall, which is exactly what the 2011 holders did before they broke on the second leg down. This time they have a better place to run than those holders ever had, a US bond paying over 2 and 1/2% after inflation. The Unfunded Act says four of the five funds taking in the most money
21:28 at his firm's are bond funds. If ETF holders turn seller, a repeat of 2011 to 2015 drawdown of 45% measured from January's high would put gold near 2,970. So why don't we consult the smart people's opinion? Where do the investors think the gold story is going? Well, I looked at some very decent opinions on the other side and one of them dumped most of his firm's gold near the top. Jim Bianco makes the best case. He argues long-term rates belong near the economy's growth rate, so 5 to 6% on a 10-year bond is a fair price. At the start of October, he said he liked bonds for the first time in 6 years. And if the AI spending works, he sees the 10-year at 7 to 8% and a firm dollar with nothing breaking. That's the world
22:14 where gold lags for years. Adam Rosen something [music] cut his firm's gold from about 27% of his book to about 5% in January on valuation. And so far he's been quite right. He still owns gold and reckons it will be higher in 10 years. So So do we. Well, you should note that gold's price is more than twice of what it costs miners to mine it. And the loudest voices this week are bulls calling the bottom. So we concede the valuation point. Nothing can prove 4,000 is cheap. And Bianco's world could be a real one. But where we differ is on the buyer underneath. January's top was set by leverage money that could sell. And that money has been leaving. What's left underneath is a price set by central banks that keep buying as real yields climb towards 3%. So here's my take,
22:59 summarized for your time. Gold did not break on Thursday. It got sold for cash by funds that had to sell. The buyers who plan to hold it for decades kept it. So if I'm right, the forced seller runs out of gold before the hedge buyers run out of reasons to buy it. Thus, I think two dates will give us the information we need. And we can be patient about this. And in early November, the World Gold Council publishes its count for how much gold central banks bought in the third quarter. Something near 150 tons says the floor buyers are still there. And India celebrates Dhanteras on the 6th and Diwali on the 8th. So the biggest gold buying festival on earth will show us in real time whether those buyers are still paying up. One more thing before you guys go. Everything in this video is free and it's only about half of what we
23:45 do. We run a basket of gold miners and developers which [music] we've taken apart company by company, how much of each we hold, and the exact test that would make us add or cut our positions, the levels we're watching, and the full written analysis behind this video are on our website and Substack TSCS. [music] The link is in the description below. And just so it's said, this is our research in our own book, shared for educational purposes only. We're not licensed advisors. We may own what we talk about and nothing here is advice to buy or sell anything. Please do your own work, stay vigilant, and never trust a non-licensed financial
