KitCo News in Focus with Jeremy Staffron.
SPEAKER_02Welcome back. I'm Jeremy Staffron. President Trump's visit to Beijing has put one of the world's biggest geopolitical fault lines back at the center of global markets. Xi Jinping has warned that mishandling Taiwan could lead to, quote, clashes and even conflicts. And at the same time, U.S. equities are pressing towards record highs, led by tech and AI. But the physical metals market is kind of telling a little bit more of a complicated story. And take a look at this board here. Gold today, essentially flat, near $46,000, $4,700 an ounce on the spot side, while the broader metals board is under pressure. Silver down more than three, platinum is off more than three, and palladium is down nearly 4%. So today we're going to be asking a simple question: is the market reading the summit correctly, or is gold telling us the market still has not seen enough to price in a real breakthrough? Now we'll also look at AI infrastructure trade because if AI is electricity, then the next bottleneck may be power, copper, batteries, grid capacity. Joining me now, of course, is one of our favorites, Clem Chambers, CEO of Online Blockchain, founder of Anufn.com. Clem, great to have you back.
SPEAKER_03Great to be back at these extremely interesting times.
SPEAKER_02Yeah, yeah. We were joking before there's there's nothing really on the news today, uh, not, but uh yeah, before we do this, I I want to kind of get into what's happening here because you uh you recently laid out a very specific metric for evaluating diplomatic meetings like this. You told your viewers gold will tell us gold goes up, bad, gold goes down, good. As the market digests Xi's warning over Taiwan today, I mean, what what timeline are you kind of watching for gold to price in the reality of this summit, regardless of the official statements?
SPEAKER_03It's not what you hear, it's what was said.
SPEAKER_02Yeah.
SPEAKER_03Yeah? So what the information will flow, it will come out of the real meetings that we don't get to hear what is said. And if that is scary, gold will go up over the next days and weeks. And if it was, oh okay, this is this we can work with this, it will go down. And if it was like, oh yeah, yeah, yada yada yada yada, they're not giving up anything, we're not giving up anything, it'll go sideways. So, really, gold is like the the thermostat for the um state between America and China, which is really the only conflict um that counts. And you know, it isn't a conflict at the base of the value pyramid, thank goodness. It's at the top, which is trade and actually intelligence. So that is where the conflict sits right now. And, you know, I I would say that they are trying to, and Trump is trying to very much, you know, get this back on track again. And he's got a very, very difficult job there. And you know, the market is saying right now that you know it's as yet a nothing burger. But of course, if there was important stuff said in private, that won't come out immediately, it will, you know, slowly drift out into um the public domain.
SPEAKER_02Yeah, yeah, good question. I mean, uh it's interesting uh because you could kind of go into you know, talking about if if if gold stays flatter after this meeting while stocks rally, I mean, does that mean that the summit worked, or does it mean that investors are being lulled into complacency?
SPEAKER_03I mean, the relationship between America and China is so vast. Yeah, that's already in the market. Everybody knows that what this tension is, or the market does anyway, not maybe everybody, but it's known what the tension between America and China is. I mean, you know, Trump couldn't have made it clearer, could he? And, you know, she couldn't have made his stance any more clear either. So that's all priced in. It's what is the result of this get together around a table and break bread. That is what will change prices. And right now, I mean, people probably worrying that somehow rare earth is all going to be fixed now because China will be nice for the rest of it, rest of all time and give everybody as much rare earth as they want. But no, that's that's that's the market thinking. What has actually or what will actually be tacitly agreed between the two parties, that is what will push our gold around. And obviously, you know, everybody that are in that room, what they say or how they look to the people around them, and to no, information is like honey, it just gets everywhere unless you're very, very careful, and it will just leak everywhere what has gone on today and tomorrow, etc., and what happens when everybody gets back, and what happens in China when when the Americans go home and all that stuff, and then that will permeate, and that will be what pushes the gold price. If it's a nothing burger, it won't push it. If it's great news, gold will fall heavily. If it's terrible news, gold will go through the roof. So, you know, you've got that range, and so your your your source in the market will be the price of gold.
SPEAKER_02Yeah, yeah, it's interesting. I mean, because rare earths are not just a trade item. They touch defense, chips, CV, AI hardware. I mean, the grid. Even if the market thinks if this if the if the market thinks that this gets fixed, why should investors trust that China gives up leverage it's spent decades building?
SPEAKER_03They won't. Exactly. So, you know, people will go wobble wobble today. Oh, well, it all seems to be going smoothly. Oh, maybe it'll be fixed out, wishful thinking, and it'll go wobble wobble wobble a few percent. But you know, over the next, I mean, people are ringing me up because I'm in the in the zone. People are ringing me up from all over the world saying, Have you got any? Yeah, can you get some? Will you have some? When will you have some? How much? Well, and and what you know, ah, it's like my phone is ringing, and normally, as you know, as a salesperson, you have to ring the lumen phone to ring other people up. But you know, everybody knows, and and Europe is now getting on the program, France is is gone ballistic on getting its rare earth sorted out. Everybody knows that that's an issue. Uh, but if you look at rare earth and you go, oh, how about chromium? How about coal? How about all these other weeds? How about iridium? How about ueterium? Well, China's got a stranglehold on pretty much all refinery in the world, full stop. They control the whole basic refinery market and world. There's some in India and they're going out of the way to get themselves sorted. Everybody's realized that although China squeezed on the throat of everybody else on rare earth, it's got it all. Not only has it got all the raw materials, it's got all the equipment to refine the raw materials. Yeah, it's got all the chemicals you need to refine and and make the equipment. You know, it's got it's got the whole base of the pyramid. And that is really the the cause of all this conniptions that you'll see between America and China. Because America woke up, went, hold on a minute, we've outsourced our kidneys and and we want them back. And, you know, that's a very fragile position to be in. So they're getting together, hopefully, to be sensible and work together for the prosperity of everybody, yeah, rather than to bash heads, because you know, bashing heads would be catastrophic.
SPEAKER_02You know, and and obviously Trump's there representing the US dollar too. And I mean, you push back against the death of the dollar argument, saying the dollar has stayed stronger than critics expected. How do you square a strong dollar with a strong gold market?
SPEAKER_03Well, gold is for war, and we've been heading towards that. And then when the changes with the People's Liberation Army and Xi at the beginning of the year kicked off, which at the very least delayed it by at least one year, gold went stop. Yeah, because gold is for war. And if you if you postpone the war by a year or three, or maybe cancel it, well, obviously you you haven't got so much war coming, have you? Gold is for war because it's not for during war, you spend it during war. So the price of gold may go down during a war, but on the lead up to a conflict, you've got to buy it in. And that's what we've been seeing countries buying in because they see a conflict coming. Now, Trump in Beijing is the flip side of Nixon in China. Now, Nixon came in and said, let's not, let's not, let's be friends and you can rise. And now Trump is, you know, two generations later has gone back to say, hey, hey, hey, hey, hey, you know, yeah, we should be friends, but stop taking the Mickey, stop, you know, stealing our IP, stop flooding our streets with drugs, you know, co-operate with us properly. Play nice. That's what I think he's trying to say. Now, whether they want to play nice, whether they will play nice, we'll find that out with what happens with gold over the next, you know, three months, maybe. But you'll there'll be a trend. It'll just go on a trend. And if that trend is gently down, that's gently good news. If it goes sideways, nothing, nothing was achieved. And if it goes up, well, that's not good, is it?
SPEAKER_02Yeah, yeah. It's interesting. I mean, watching it today with all these headlines, it's flat. Uh, but silver's down more than 3% this morning after that huge run. Uh, you've called silver FOMO gold, but is that FOMO washing out, or is silver kind of still confirming the hard asset story here?
SPEAKER_03Well, what happens with commodity verticals is that there's always another bite of the cherry. In fact, there's several bites of the cherry. Yeah, they they they make the amazing top and then they fall off, and everybody's sad, and then they kind of come back. And then everyone's going, yeah, it's gonna do it again, and it doesn't. And then it falls heavily, and then two years later, it does it again, but not quite as much as before. So there are shocks and aftershocks in commodities when you get a boom bubble bust. And to me, this just looks like a silver aftershock. But you know, I I I I don't have a horse in that race. I had it when it was $28, and then I left at between 90 and 107. Uh, and you know, that was great. I love silver, it's been very kind to me, but you know, it's like an old girlfriend, it's no longer calling.
SPEAKER_02Yeah, yeah. It's a good trade, too, Clem. Uh, okay, let's pivot over here a little bit to trade because Treasury Secretary Scott Bessant said in Beijing just today that the US and China are discussing what they're calling a board of investment mechanism to kind of fast track some deals and lower tariffs or on non-critical goods. Does this look like the new US-China model? Keep basic kind of trade alive to control inflation, but wall off AI, chips, defense, and strategic technology?
SPEAKER_03Well, you know, Trump's always being criticized for being transactional. Yeah. Yeah. And China is very transactional. And, you know, that's the whole point about trade. Everybody can be friends. It doesn't matter if you make a bit of money or lose a bit of money, or, you know, you you overcharge a bit or you undercharge a bit, you're you're transacting, aren't you? And transacting's just great. Everybody, everybody, it's it's a win-win. It should be in transactional business. It's when one party wants to win and wants you to lose, a bit like we've got in the Middle East right now, that's when things get desperate. So, you know, what China is, if you look at China, very sensible in many ways. It just wants to do its thing. It's cracked it, it's got a fantastic economy, it's got a fantastic, it is the workshop of the world, everybody totally is reliant on it, and it just keeps its nose to the grindstone, basically, and just grinds and grinds and grinds and grows and grows and grows in the same way as a lot of the West has forgotten how to do. Right? So they don't want no trouble. They don't want no trouble, they just want to get on with it. And if they carry on getting on with it like they've been getting on with it for the next the last 30 years, they will be the dominant world power, which is why America's woken up and gone, oh hold on a minute, hold on a minute. Yeah, yeah, yeah. We wanted things to go well, but they're going a bit too well for you now. Right? So you're seeing a sort of rapprochement trying to be formed here. That's how I would vision it. You know, you don't have to go to Beijing to cause trouble. You go to Beijing to try to do a deal. He's the he's the deal man, for good or for bad, for right or for wrong, whether you love it or hate it, he's missed a deal. Well, you know, the Chinese are famous for being dealers, wheelers and dealers. And and China's been very good at that and has been very clever and very strategic, just like the West hasn't. The West has been tactical, short-termist, you know, trying to just you know do its short-term political stuff. China's been strategic and has been grinding along very, very successfully. Well, you know, now the superpower is getting together with the new superpower and saying, hey, hey, hey, hey, let's let's sort this out, let's do some deals, let's be sensible, let's muddle along, which is great if that could be pulled off. Could sensible behavior break out in this world? I hope so, because if it doesn't soon, there's going to be problems.
SPEAKER_02Yeah, yeah. And I mean, you know, to further that point, I mean, you you said that the country that is kind of the workshop of the world tends to become the dominant power. I mean, Britain had it, America had it, now China has a huge share of it. Can can America really win the AI race if if it cannot rebuild the physical industrial base behind it?
SPEAKER_03Okay, this is an important idea that I've been working on for some time. It's wrong to say that you did, which is versus versus thinking. Okay? It's all about can you win and then can someone lose? That is a negative pretorial way of looking at it. It should be cooperative. Can America grow and be prosperous and do amazing things working with other people? The answer is absolutely yes. Can it beat China? Can it get into a competition and overwhelm it like some WWF competition? That's the totally wrong way of thinking about it. That's that's really a catastrophic way of framing things. Yeah, so I think that you shouldn't think of it as versus. If it's going to be versus, it's gonna be catastrophe. If it's collaborative, cooperative, wow, it could be amazing, right? We're we're about to put ballooning service centers in space. Yeah, Musk is putting those crazy um equipment in in orbit. You know, we're we're we're getting quantum computing, there'll be, you know, fixing all the diseases with with with DNA, there'll be plugging computers into people's brains, the AI is going, you know, amazingly well. That's all those things to look forward to, right? Yeah. So why do we have to be versus? Why do we have to win? Why can't everybody win? So that's my model. And with a bit of luck, you know, people in China won't be thinking us against them, and America won't be thinking us against them. They'll be thinking, what benefit can we get from them? And what benefit can we get, can they get from us? You know, that's transactional. That that would that is what Trump is meant to be about. Transactional, right? Do a deal. Well, I hope he is the master of the deal because this is one deal that needs to be done.
SPEAKER_02Yeah, yeah, but isn't there still a hard limit to cooperation? I mean, if rare earths, chips, AI, and Taiwan all sit inside the same strategic relationship, where does cooperation end and national security begin?
SPEAKER_03Well, yeah, there's only one kind of national security, and that's not to be on the war path.
SPEAKER_02Yeah, yeah.
SPEAKER_03So the first thing that that you know some countries need to do is get off the war path. There is no security these days, not if you're on the war path. Everybody dies. That's why we haven't had a war since 1945, because nobody dares have one. So, and you know, but it needs to stay that way. Yeah, I mean, it's the fact that it seems that we're so far away from World War II that people can't remember just how diabolical that sort of stuff is. That is one of the problems we have. Yeah. So, you know, war nobody, nobody, I don't think, now can even, you know, benchmark the cost of any any sort of conflict like you know they've been you know sidling up for. So that is the ultimate thing that has to be avoided. National security is about having a strong economy and having strong governance, which America has strong governance, although it's hard to believe, has strong governance and has an advantage in that area. And you know, China has strong strategy, has it has its advantages too. But rather than use those advantages to arm wrestle, yeah, you could should be able to use those advantages to elevate everybody. And and that's the choice that world leaders have to make now. Is are they going to elevate or are they going to escalate? And if they escalate, it's all over. And if they elevate, the future could be brilliant, right? And the markets are dwarfed by the prospect of those two outcomes.
SPEAKER_02So I guess you know the better question may not be whether America can beat China. It's whether America can become stronger without blowing up the system that still feeds its own prosperity.
SPEAKER_03It's not whether America can beat China, it's whether China or America can can be wise enough to collaborate together to do fantastic stuff. I mean, you know, you pick your up you pick your iPhone up. That's that's a function of China and America, working together. Yeah, and that's a great thing, right? Well, you you shatter that relationship, um, and you're going back to the Nokia.
unknownYeah.
SPEAKER_02Sometimes I miss that, Nokia. I'm not gonna lie. Um, you know. Oh, you didn't miss the stop, mate. That was I was coming to that a few weeks ago. Yeah. Rim was too there for a minute. Hey, let's kind of look out at how you're playing this. Uh while a huge amount of money is still flowing into semiconductors and software, you're kind of targeting the physical side. You recently said AI is electricity, there's no limit for the demand of electricity. That's gonna be the chalk point or the choke point. So, I mean, Clem, walk us through why you see the AI boom as an industrial power and a hard asset trade.
SPEAKER_03Well, okay. First of all, uh, there's a lot coming up, right? America wants to reindustrialize, quite right, too. Well, they're gonna have to build out massive amounts of infrastructure for that. Okay. AI, well, that is critical. Talk about national security, yeah. But you've you've got to have that. And that's a massive build-out. So you've got a gigantic amounts of build-outs. Well, this, for example, there's simply enough, not enough copper to go around. There's not even enough backup generators to go around. So, you know, if you want to ring up Caterpillar and say, can I have a backup generator, please? Let's say get in the back of a very long queue. And funnily enough, their share price has gone through the roof. Yeah. So all those things, what I'm looking at now is the supply chain of AI and re-industrialization. And when you look down it, it's it's a very long chain. They're all going to be hauled up by this massive um layout of infrastructure. It's going to be highly inflationary. We're going to have high inflation for sure, you know, really high inflation. Because America has to go there. It has to print money to do it, and it will. And Bob's your uncle. We're going to have lots. Well, it's going to be a stock market rally, but it's going to be a bonanza, right? So I it's every part of the chain. So you look at the bottom of the chain, copper, right? So you you invest in people that do copper. You you look a little bit further up the chain, and you've got people that make cable. So maybe you want to put some money with cable makers. Yeah, you look further up the chain, and you've got people that make silicon wafers. Well, you know, maybe you want some of them. And before you know it, you're buying Cisco, like I told people was a good thing two days ago before it went 20% last night. Yeah. Because it's networking. You've got to have networking. And then you look at another company, somewhere like Luminan, and they're they've got cables that all this AI is going to be going up and down all the time between all these server centers. So it's going to, it is not, it's going to, it is dragging the whole bell curve up. So you look at ScanDisc and go, blamey, it's gone up 8 billion, trillion million percent. Wow, wow, that's because of AI, is it? But then you can go down the chain from there and you'll see so many people that are going vertical now because all being dragged up by the buildup of AI, which typifies the sort of build-out we're going to get with America reindustrializing. Because ultimately, it's no good collaborating with China if you're not going to actually do it properly.
SPEAKER_02Yeah.
SPEAKER_03There's no good outsourcing your light bulbs. You know, you've got to get to be the an industrial power that can do amazing things. In the same ways, if you look at what SpaceX does, it's an amazing industrial power. It makes those things. It's an incredible bit of engineering and manufacture there. So, you know, but you just can't have this incredible fifth generation manufacturing without the fourth generation, the third generation, the second generation, and somebody with spades sticking copper out of a hill. You've got gotta you've got to integrate, haven't you?
SPEAKER_02Yeah, copper's I mean, it's just been on a crazy run. Uh hey, but you you brought up something good there. I mean, if America has to print what's that, Club? It's not even starting copper. No, yeah, so you got a long runway to go. I mean, this is kind of well, they they call it they call it Dr. Copper for a reason, but I mean, uh, you brought up the fact that if America has to kind of print or borrow heavily to fund this build out, is the rally really a productivity rally or is it an inflationary kind of asset price rally dressed up as an AI boom? It's all of them.
SPEAKER_03Yeah. It's all of them. What will happen? It goes like this. Everyone will go, oh, you want money to do AI? Yeah, here it is. And then other people go, hold on a minute. I make I make training shoes and I need to roll my $17 billion debt. Oh, we haven't got any money, we're giving it all to the AI people. Oh, oh, that's not good. Oh, um, have a word with the Fed then. Hey, Fed, look, look, the other people need some money too, you know. Oh, okay, then. And out it comes. And so the other people get the money. But the point is it's being used for productive assets, and that is less inflationary than using it for non productive assets. So while it will be a massive print, a printerphon, you know, royale, it it won't have a hyperinflationary effect, it but it will have a strongly inflationary effect. Interesting. And it will all get plowed in to more and more stuff. Now you could Turn out that at the end of the of the process, you end up with an excess of capacity and prices collapse. But you know, probably not. Yeah. So this build-out is going to be like no other. Well, maybe not since 1942, anyway.
SPEAKER_02Yeah. You know, you recently kind of pointed, uh we could talk about your framework because you were pointing to intersys as an example of the kind of company you're kind of looking at industrial batteries, backup power, energy storage, power systems, not as a recommendation, but kind of as a framework. Is this where you think investors should be looking? The less glamorous companies that kind of make the that build out physically possible.
SPEAKER_03Okay, when I do my research, I go, that's a good company. I have a look at it. Oh, it's 70-time sales. Yeah. Okay, so there's a networking company, it's got sexy networking, anti-gravity, laser beam networking. It's the latest, greatest thing. And it's got a, you know, 40-time sales. So you look at Cisco, it's got a two-time sales. Well, I think Cisco can do networking if they want to. So, you know, I'd buy that because they they are going to pivot into AI and networking infrastructure. Funny enough, the day after I posted that, they did. And that was the news last night. And bang, up it went 20% overnight. Because it's like there's all these. I mean, Nokia, right? Nokia, somebody said to me in on my YouTube comments, you need to look at Nokia. And the next guy that posts burst out laughing and say, What an idiot! What are you talking about? I went, Nokia, hold on a minute. That that that's ringing bells. So I had a look at it and went, oh, holy cow, right? I'll have some of that. I'll have a lot of that, in fact. And then of course in the next few days it went through the roof and it's continued to go through the roof because Nvidia wrote it a check to put AI in the back end of 6G. So there's an example of taking, you know, a company that everybody laughs in, and all of a sudden, quick little pivot, and and it's the brains going to be the brains behind 6G. Well, you know, there's so much of that going on right now. And the back story for that is we're in a NASDAQ bubble now, just at the beginning of it. And we know what happens in a bubble. Some people go, Oh my god, we're in a bubble, oh no.com, oh terrible, run away. No, no, no, no, no, no. Run away at the end, not at the beginning. Now's the time to run towards it. But we are going into that bubble, probably two years, yeah, and so much stuff is just gonna go insane because of the underlying drive towards reindustrialization plus AI. Yeah, well, the two together, you've you've got to you've got to fund that, and they will fund that. And it and it's not it's a good thing to fund. If you could fund social security, it just goes into people's hands and straight down the s the stores, and you get inflation. But if you fund companies to build factories, yeah, it goes into productive assets and it fl it the money flow goes through accelerating the economy, which generates taxes, generates um jobs, generates all that good stuff. Now, it's not neutralized, it has still got an inflationary impact because obviously, you know, like if you want to buy a generator, you want to buy one, you really want to buy one, you're gonna have to pay through the nose for it. So it will have an inflationary effect. Inflation is coming, and people who are looking at gold and silver, yeah. I mean, I I DCA, dollar cost average, that would be a very sensible thing too. Okay, and have your um portfolio allocation of precious metals sensible thing to do, yeah. And if you haven't, you need to read the book on basic investing and see how much you should have. So, you know, that is it it's all going up. You see, I'm sorry, you go onto the internet, everyone's gonna die, the the the dollar's gonna burn, the stock markets are gonna crash, you've got three weeks is before it's all over, right? This is not where it is. We're and I've been saying this for quite some time now, it must be said, I probably said this six or nine months on your show. Yeah, we're gonna get a massive bull market boom. Boom, bubble, bust, of course, because that's the cycle. But we are now out of the boom and we're now into the bubble phase of this, and it's probably got two years to run. So, you know, you you've bear that in mind. And if you see some sense in that, then you need to position yourself accordingly. You don't have to believe there's going to be a massive bubble, but you know, that it's about positioning now because we're in a new epic era. Yeah, it's it we are in a new epoch here, and so people need to, you know, readjust and position themselves for that. Because if not, they'll just miss it.
SPEAKER_02Well, you heard it here. Um, and I guess this could bring me to a Kitko kind of news question. I mean, you know, obviously building out next generation power grids requires that massive amounts of raw commodities, especially copper base metals. How quickly does an AI electricity deficit start showing up in the global mining sector and that raw material supply chain? It already has.
SPEAKER_03That's why copper is at all-time high. And I'm saying it's only just started. It's already there. And there's so many choke points here. You know, think about the choke points just in AI. Forget reindustrialization. Yeah. Which, you know, Trump said that. And he's not saying it because nobody agrees with him. He's that's how it's gonna go, right? So there's all these choke points, and energy is the big choke point, which is why people who are doing uh or say they can do small modular nuclear reactors are so in fashion right now, because you know, you need the sort of levels of energy that that you know are really, really hard to adjust to. Yeah. And you know, that's why all of a sudden lots of old memes about what you can't do and all the things about you know climate change are suddenly sinking into the background, right? Because, you know, energy is is is the big thing. And if you haven't got energy, you're you're stuck, aren't you? If you look at the amount of energy that China has got, it doesn't just go, oh, we'll have nuclear, although it's building, I can't remember, any power plants, 50 nuclear power plants right now, something like that. It'll have 80 within a few years. Yeah, not just building that. People say, Oh, they're not, they they don't do windmills, they don't do solar. Yes, they do. They'll have all that too. Coal, they'll have all that too. Any energy at all, they'll have it. Yeah, because you can't have too much of it, you just can't have too much energy. As anybody that's been, for example, a Bitcoin miner finds out, you know, you've just got to have the energy. You've got to go where the energy is. Well, that's a small example. What's going to happen with AI energy demand is a multiple of what the Bitcoiners have been doing, and then you've got a whole reindustrialization. Well, it's not going to be running on candles, is it? So, you know, energy is one of a number of bottlenecks. Another bottleneck is I want to build a factory over there. People say, No, we don't want you here. No, go away. Find somewhere else. Are you going to use our water for that? No, no, no, go away. We don't want you here. We don't want to hear humming over the over the hill. We don't want to see a smokestack here. So there's going to be all sorts of of bottlenecks. A lot of them are not just going to be raw materials, it's going to be political. You know, people are already saying, no, no, what's it is it Maine that has banned uh uh silver farms, or whatever you want to call them, colos. A state in America that has moved to say you can't build them here. Right. Well, you know, that's gonna be a big thing, and that's gonna be a clash again if you want to compete with China. China's not gonna say, oh no, you can't build it here. Oh no, let's say we'll build six. Yeah. So the there's all sorts of readjustments that are gonna go on, all sorts of bottlenecks, all sorts of new uh situations, all sorts of ways of positioning yourself to to and be in the markets to take advantage of developments.
SPEAKER_02No, I gotta ask you. I mean, uh if we should talk about the bond market just for a moment, because I mean if governments now need to fund defense, AI infrastructure, this energy security, and reshoring all at once. I mean, does do bond markets become the referee that decides how much of this industrial policy is actually affordable?
SPEAKER_03Would have been 30 years ago, but not anymore. Yeah. I mean, they they just they just monetize the debt. Yeah, that's that's one of the reasons why it's potentially inflationary. So, you know, oh here's some bonds, oh we bought them back off you, oh, here's some cash. Yeah. I mean, you know, that that is what QE is, was, will be, yeah. And what QT was, oh now we want to, we want more cash back. Have have these have this paper instead. Yeah, oh, we're draining the cash out. Oh no, we're pushing it in. You know, they they have since 2008, the the monetary policy um is is completely different. I mean it's unorthodox monetary policy, that's what they called it back then. It's not unorthodox anymore. And you know, unfortunately, that's one of the reasons why we have um runaway budgets, is because politicians go, oh, you can just print money just like that, we'll have some, we'll spend it on our friends, and then you get these blooming massive deficits. But so, you know, there's all sorts of problems and readjustments that are going to have to be made, and all sorts of ways of it going wrong, and all sorts of ways of it going right. But I think on balance, as long as America and China can be sensible, because they're the two big players, then you know it it will it will sort itself out. And if you go back to the statement, the strategic statement that was released, I think, in November by America, it's kind of implicit that America's gonna sort out the Western Hemisphere. And it's kind of saying, look, leave Taiwan alone and you can sort out the rest. So Taiwan is that is that schwa point, or whatever you want to call it, is the pivot that that needs to be sorted out. Now, whether that is why Trump is there or not, I don't know. But as long as China just goes, oh, well, you know, we'll sort that all out in 30 years' time, everything's gonna be rosy. If they go, no, no, no, no, year after next, we're having it. I don't care. Look, I'm I'm only I'm only gonna be the boss for a few more years, and I want it in the books that I did it. Then we're in for big trouble.
SPEAKER_02Always interesting, Clem. Hey, uh, before I let you go, I mean, we've got to talk about liquidity just for a moment. I mean, you warned about liquidity drains kind of across the board. Your point is that when money flows out of the markets, capital can kind of move back into cash, into chi bills to kind of wait that storm to clear. As we look through the rest of the quarter here, I mean, we're in May. What are you kind of watching first? Is it something like the Fed balance sheet?
SPEAKER_03They did a bazooka with the um Iran thing. You can see it in the chart. You know, the market's crack, the market's going, oh, I don't like this, oh, we're gonna crash, and bang. Same as happened with the tariff uh crash. Yeah. But that bazooka was what put the market back on trend, that long-term trend. But that money will push, um, will go through the economy over the next you know end months, and you'll see the market kind of curve over again. But that it's got a lot of momentum in it. That money that they pushed in at that point, or whatever they did there, that that it you can't just pull it back. So that it will drive the market for a few months more, but the impact of it, the momentum of it, the force of it will will slow down. And then I'm expecting to see it go straight back on that line that we've seen for so many years. Because that's how they're navigating the liquidity, they're navigating it by by the market. Because, you know, that that's they would say, look, you can't complain about being poor when you could have bought some shares, and people say, Well, I couldn't buy many. I say, Yes, you could. I could have bought some, couldn't you? But but but well then, you know, you can't complain, can you? You can't complain you're in the wrong leg of the K because all you needed to do was buy the put 10 bucks in the SP 500 every month, and by now you'd have a nice little nest egg, but you don't do you. So they are navigating by the SP 500 for near enough. And when they when they uh when they curate that, the NASDAQ goes faster because it's got the higher beta stuff in it, and the Dow goes slower because it's got the lower beta stuff in it, generally. So, but that is how it's being navigated, and if the market ever looks like it's gonna and fall to a level where it's gonna be systemic, they just pull the lever on it. So they will manage the liquidity by looking at the market and saying, is it smooth? Is it going in on the right angle up? It's and and that's it. So you can just look watch that, and you'll see. Well, as you saw this year, oh, Fed's printing again. Funny that, yeah, and as you can see back when the Silicon Valley Bank went, you know, up went, they pulled the lever and up went the balance sheet, and then as soon as the market was stabilized, it carried on going down again. So that is a little chart of what they're doing to try to keep America stable when it's in a situation where it has a runaway deficit, and probably uh you know, of a um an import-export deficit at the moment as well. Heaven knows what happens to all that tariff money, and when that goes back, I mean, you know, it it's it's a mess. But it the key um problem is the fiscal deficit, and and you know, it was meant to come down, wasn't it? It's gone up, isn't it? And and that is a almost a runaway train. It's a long track, but there is a drop at the end of it, and you know, you can't go down that track forever unless you're building it faster than you're going down it, and the the train is going faster down that track than they're building the track, so that is something that has to be grasped for at some point in the not too distant future. But it's not going to kill the dollar. Yes, there will be higher inflation because of all this money printing, and and yes, there will be a stock market boom, and that yes, there'll be a ton of opportunities for people that want to go looking for them, and it will be a wild and worrisome time for a lot of people.
SPEAKER_02I'm writing it down on my sheet right now. Two years left. That's what I'm taking out of this. This is good. All right, Clem, always appreciate your time, your perspective. Thank you for joining us. Uh, interesting times. We'll have you on soon and kind of go over this. Yeah, I look forward to it. All right. Appreciate your time. Thanks, Clem. See you soon. All right, that's the breakdown. The US-China relationship remains the primary geopolitical test. And according to Clem, gold may be the cleanest market signal to watch here. Meanwhile, the AI sector is facing a growing need for energy and physical infrastructure, creating a possible, or I guess potential choke points in commodities. What's your strategy here? Are you monitoring gold for the geopolitical signal? Make sure to hit subscribe, like this video, turn on that bell so you never miss an interview. I'm Jeremy Stafford. Thanks for watching Kitco News. We'll see you next week.
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