Gold sell-off explained: what central banks are buying now

0:00What if the biggest banks in the world, the Goldman Sachs, the UBSs, are all quietly saying the same thing right now and almost nobody in mainstream media is paying attention? What they're saying could decide whether your wealth grows or whether it gets silently eaten alive. And no, this isn't clickbait. I'm going to show you exactly what they wrote because I have every single document here in front of me. I'll do one better for you. In fact, I'll make them available to you, but I'll show you where you can get them in a second.

0:31These are literally the very own research notes from these investment banks. And I was reading these while I'm on holiday here. You can guess why I am. Put it in the comments down below. And I'm going to break it down so that a fifth grader can understand this because finance doesn't have to be complicated.

0:51Because right now something is happening that hasn't happened in over a decade. The world's central banks, think of them as the boss banks, they control every country's money, and they are dumping US debt and they're replacing it with one shiny single asset. And at the same time, the most populous country in the world just started a brand new programme to pour money into that same shiny asset.

1:22And while Wall Street firms are calling for, yes, we're talking about gold, to rise significantly from here, look at what they're actually doing. Institutions are heavily selling, the most they've sold in a long time. So the scary part is this. If you're just sitting here in cash or a savings account or you're waiting for the market to recover because it's too crazy right now, well, you are losing money every single day, every single month, every single year, guaranteed.

1:53Because say your savings account pays you 4%. If you're with one of the big banks, they'll pay you 1%. But your groceries and your gas and your rent are, according to the government, up about 5% on the year. Well, guess what? You're getting poor now. You're probably getting a lot less in your savings. And inflation in real life is probably a heck of a lot more than you think it was. I stayed in this very hotel 10, 20 years ago maybe and it was 90% cheaper than it is right now. That's the real inflation out there, right?

2:25And why is that? Well, the dollar is under pressure. Prices are not coming down. And the people who don't understand what's happening are the ones who are going to get hurt the most. And my mission here is to make sure that doesn't happen. So in the next few minutes I'm going to walk you through in plain English, no jargon, exactly what these Wall Street research reports say. I give you access to them as well.

2:52I'll tell you why gold is at the centre of the biggest financial shift we've seen in decades, and a very simple framework everyday investors can use to protect and grow their wealth. So if that sounds like something you might be interested in, stick around to the bitter end because I'm going to show you where the smart money is actually going.

3:11And if you're wondering who is this chap in his hotel, my name is Felix Prehn. I'm a former investment banker and I've worked inside the machine. I've seen how Wall Street really moves because I used to be a banker and my mentors used to all be investment bankers on Wall Street for many decades. And that led me to build the GOAT Academy where we've now taught well over 20,000 students how to invest like Wall Street does in terms of rules and structure and risk management and so on. And it's my mentors who teach this. So when I say I've read these reports cover to cover, I actually have.

3:48So let me show you what they're actually saying and what you can learn from it. Gold just had its worst month in 13 years. It dropped 12% in a single freaking month. And if you saw that headline, well, you probably think gold's in trouble. But here's the number I want you to look at. The drop had nothing to do with gold being a bad investment. It was caused by something called a liquidity squeeze.

4:12Let me break that down for you because this is really, really crucial. So what happened? Step one is that big funds, the big hedge funds particularly, those guys control billions of dollars, right? I think we agree on that. Put agree in the comments down below. And they sold a lot of gold in a very short period of time. In the US, we saw about $14 billion coming out of those gold ETFs from funds just in a very, very short period of time. And the other guys, the managed money, that's what they're called, they slashed their gold positions for about 22 tons, which is a lot, right?

4:50And then the computers kicked in and they also sold, but they didn't sell, and this is part two, because they thought gold was going to be all over. They sold because they needed cash. So the why has nothing to do with gold and has everything to do with cash. And think about it this way. Imagine your neighbour has a beautiful house, great neighbourhood. It's just remodelled the kitchen, spent $50,000 on that. I know some people are crazy, they actually do that. And then he loses his job, which sucks.

5:28So what do they now do? They don't sell the house because the house is bad or the neighbourhood is bad or it's worthless. They sell it because they need cash to pay their bills. And that's exactly what happened with gold. The Middle East conflict made oil prices higher. They still are high as I'm recording this. And therefore everybody got scared and then basically every stock in the world except for energy stocks and a few outliers went down.

6:01So hedge funds, these managed funds had losses everywhere and they use leverage. Hedge funds are, if they are the conservative kind, they use 5x leverage. If they're the more lunatic kind, they might have 40x leverage. So yes, if the market goes down a per cent, these guys potentially lose 40%. You get the idea, right? So they react very, very quickly to close positions and they had to sell something. And they had to sell winners, including gold, to cover their losses everywhere else.

6:37It's one of the worst months for hedge funds on record and I know you are all now starting a GoFundMe page because you think the hedgy guys are suffering, right? I mean the 6 week summer vacation is at risk. The payment plan for the second yacht, they're thinking about it. It's really serious. Let's help them.

6:59But in all seriousness, in a crisis, you sell what you can, not what you want. And gold was very liquid. It was easy to sell quickly. So it got sold first. And now I need to probably apologise to you guys here. Turkey, and I'm not talking about the food, no, the country. It is a country in Asia with a teeny tiny bit of Europe. And I told you about that these guys were selling gold. And that is true, but it isn't the entire story since I've since learned.

7:32Why did I not know it at the time? Because the data we get is imperfect. It's just the nature of the gold market. So we track literally in our community here. You can get access to that if you want to see what the institutions are doing. There is actually a map here and you can toggle on central bank gold and then you can zoom in around the world and it'll show you here in orange who is rumoured to be selling. And the Turks were definitely rumoured to be selling a lot. And that is actually kind of true but it's a little bit more complicated.

8:03So here's what actually happened. Turkey used about 50 tons of gold in what is called a swap. Now, what the heck is a swap? It's basically using something as collateral, like putting your car title up to get a short-term loan. Say you want to go to some dodgy lender and said, I want $1,000, here is my car registration. It is like pawning a car or a watch. You walk into a pawn shop and you hand over your Rolex and they give you some cash for it. But you didn't sell the watch. You borrowed against it. And you did it because the watch is valuable. That's the whole reason they gave you money, right?

8:48So Turkey was under financial pressure because the energy crisis hit their economy very hard. They needed cash now. They've done this before during COVID and also during 2023 they had a big earthquake. They have gold in London and they can obviously have dealers who arrange this for them. But it kind of proves that gold is very valuable. You can borrow against it because other people believe it's worth a lot, right? Nobody's going to give you a loan backed on your old bicycle or your six-year-old iPhone watch, right? Because it's worth nothing. But everybody accepts gold as collateral.

9:31So why then does this become good news for gold buyers? Well, before we dive into this deeply, I think this is the most important part of the video. A lot of you guys are always asking me in the comments, what about this stock? What about that miner? What about Apple or gold or silver or copper? What should I do? And if I gave you the answer to that, that answer would have a shelf

9:53Life of probably a few minutes or maybe a few hours, maybe even a day, and it'd be a different story, right? It'd be useless. So what I've done instead, I've taken about 4 hours of teachings and I've compressed it down to first 2 hours and then 15 minutes. I don't take a breath in this 15 minute video and I made a mini master class for you that actually teaches you how Wall Street makes those decisions, like what do we buy, when do we buy it, what are the rules, and there are only a couple of them. They're very simple to learn actually.

10:23And that structure is available to you for free. You can just go and watch it. You can go watch it right now. It's at felix.org/getfree. And my hope is that it'll help you on your path to get free financially. So check out that educational video down below, the link in the description, felix.org/getfree. And if you've done that, just put a GF in the chat for get free or gold. What does F stand for? Can't think of something.

10:49But you see, when the big funds panic sell, literally, let me show you some data on that. I'm going to have this in our community here. It's a link down below to this as well. It's like $6 a week. You can cancel anytime. When the smart money sells this aggressively, and again, this is not financial advice, I'm not a registered financial adviser or anything like that, we have a score here of 13, right? So zero would be everyone's selling, 100 would be everyone's buying. 13 is pretty serious selling, right? Institutions are heavily positioned against gold, it says.

11:21Now, historically, this is just data over the last 3 years. I haven't got any older data. The score is 0 to 20, and it's 13 right now. Over the next 90 days, on average, we went up 18%. Now, past performance doesn't guarantee future returns, right? Want to be very clear on that. But you can see when you're in these extreme sell-off periods, historically for the last 3 years, it tended to be the beginning of a rally.

11:46Now, the last 3 has been very good for gold. So obviously take all data with a pinch of crack cocaine. But what I'm trying to say to you is when the big funds panic sell, the price drops, but the fundamentals actually didn't change. The reason gold was going up was what? It was central bank buying. It was fears of inflation. It was just general chaos around the world.

12:11Has any of that stopped? Put in the comments down below. You think any of those stopped? One or two or three of them have stopped, put it down below. In my humble opinion, none of this has really gone away. So literally what we've got here is a Black Friday sale that nobody asked for.

12:29Right now, what about the smart investors? What about the countries who are buying the most gold? Again, go into our little community here and it says central banks is their 15th straight month of gold buying. China leads the pack. Now, this gets updated live, as it says, live. And yes, China sold us in their own shopping. They added $1.9 billion in gold ETF inflows during the same month where everybody else was selling.

12:57And gold is up over the year, right? Or on the year rather. It's not quite where we want it to be, but it's certainly not like completely beaten. And by early April, we're seeing the ETF flows turning positive again. So maybe you're starting to think maybe I'm someone who wants to take this more seriously rather than ping-pong around and you want to learn the actual rules of Wall Street to pick stocks and metals and anything else. The real rules, not some sort of TikTok version. So check out the free master class that I just mentioned at felixfriend.org/getfree. Link is in the description.

13:33Now I promised you that I would show you what the biggest banks are doing and I'm also going to put all of these reports into our free community at Felix Friends resource. I think it is anyway. There's a link down below. It's really free of charge and you find a ton of educational stuff in there and these gold research reports.

13:48So what are the biggest banks in the world telling their richest clients and their institutional clients? Let me translate it for you. And we're going to kick us off with some UBS because the Swissies know a lot about gold. And there were a couple actually they put out in the last day or two. And UBS has put out a clear year end target for gold that represents a significant move up from where we are right now.

14:12And the reason for that is very simple. This is UBS, the Swissies. And number one, they say there is a significant stagflation risk. Now, that's a scary sounding word, but it's actually quite simple. Stagflation is when you get the worst of both worlds. Prices go up, that's inflation, but the economy slows down and people start losing their jobs. That is stagnation. And you put them together like a lunatic economist, and then it becomes stagflation.

14:41Now, if you're English, you hear stag, you probably think, let's go to Barcelona and get drunk. But that is just you. Now, gold has historically done really well during stagflation because people rush to things that hold their value. So that's their first reason to be bullish on gold.

15:00The second reason is a weaker dollar. When the dollar gets weaker, gold gets stronger, right? The going gets tough, the tough get going, that sort of thing. Because gold is priced in dollars. So think of it like a seesaw. One side goes down, the other goes up. You get the idea. So UBS's own research team expects a weaker dollar over the medium term which is definitely supportive for gold if it happens.

15:28And they are also looking at number 3, lower interest rates. Remember our great grocery store example at the beginning of the video, right? When the interest you earn can't keep up with inflation, people look for better places to put their money than cash in their bank account. Gold is one of those places.

15:48And the problem with high interest rates is the following. So think about it. Think that you can get 5% right now from US government debt, right? That's quite good, right? It's 5%. They're definitely going to pay you back. Well, probably. But let's say the 5% becomes 1%. Who the heck wants 1%? Nobody really, right?

16:13So why don't we put some of that money into gold, which I know pays us nothing, 0%, but there's a chance it's going to go up, right? The value is going to go up. US debt is never going to go up in value. So when it pays you a relatively high interest rate, people are like, that's okay, I don't need a value increase, I can live off my 5%. But when it goes down a lot to say 1 or 2%, then people are going to move more of their money into assets that they believe are going to go up, like gold.

16:41And then their 4th reason that the Swissies put out is the boss banks, the central banks, the guys who print all the money. What are they doing with their money? Well, according to the World Gold Council, what are they doing with their money? Well, they're putting into gold. Very simple answer really. It is now 20% of emerging market reserves, which is enormous.

17:07And we're going to go a little bit deeper on that in the next bit here. But before we do that, I want to touch upon what Goldman Sachs says. And I mean, they're called Goldman Sachs, obviously they have to be in gold. But yeah, they're probably the most powerful investment bank in the world. It's true, just ask them and they'll tell you.

17:25And this is a special research report that is put out. Literally, their top commodity analyst said they are constructive on gold even after the sell-off. Constructive is Wall Street code for you think it's going to go up, we've loaded up. So when Goldman Sachs says it after a 12% drop, they're basically saying the sale doesn't scare us, we're still buying.

17:47And Goldman Sachs is specifically talking about Iran, oil prices, gas prices, food prices, all affected by the Middle East. And when those go up, you get higher inflation. And when you get higher inflation, that tends to be good for gold, right?

18:10But the real kicker is from UBS's CIO, chief investment officer. I mean, it's very important. I don't know if you can read that. Can you read that? What does it say there? It says, stay bullish on gold. This is them saying it, not me. I'm not a financial adviser. These guys are. I'm not telling you what to do. You got to come to your own conclusions. But bullish means they think the prices are going to go up, right? Bulls. Think about it. Bulls run forwards. They got horns.

18:37Bullish. Why? Lower interest rates. Federal Reserve saying they might lower rates at some point. And energy supply disruptions. It's going to take years to repair what's been damaged in the Middle East, not weeks or months.

18:56And on top of that, we also still have the main reason why I believe the dollar is going to fall. We have a massive deficit in the US and in Europe because they're all spending money they don't have and the war is going to make that significantly worse. And what does that mean? How do you pay for a deficit? It's very simple. You just call your friend at the central bank and you say print some money. Now what happens to the value of money when you print more and more and more of it? What do you think? There's some money. Actually don't know what that's worth. But say.

19:26This was all the money in the world, right, this here. And then I came along and said actually no, now I've just printed some more, there's twice as much money in the world now. By logic this money would lose half its value, right? And that's the same thing that's happening to the US dollar. More US government debt means more money printing and therefore it means a dollar that's worthless. And therefore people worry about money and the value of money, and I think they should, my humble opinion, and therefore people put more money into gold.

19:57So let's zoom out. The way I see this is the world is a pyramid. Down here you have the little people, you and me, the unwashed masses, the retail investors. There are lots of us. Above that you have the almighty banks, Wall Street. And then above that you have what we're now calling boss banks, which are the money printing lunatics, also known as central banks. Think of the Fed.

20:30So who's buying gold? Well, these guys, the boss banks, they're buying gold, right? Retail is generally speaking buying gold. Now the banks in between are saying we're bullish on gold. So explain to me the bear case scenario, please do in the comments down below. I'm not telling you what to buy, I'm going to be very clear on that, right? I'm not saying put all your money into one asset, it's going to go up to the moon, any of that.

20:58We're not doing any of that here. We're just saying a rational portion of one's wealth in gold may make sense for some people. And you got to know your time frame, it's liquid and premiums, storage issues and everything else. Actually one of my mentors, who also happens to be the head of our academy, he has 12 very large dogs and a shotgun when I asked him about gold storage. But I know you still put stuff obviously into storage, but yeah, there are other ways of dealing with it.

21:33And I want to get one other point across to you because I think it's very important. China has just done a rule change which allows its insurance companies to put 1% of their assets into gold. Now 1% doesn't seem like a lot, but if you think about insurance companies as basically enormous piggy banks, the business model is simple. That's why it's one of Warren Buffett's favourite businesses. They collect premiums from hundreds of millions of people and businesses and then they invest that money. So it's a massive piggy bank and they only have to pay out if something terrible happens, somebody dies, catastrophe, that sort of thing.

22:09So normally they put that money into real estate, into stocks, into bonds, the kind of typical thing. But they now have opened a slot, a 1% wide slot. And UBS, the Swiss bankers, are saying they haven't even fully allocated the 1% yet. And the programme could get expanded. Again, we don't know that, but other sectors and the percentage point could possibly increase. So it just means there is this pot of money sitting there that could potentially buy a lot more gold.

22:39So let me give you what I promised I would give you, which is the 3 step framework. Every single time you buy something, gold, silver, stocks, whatever it is, I would ask myself these questions. The first question is, what are the smartest institutions in the world doing? So not what your uncle says at dinner or whatever. Forget the opinions of random people who post on social media. Look at what the biggest, most well-resourced institutions are doing with their actual money.

23:12And the answer right now is central banks are buying gold. They're reducing their dollar exposure, right? Chinese institutions are scaling into gold through insurance companies and so on. Goldman Sachs says they are constructive on gold. UBS says stay bullish on gold. Again, not me telling you what to do, you got to come to your own conclusions. But all of these were published in literally the same 48 hour window, which is why I thought I should share this with you. And tell me if this is useful, by the way, put "useful" in the comments down below.

23:40And then I look at question 2. What's the crowd doing? And when the crowd is doing the opposite, and my handwriting really is dreadful, isn't it? How bad is my handwriting? Put that in the comments as well. We call it a contrarian investor. If everybody's running for the exit and you see one person very calmly walking in the other direction, who would you want to follow?

24:04So when the average investor panic sells, the smart money starts buying. History tells us this. Maybe we want to side with the smart money, right? And that's what I was showing you with this data here, which again obviously not financial predictions, just saying there's been a lot of selling last week. That happens typically. My data got eaten. Lovely. There she is. Typically we've seen a nice rally afterwards, right?

24:33And then number 3 is what is the long-term structural trend here? This is a short-term fad. This is a long-term thing. Are the reasons people are buying gold going to disappear next month? De-dollarisation, so countries moving away from the dollar, right, that's been building for years. Geopolitical uncertainty, do you think they're all going to sing kumbaya in the Middle East next week? Maybe. Is the government going to stop spending more money than it has? They're just going to sit down and go, look guys, we just need to be reasonable and look after future generations, we're going to balance the budget. Do you think that's going to happen? They're all going to lose their job if they did that. Never going to happen.

25:16And then you see all the emerging market countries buying a lot more gold because they don't want to buy dollars, right? In my humble opinion these are multi-year forces. So it's a longer term trend. It isn't just a season. I was going to say it's like climate change, but that's a bit controversial nowadays, isn't it? But imagine that was a true story and it really was going to get hotter and hotter and hotter forever, then that would be the sort of long-term trend, right? Bit like, remember the ozone layer was going to disappear completely. I also remember as a child that acid rain was going to kill every tree in the next 15 years. It's always a good way to sell some stuff, isn't it?

25:56So my hope here is that this has been helpful to you, that you understand this better. Not to turn you into a permanent gold bull, rather because balance is what is important. But the research is definitely fairly bullish and I make it available to you. So if you want to learn those Wall Street rules, watch the free mini masterclass at fenix/getfree. If you want to get access to our live data here and track your stack and all the other cool things that we do, you can do that as well down below. It's like $6 a week or something like that.

26:32And if you want to get access to just the free reports, you're also very welcome to do that in the free community. And if you got some value out of it, you think somebody else might, you could even share the video. I know, crazy. And I wasn't going to make this video because I'm on a flight as you can obviously tell, but I was doing some light reading as you do. JP Morgan.