This week’s *Live from the Vault* focuses on claims that gold has overtaken US Treasuries as the world’s top reserve asset, alongside reports that central banks are accelerating repatriation of sovereign holdings as confidence in dollar-based systems ebbs. The episode links renewed attention on Fort Knox to the launch of a Hong Kong-SGE gold connection, and discusses the prospect of a full audit of US gold reserves as well as the early stages of a gold revaluation process.
The programme says China accumulated more than 40,000 tons of Western physical gold, and frames Hong Kong’s role as a structural reset rather than an additional trading venue. It also covers chart-based commentary pointing to a potential short squeeze, then cites Laos adopting the SGE price standard as de-dollarisation spreads, before turning to CME and its move towards 24-hour futures trading.
Gold Surpasses US Treasuries and Central Banks Accelerate Repatriation
We are seeing a historic shift as gold officially overtakes US Treasuries as the world’s preferred reserve asset. Recent reports show central bank gold buying has remained at historic highs, following consecutive years of net purchases exceeding 1,000 tonnes. As trust in the US dollar system continues to erode, we advise derivative traders to rapidly reduce exposure to long-term US debt instruments.
Central banks are actively repatriating their physical gold, which is severely reducing the supply available to back paper markets. Surveys show that over 70% of sovereign reserve managers now prefer keeping their gold within their own borders, up from 50% in previous years. This physical drain means paper-based gold derivatives on Western exchanges face unprecedented liquidity risks.
Eastern Gold Pricing, Short Squeeze Risks, and Western Market Vulnerability
The launch of the Hong Kong-SGE gold link has created a powerful Eastern pricing standard that bypasses traditional Western dominance. With estimates suggesting China has quietly accumulated tens of thousands of tons of physical gold, pricing power is shifting rapidly from London and New York to Shanghai and Hong Kong. We must monitor this Eastern pipeline closely, especially as neighboring nations like Laos adopt these new non-dollar price benchmarks.
We expect a massive short squeeze in the coming weeks as paper shorts on Western exchanges are forced to cover. Historical data shows that paper markets cannot suppress prices forever when physical supply dries up, similar to the market dynamics seen during previous gold bull runs. Derivative traders should position themselves with long call options or transition to physically-settled contracts to capitalize on this revaluation.
In a bid to stay relevant, Western exchanges like the CME are pushing 24-hour futures trading, but this does not solve the physical shortage. These paper-driven gambits are unlikely to stop the migration of capital toward physical Eastern hubs. We highly recommend avoiding leveraged short positions on Western exchanges, as the risk of sudden margin spikes and delivery defaults is now at an all-time high.
