Europe Is Cracking – Gold Demand Explodes, What Comes After the Crash? | John Reade

The critical next phase for gold demand growth requires the retail investor (man on the street, woman on the street) to return to physical gold purchases via bar and coin retail channels, which would confirm that institutional/ETF buying is symptomatic of a broader Western investor shift toward gold.

“What we probably need to see is again the man on man and woman on the street return to buying gold. If if they're buying it physically, they'll probably buying it via ETFs as well.”

Western investors have been largely absent from gold for the past 2-3 years, with bar and coin demand down 50-55% in the US and negative in some quarters in Germany and German-speaking Europe, meaning they have missed most of the gold rally and represent a significant untapped demand source.

“bar on coin demand has been pretty weak um even negative in some quarters in Germany and and and German speaking Europe. US demand isn't as bad but it's probably down 50 55% over the same sort of couple of year period”

German and UK economies are performing poorly, with high interest rates and lack of investor confidence, causing a shift away from gold to alternative investments with positive nominal and real yields, particularly government bonds paying positive returns.

“Germany which is one of the biggest U markets and also the UK things aren't going well economically here people don't necessarily have the confidence um to go out and make investments they're trying to make ends meet and the fact that high interest rates um high by standards of the last 10 years prevail throughout Europe has meant that investors have had an alternative for the first time.”

ETF flows in Q1 2025 swung 400 tons in gold's favor compared to Q1 2024 (226 tons of inflows in 2025 vs. 170 tons of outflows in 2024), representing the inflection point where Western investor participation is returning after four consecutive years of ETF outflows.

“ETF flows come out on a on a daily, weekly, monthly basis. We've seen 226 tons of inflows into ETFs and that follows four consecutive years of outflows. If I look at the first quarter of last year, we saw outflows there of of about 170 tons, I think. So the gold market's about 5,000 tons a year, 1,250 tons a quarter. We've seen a swing of 400 tons of the actions of ETF investors this quarter past first quarter 2025 compared to 2024.”

Commodity Trading Advisors (CTAs) bought substantial positions in gold starting March 1, 2025 (when gold broke above technical levels), which drove gold from $2,000 through to approximately $2,400 per ounce, and remained long throughout the year, making them critical to gold's short-term direction.

“if you look at Comx speculators on about the 1st of March last year, and I remember it well because it's my birthday and I'd taken the day off. That was the day that gold broke out. It crossed a few technical levels. We saw the commodity trading advisers or the CTAs on COMX all start buying gold and that was what took gold through through uh um uh up through $2,000 an ounce and then took us up to about $2,400 an ounce. They bought loads of gold and remained long gold basically all year”

Western investors (retail and institutional) have been largely absent from gold purchases for the past 2-3 years, with bar and coin demand down 50-55% in the US and even negative in some quarters in Germany and German-speaking Europe.

“Now I mentioned before western investors have mostly missed out from the moves in gold over over the last couple of years because bar on coin demand has been pretty weak um even negative in some quarters in Germany and and and and German speaking Europe. US demand isn't as bad but it's probably down 50 55% over the same sort of couple of year period.”

Indian sovereign gold bonds were issued by the Indian government with the goal of reducing gold imports and current account deficit pressure, but they failed from an issuer perspective because rupee-denominated gold rose in price, making the coupon payments expensive.

“these sovereign gold bonds have cost the Indian government a lot of money so much so actually that they've stopped they've announced that they won't issue any more sovereign gold bonds and rather what that's encouraging Indian investors who want exposure to the price of gold rather than to own the physical jewelry. It's encouraged those investors to go into exchange traded funds.”

Poland was the largest gold buyer globally in 2024 among disclosed central bank purchases, driven by its perception of geopolitical risk from neighbors closer to troubled areas, desire to demonstrate successful European economy status (matching gold holdings of Germany and France), and confidence in its own growth trajectory as an EU member.

“They were the largest buyer of gold last year out of all the the disclosed purchases... Yeah. In the world. Why? Because it is a successful upand cominging growing European country that looks upon its neighbors and looks upon Germany and France and sees how much gold they have in their reserves and thinks, well, that's what you need to do to demonstrate that you're a successful uh European economy. Poland's been one of the the real successes um since uh it it joined the European Union uh and is a real dynamic economy. It also is very much aware of geopolitical risks.”

Large debts and deficits in the United States and other Western economies have been 'looming' for a long time, making the recent market turmoil a consequence of long-standing imbalances finally coming due.

“large debts and deficits in the United States and other important western economies have been looming for a while. And now we have a president um who seems to be throwing the rule book out the window”

The US administration's erratic tariff announcements and policy reversals (including the 90-day postponement) are signals of institutional instability and unpredictability that undermine the rules-based order upon which US dollar dominance depends.

“when someone comes in and and and picks up a different playbook, everyone has to to really adjust particularly when that person is, you know, the the president of the United States and that's still the most important economy in the world by a country mile.”

Tariffs are not the fundamental driver of market stress but rather noise revealing deeper structural issues: large accumulated debts and deficits in the US and other Western economies that have been building for years and are now coming due regardless of policy approach.

“tariffs are noise. I think they're indicative of uh circumstances which have changed very much... They are noise. I think they're indicative of uh circumstances which have changed very much.”

Commodity Trading Advisors (CTAs) accumulated significant COMEX gold positions starting March 1 (Reed's birthday) 2024 when gold broke through technical resistance, driving prices from $2,000/oz to $2,400/oz, and held substantial positions through the election before taking partial profits.

“if you look at Comx speculators on about the 1st of March last year, and I remember it well because it's my birthday and I'd taken the day off. That was the day that gold broke out. It crossed a few technical levels. We saw the commodity trading advisers or the CTAs on COMX all start buying gold and that was what took gold through through uh um uh up through $2,000 an ounce and then took us up to about $2,400 an ounce. They bought loads of gold and remained long gold basically all year and maybe took some profits ahead of the election.”

Gold has achieved 22 all-time highs in 2025 so far, continuing to climb even as equity markets rally and then reverse, indicating that speculative longs have been flushed out and genuine underlying demand is driving prices higher.

“gold has gone on to hit its 22nd all-time high of the year so far”

Since the last Commitment of Traders report (as of Tuesday), approximately 5 million ounces (roughly 160 tons) of COMEX futures positions have been liquidated as gold prices fell, likely representing the flush-out of leveraged speculative positions that had accumulated during the gold rally.

“since the last commitment of traders report so that's as of last Tuesday we've seen about 5 million ounces of of positions liquidated. So aggregate open interest has fallen as the gold price fell. That probably means that was the flush out of the leverage positions”

Approximately 5 million ounces (160 tons) of aggregate open interest in COMEX gold contracts have been liquidated since the last Commitment of Traders report, indicating that speculative leverage positions have been flushed out of the market.

“since the last commitment of traders report so that's as of last Tuesday we've seen about 5 million ounces of of positions liquidated. So aggregate open interest has fallen as the gold price fell. That probably means that was the flush out of the leverage positions”

Gold traders moved large quantities of gold from London into US COMEX depositories in anticipation of potential tariffs on gold flows, not due to fundamental changes in gold supply or demand, but as an insurance policy against trade barriers.

“there has been an enormous amount of gold that's travelled from Europe, basically comes from London, goes to Switzerland to get re-refined and recast and has ended up in depositories associated with the Comx futures market in the States. This is not investment demand in the United States. It's not consumer demand. It's not feed stock for a jewelry industry. What this is, this is the gold trading industry prepositioning its inventory, which it usually holds in London. It's been moving it to the United States in case there are tariffs on those flows.”

The temporary shortage of immediately available gold in London was caused not by lack of physical gold but by bureaucratic bottlenecks at the Bank of England processing withdrawal requests when multiple banks queued simultaneously, a queuing problem rather than a supply problem.

“It caused a temporary shortage of immediately available gold in London as well. Not because there's a lack of gold in London. It's just that most of it's in the Bank of England. And the Bank of England like any other government organization or bureaucratic organization doesn't have the ability to be able to scale up its activities four or fivefold”

The US Treasury market is not behaving as a safe-haven asset should during a risk-off environment—yields are spiking (to 4.4% on the 10-year) instead of falling as would normally occur during a crisis, indicating a fundamental loss of confidence in the US financial system.

“the US 10-year yield chart looks exactly like the gold chart and I wouldn't have expected that cuz I would have expected maybe yields to drop and then spike uh or but do the opposite like yields are spiking right now 4.4% on the 10-year roughly moving in the opposite direction”

Ray Dalio warned that investors are excessively focused on tariff details while missing the larger breakdown in monetary, political, and geopolitical orders that will dominate financial markets.

“Ray Dalio said something like warns that investors are too focused on tariffs and not paying enough attention to the breakdown in major monetary, political, and geopolitical orders.”

Central banks buying gold dips has been a consistent feature since the global financial crisis and has accelerated since 2022, creating a multi-decade trend of diversification away from dollars toward physical gold.

“emerging market central bank buying that that is that has been a feature since the global financial crisis. and that emerging market central bank buying continues at the high rate that we've seen the doubled rate that we've seen since 2022.”

Gold has recently appreciated in every major currency over the last few years, not just against the dollar, indicating a genuine supply-demand imbalance rather than mere dollar weakness.

“we've seen gold go up in every currency over the last few years um things have changed in the last few months”

Western ETF inflows reached 226 tons in Q1 2025, compared to 170 tons of outflows in Q1 2024, representing a swing of 400 tons of investor action (on a total market of ~5,000 tons annually or 1,250 tons quarterly), which explains much of the positive price performance this quarter.

“We've seen 226 tons of inflows into ETFs and that follows four consecutive years of outflows. If I look at the first quarter of last year, we saw outflows there of of about 170 tons, I think. So the gold market's about 5,000 tons a year, 1,250 tons a quarter. We've seen a swing of 400 tons”

Gold is now performing its intended function as a safe-haven asset while the traditional safe-haven assets (US 10-year Treasuries and the US dollar) are not behaving as they should, which signals that global investors have reduced faith in the US financial system.

“Traditionally, you're absolutely right Kai. you would expect in a riskoff moment that the dollar would strengthen and that that bond yules would fall. US bond yules would fall. And personally, and and and look, you're right. I'm spending a lot of time looking at fixed income markets and and there's lots of intricacies going on there about basis trades and all manner of stuff. But to me, let's just cut to the chase. The safe haven asset of the world of the world's financial system, the 10-year Treasury or or the Treasury market more general, isn't behaving like it should. That tells me that people have reduced faith in the US. Gold is now behaving as you would hope it to be.”

Investors are overconcentrated on tariff-related news and underweighting the larger theme of breakdown in the major monetary, political, and geopolitical orders, as warned by Ray Dalio.

“Ray Dalio said something like warns that investors are too focused on tariffs and not paying enough attention to the breakdown in major monetary, political, and geopolitical orders.”

Gold-backed bonds, when genuinely backed by physical gold, are not necessarily as bullish for gold demand as some advocates claim.

“goldbacked bonds uh when they're issued and genuinely backed by by gold um actually are not necessarily the panacea for the gold market that some people think they are.”

The mechanism that will re-activate Western retail gold demand is fear-driven capital rotation out of equities, which requires equity investors to abandon the 'buy the dip' habit and shift toward defensive assets.

“When they stop trying to buy the dip in equities, maybe they'll start to think about buying some gold. Yeah. Sector rotation of funds, 401k money needs to get scared.”

US politicians and Trump administration advisors talking about selling US gold reserves to fund a Bitcoin reserve would reverse the central bank gold-buying narrative that has driven gold prices higher and would be bearish for gold if such an announcement occurred.

“I do care about though is if the US does anything to sell any of its gold. And there are a number of advisors or people wellconnected with the US administration that are suggesting that the US should sell some of its gold in order to fund a strategic Bitcoin reserve. Now, one of the biggest stories that has been helping gold in the last few years has been this big uptake in uh in central bank purchases. If the US as the holder of the largest stock of gold in the world were to announce a gold sale, that changes that narrative. That's the bare case to me.”

Emerging market central banks are expected to increase gold purchases at even higher rates than the current doubled-rate seen since 2022 because growing geopolitical concerns (particularly around US dollar reliability) will motivate further diversification away from dollar holdings.

“I mean, it's emerging markets, central bank buying that that is that has been a feature since the global financial crisis. and that emerging market central bank buying continues at the high rate that we've seen the doubled rate that we've seen since 2022. Uh I expect that only to increase from here because if you were worried about your or if you were concerned about holding US dollars previously, you now might be worried and therefore that I think will encourage more central banks in the emerging market space to diversify into gold.”

India could potentially emerge as a more important geopolitical power than China over the next 20-30 years due to superior demographics, assuming it can productively employ its demographic dividend.

“this may be India's century rather than China's for demographic reasons certainly China's in the lead at the moment but I wouldn't underestimate India's potential to become a genuine geopolitical or or or hegemonic threat to the United States over the next 20 or 30 is”

Tariffs are noise rather than signal for understanding long-term gold demand because they are indicative of a deeper shift in which the US political establishment is deviating from the post-WWII rules-based order that traditionally governed trade.

“They are noise. I think they're indicative of uh circumstances which have changed very much. You know, politicians, global institutions have a rule book why which they play by. And uh when someone comes in and and and picks up a different playbook, everyone has to to really adjust”

Revaluing Fort Knox gold from its official book value of $422 per ounce to current market prices would be merely an accounting transaction and would not be bearish for gold unless it were coupled with an actual sale.

“I don't care about the US revaluing its gold because it values it at $422 an ounce. And if it revalues it to, you know, 1300 or whatever, who cares? That's an accounting transaction. Sorry, not 1300, 3,100. Yeah. Shows how long I've been in this market. Uh, but I don't care because it's an accounting transaction. And and you don't have to revalue gold in order to sell it. And just because you do revalue it doesn't mean you're going to sell it.”

The Commitment of Traders (COT) report released on Fridays shows positions as of the previous Tuesday, creating a lag that makes real-time positioning unclear but can be cross-checked against COMEX open interest trends.

“we look at the commitment of traders report. It tells us what those positions are but they're always a bit out of date because you know they released them on Friday as of positions last Tuesday”

The US government holds 8,133 tons of gold (compared to Germany's 3,259 tons), more than two years of global annual gold production, making the US the world's largest central bank holder of gold.

“They're the biggest holder of central bank gold, 8,133 tons, they say. Um, compared to the next biggest holder, which is Germany, which is 3,259 tons, I think. So, this is huge. Annual production, 3,600 tons. So, more than two years of production held by the United States.”

The critical bear case for gold is a US government announcement to sell a portion of its Fort Knox holdings to fund a strategic Bitcoin reserve, which would reverse the narrative of central bank gold buying that has supported gold prices for years and would be bearish for gold sentiment immediately.

“What I do care about though is if the US does anything to sell any of its gold. And there are a number of advisors or people wellconnected with the US administration that are suggesting that the US should sell some of its gold in order to fund a strategic Bitcoin reserve. Now, one of the biggest stories that has been helping gold in the last few years has been this big uptake in uh in central bank purchases. If the US as the holder of the largest stock of gold in the world were to announce a gold sale, that changes that narrative. That's the bare case to me. I think it's a small possibility, but that's what you should keep your eye on because that would change the sentiment towards gold in a heartbeat.”

The gold borrowing cost spike that accompanied London's shortage was temporary and has normalized, with the gold market now likely oversupplied in the U.S. depositories, such that New York stocks of gold will probably begin to decline.

“caused gold interest rates, the cost of borrowing gold um to spike, but that's all returned to normal now. There's probably enough gold in the in the states. In fact, I think there's too much gold in the States, and you probably will start to see those New York stocks of gold start to decline now.”

An audit of US Fort Knox gold reserves should be conducted by independent auditors (like those who audit World Gold Council ETFs quarterly) to definitively prove the physical gold exists, and such an audit would either resolve longstanding conspiracy theories about missing gold or reveal a genuine issue—either way benefiting transparency and confidence in the gold market.

“And I wish they would because the fringes of the internet have been talking about, oh, there's no gold in Fort Knox for years. So, go in there, count it. We we run two ETFs, the GLD and the GLDM um ETFs in the United States. We count every bar, well rather independent auditors count every bar every year. And I know how much of a job that is. We do a sample count every quarter. So counting 8,133 tons is a big job, but do it. Prove to the world that the gold is there.”

Gold audits of Fort Knox (though they would be administratively challenging due to scale) should be conducted to settle conspiracy theories definitively, similar to how independent auditors currently audit GLD and GLDM ETF holdings quarterly.

“I wish they would because the fringes of the internet have been talking about, oh, there's no gold in Fort Knox for years. So, go in there, count it. We we run two ETFs, the GLD and the GLDM um ETFs in the United States. We count every bar, well rather independent auditors count every bar every year. And I know how much of a job that is. We do a sample count every quarter. So counting 8,133 tons is a big job, but do it. Prove to the world that the gold is there.”

If the US were to secretly sell Fort Knox gold, the market would inevitably know because the gold would have to be refined and find its way into the market, leaving a discoverable trail through gossip and transaction activity in the gold trading community.

“I know the gold market very well from the inside. If people or sorry if that gold had been sold, somebody would have gossiped about it because they always do. And it would be such amount of gold that had been sold over the years and would have had to have been refined and would have had to find its way into markets. We'd know about that.”

Western central banks appear to report their gold holdings accurately and truthfully based on historical experience with central bank behavior, making the conspiracy theories about missing Fort Knox gold unreliable.

“I tend to believe Western governments when they say what they they they say because, you know, my experience, I've I've when I was at UBS, I've I've dealt with a lot of central banks when they were selling their gold and a few central banks when they were buying their gold. They pretty much reported what they had and and what they did at the right time. maybe a few timing issues in terms of disclosure. Western central banks do seem to do what uh you know do seem to tell the truth. Why should the US be lying?”

The 'buy the dip' behavior that has enriched equity investors over the past several years (especially through mega-cap tech stocks) has become an ingrained market habit that persists even when fundamental conditions deteriorate, and may not translate effectively to gold if equity investors haven't yet been scared into seeking diversification.

“BTFD as it's known has become a very ingrained habit of investors who who try and you know who who have succeeded and made great money from uh from buying dips in equity markets over the last few years. We'll see whether they continue to try and do that.”

Allison Mloud has argued that gold's rise reflects dollar weakness rather than gold strength, a narrative that has been commonly circulated but which Reed rejects based on evidence that gold appreciates in all major currencies, not just versus the dollar.

“your fellow countryman Allison Mloud's been telling us it's what do you call I'm missing a word here but constantly telling us it's not the value of dollar of the gold going up but the value of the dollar going down right”

Judy Shelton has been advocating for gold-backed bonds as a structural reform to monetary policy, representing one perspective on how gold could be reintegrated into the financial system.

“it's interesting to learn more uh about goldback bonds because it's something Judy Shelton has been, you know, advocating for and I think we're interviewing her on on our channel, I think next week or the 19th, I believe.”

High interest rates in Europe over the past few years provided an attractive alternative return to gold, causing some European investors to rotate out of gold and into government bonds as yields became positive in real terms.

“the fact that high interest rates um high by standards of the last 10 years prevail throughout Europe has meant that investors have had an alternative for the first time. I came across many ETF investors uh over the last few years who had turned to gold because they didn't want to pay negative interest rates when they were buying government bonds. Um so, you know, I'm not surprised we've seen profit taking from some of those. They bought gold. It's done very well. And hey, now they can invest in in in government bonds uh at positive nominal and even real yields”

The pattern of gold price corrections since March 2024 has been short and shallow because "somebody really is buying the dip," primarily central banks and the jewelry sector, demonstrating structural bid under the market.

“Since March last year, the sell-offs have been short and shallow because somebody really is buying the dip. I think that buying of the dip has been central banks and uh uh and to a certain extent the jewelry sector but it's been very interesting to see just how resilient gold has been since March last year”

Many informed gold market participants have long been calling for equity market corrections and US recessions, and these warnings have been dismissed for years, making current market turmoil a validation of long-standing warnings.

“I've given up calling for a correction in uh equity markets in the states. I've given up calling for the recession in the United States because we've been looking for this for perhaps quite a long time and it hasn't really come through. Um the fact though that that that the chickens are coming home to roost uh in in global financial markets shouldn't be really a surprise to anybody.”

The large move in gold has been "absolutely insane" and driven host Kai Hoffman to worry about the level of hype now in the gold market alongside media commentary from Joe Rogan, Elon Musk, Donald Trump, and Scott Bessent.

“the move in gold has been absolutely, for a lack of better term, insane. I'm I'm happy. I'm a gold bull. I'm I'm really bullish on gold here in general. I get the the bull case, but maybe we could poke some holes into and see if there are some downsides... Joe Rogan, Elon Musk, Donald Trump, Scott Besset, everybody talking about gold and the the gold in Fort Knox and there's so many things that are hitting the gold market at the same time that I was worried about too much hype”