00:00What is a projection worth these days in terms of the gold? And what is your projection?
00:04It's easy to answer it by saying I think there are still six or seven good reasons why gold will
00:09continue to go higher. And one possible outcome, albeit low probability, where gold could either
00:15top or go lower. The reasons why it will continue to go higher, you will always hear about the
00:20geopolitical situation. Yeah, that's sort of a bit boring in many respects because the market
00:26discounts things extremely quickly. So these tariffs, things, these wars, even wars come and
00:32go, not to diminish them in any way. They're relatively minor drivers. The main driver has
00:37been over the last three years central bank buying. But remember, they're buying it not just for
00:42geopolitical reasons, but for own wealth management. Their own portfolio adjustments need to be made.
00:49These central banks think of their portfolios in the same way. They have vulnerable currencies,
00:55they see inflation, they need to offset it. They're comparing themselves to their Western
00:59counterparts. So I think that will continue. Then you've got the classic macroeconomic story,
01:04which I know many traders around the world stare at based on the dollar and based on the interest
01:10rate scenario. But there are a number of things that are not being considered. One is deregulation
01:16in China. For instance, their insurance market at the beginning of this year allowed their insurance
01:22companies to invest in gold for the very first time. That's a $5 trillion market. They allowed 10
01:28insurance companies to invest 1% to begin with, which is a huge amount of money. Secondly, you've
01:34got in Japan, you've got a whole generation passing a huge amount of money from old to young.
01:40Then they're experiencing inflation for the very first time, geopolitical problems,
01:44a nationalistic prime minister who actually wants to spend and spend and spend. And that will get me
01:51to my third point in a minute. So a lot of people willing to accept gold and gold ETFs in Japan.
01:56And then India, a whole new generation who perhaps won't want to hold gold as jewelry in the future.
02:03I'm not saying jewelry will come down, but alternative forms of financial instruments.
02:07They're far more educated. They've got electronic access. And so a lot of people in India who would be
02:14buying gold as well in new forms. But the most important thing, the most important thing that's been
02:19driving gold has been the fear of runaway debt. And I still think that is the case. Last April, we reached
02:28a situation when the tariffs were introduced and the whole yield curve shifted in one go. And Mr.
02:34of Besant stepped in to intervene. It almost seems too good to be true, though. I mean,
02:39I'm just trying to be the devil's advocate here. Is there any at one point, you know,
02:44we're already at 5,000. Is there a level that you see that it's going to start pricing out buyers and
02:49investors? I think you're already seeing some jewelry people being priced out by definition. But as
02:54investors, people tend to chase rallies. So the central banks will not chase it. They will probably sit
03:00underneath waiting for retracements. But they're going to be there, as I've described.
03:03But the one thing I think that could tip the balance against gold going forward is if Mr. Trump,
03:10who apparently is the luckiest human being ever to walk this earth, in my opinion,
03:14actually manages to pull off a couple of things. He's obviously pushing for very high levels of
03:19growth by forcing interest rates down. You know the Fed situation very well. And you also,
03:24I perceive them to be willing to accept relatively high levels of inflation. If they manage to produce
03:32those two things, pay down the current account and project long-term debt as having peaked,
03:37that is where I think many of the people who have been claiming debasement of currencies will have the
03:44story slightly robbed, because it's an unexpected outcome. And that's what I think they're trying to do in the
03:50United States. And that could mark the top of the goldmine. But probability adjusted, low probability.
03:56What about, you mentioned one of the main drivers, if not the main driver, has been central bank buying.
04:02And I wonder what degree of confidence we can attach to continue buying at the current pace,
04:07for example. Is there any leading indicator, apart from the fact that they report what they buy?
04:13No, there isn't a leading indicator. But we know for the last three years, there was 1,000 tons. And this
04:19year is just under 1,000 tons. With Poland this year being the predominant bank, many of the banks do not
04:25report their numbers. And so we have to glean it from our relationships and stuff. But I don't see
04:30any reason. What they are not prone to do is pay market prices. What they are prone to do is sit on
04:36the bid, to coin a phrase, and let it come to them. But they are all still buying. There was only one or
04:43two central banks, frankly, I can't remember which ones, who sold a little bit last year. But do remember
04:48that they manage their reserves the same way you manage your own portfolios. And they are trying to learn
04:55from the Western central banks, I believe, because they have historically had currencies that fluctuate
05:01wildly, have spikes in inflation, are not as secure. They're emerging economies. And they believe that
05:08they need to hold greater reserves. So everything points to them mimicking, to some degree, the Western
05:12central banks. And you're seeing why Hong Kong perhaps wants to develop this sort of global trading
05:18hub here. London, though, is, I mean, it's been the traditional hub, and it's very entrenched.
05:25What do you see needs to happen for Hong Kong to really kind of compete in terms of liquidity and
05:28the like, to be a global gold trading hub?
05:32Transparency, more than anything. I think that's the important thing. And you have it in droves.
05:36I have no doubt that Hong Kong will establish itself in the region as the predominant gold center.
05:42Many things have to happen. You've got the refining capacity. You've got the willingness to set up the
05:48exchange. You've got a degree, a number of central banks who will no doubt want to custody their gold in
05:54the region. You have everything going for you. The one thing, and I would be at pains to mention this in my
05:59piece this afternoon, is it must become with responsible sourcing. It must come with an acknowledgement that the
06:06gold must be secured from regions and from mining communities that are up to muster, that pass
06:15this test. Because bad stuff in is bad stuff out. And that is not a smart situation to be. There's no
06:24suggestion that they will not do that, because I know that LBMA refineers are very much engaged in the
06:30equation. But I would warn the authorities that that is probably one of the most important things to gain
06:34international acceptance. Digital gold? Tokenized gold? How should I look at that and how it's going to
06:42shape this business? It's an interesting question. We have been running studies recently as to why
06:47the big gold stable coins in the world, for instance, Paxos and Tether, why they have been
06:53relatively, in fact, very unsuccessful. They won't mind me saying that. Roughly $2 billion under assets
06:59each over a period where gold has gone up five times. So there's fundamental flaws in the concept.
07:05And we're not really sure why. It could be the cost of them, lack of trust, lack of regulation,
07:10we're waiting to see. Will the Hong Kong authorities launch gold stable coins? I'm sure they will try.
07:17The question is, is there a market for them? Do they do anything but provide a more expensive
07:23alternative to gold ETFs, which are, you know, predominant at the moment? Remains to be seen.
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