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00:00Do you agree with that relationship in the way that, as Tatiana noted, gold's relationship with
00:05stocks has been consistently positive, but there's evidence now that precious metals at the mercy of
00:10risk assets and speculation that those returns could have altered that role of it being a risk
00:15asset? So in the long run, gold has a zero correlation to equities since the 1970s, but
00:22it's not stable. It morphs in and out, just about to cause a maximum frustration on investors.
00:26And the reason why gold has had some headwinds, just like equities, is because in the current
00:32environments, nominal yields and bonds have been rising higher, but inflation expectations have
00:37not budged, which means real yields have been moving higher. And ultimately, this brick, this
00:42barbaric relic, is competing with cash. If you get compensated for holding cash, well, then why hold
00:48gold? And the question is really, what's going to persist? One of the unique things about a supply
00:55shock is that the economically sound reaction is usually political suicide, and politicians do
01:01the opposite of what's the sound thing. Think price controls in the 70s or help to the consumer during
01:08the pandemic. So let this go on long enough, and the government, I'm not trying to be critical of this
01:13administration. It happens throughout the world. The Italians just cut the fuel taxes. So the
01:19government reaction, that's what gold then reacts to. Or let next week's non-farm payroll report come
01:24down, and the folks at the Fed say, oh, we've got to cut rates. Don't worry about this inflation.
01:28Miran at the Fed says, oh, we only worry about it if there are second-round effects. So it's that
01:32second round that tends to be better and supportive of price of gold.
01:35I get that. But how much is also, Axel? I mean, gold was up, what, 56% last year, quite
01:42a run. Go back
01:43the year before, it was up 23%. I mean, so how much is also, though, it just had such a
01:50strong,
01:51strong run, and some of that had to be undone?
01:53Well, the one thing, there are a whole bunch of different investors in gold. One of the groups
01:58that was absent for several years-
01:59Retail?
02:00No, speculators. They were busy with meme stocks, all the wonderful SPACs, and then crypto.
02:06And then a year ago, they decided, hey, gold isn't such a bad place. And so what they do is
02:10they mostly increase volatility. And so that's obviously a component that contributes to it.
02:15But retail has not had a frenzy. If you look at the total ounces held by the physical gold ETFs,
02:22they're not back to the 2022 highs. Of course, normally, we reach new highs, but we haven't had
02:28the panic into gold. It's not the typical speculative bubble, so to speak. But what is
02:33unique about gold compared to other asset classes, it's a much smaller asset class. And so one of the
02:39investors is the quote-unquote gold bug that's worried about fiscal sustainability, while that
02:43fringe view is moving a little bit closer to the mainstream. And it doesn't need many of those
02:50investors to reallocate to gold for it to have a dramatic run. Now, as we're at these levels,
02:54volatility is, of course, very high as well.
02:56So then are you saying there is an opportunity for retail to drive it higher?
02:59Well, of course. The question is the timing, right? I mean, I tell people I'll sell my gold
03:03when fiscal sanity comes back to Congress, which I get a chuckle and says never, right? And so,
03:10but what gold is going to be tomorrow, I don't know. But over the next several years,
03:15neither the left nor the right has any intention of doing proper entitlement reform,
03:19and neither is their drive to properly drive revenue. And so we are living in eternal deficits.
03:26So you're saying either cut spending or raise taxes, and neither party wants to do that?
03:31That's right.
03:32Or neither party will agree.
03:33Milton Friedman says the only thing you can do is cut spending, because the moment
03:37you actually raise revenue, government will find a new way to have yet more spending. And
03:41historically, he's right in that. And so going back here to the Iran war,
03:46the market is pricing this in as a short-term shock, some differentiation in Europe and here.
03:51But even a bad case scenario, let's say the Iranians can charge a gazillion for every ship
03:57that goes through, that would mean oil will flow again, and we'll live happily ever after.
04:02The world is a more expensive place to do business in, and that's historically good for gold.
04:08Go there, go there. Because I think one of the things that we keep trying to get to is,
04:12what is the longer-term impact of this war, this environment, where it feels like, you know,
04:18you talk about spending, I think about defense spending. We're going to talk about that a lot
04:22in our four o'clock hour. I mean, we're talking about a trillion dollar, you know, budget spending
04:27that we're looking for in the United States, other countries, European, everybody seems to be
04:31like focusing on things like defense and spending. And I just think then the fiscal houses of governments
04:37get even worse. What are the implications of that?
04:39Well, we live in a different era, the peaceful era since World War II is over. We saw that Ukraine,
04:46Gaza, those were symptoms of a new time. Iran is a symptom of this time. Governments are more
04:51nationalist. We have protected industries. All of that makes the economy less efficient.
04:57There might be the right political reasons to do these things, which means we'll be spending more.
05:01You didn't mention climate change, right? All that is making it expensive. Population is aging.
05:06Well, we live in democracies. How do you solve these things? You solve them with debt printing
05:11money. And right now, the Fed is quite disciplined. But the interests of government and those are
05:17savers are not aligned. And the gold investors is investing based on that.
05:21There are some out there who could be watching right now and say, you know, the administration
05:25would probably say this, but the military action that the U.S. has participated in this year,
05:33they would say would make the world a safer place. The president has said that many times. And we
05:38actually had Wilbur Ross, the former commerce secretary, on earlier this week. And he made the
05:41argument that essentially the rest of the world has been put on notice that President Trump will
05:45use the American military to go after you. Does that make the world more stable?
05:50Well, I'm not doubting that that is the right thing to do. Indeed, the Europeans need to get
05:55their act together and do substantially more. All I'm saying is less efficient, right? The same with
06:00trade. Having free trade makes a more efficient world. It might not be in a national security
06:06interest, right? And that's why we put certain blocks in place. And talking about tariffs, it doesn't
06:10just impede the flow of goods, it impedes the flow of currency, increasing borrowing costs. So these
06:16are things that are happening. I'm not judging. I'm describing. And the gold investor is saying,
06:21well, this is a good thing for gold. Now, that doesn't mean gold can't get overheated in the short
06:25term, or it can't have a very strong correction. But that is one of the reasons why people are
06:30investing in gold and continue to invest in gold. So we're $4,412, $4,412 an ounce. Do you have
06:37a
06:37number that you think about? How far? No, you guys always want a number. One of the reasons I don't
06:42give a number. Have you met the Bloomberg? Yes. So one of the reasons I don't give a number is
06:47because the market is fairly small, you can get through this number in no time, right? And so
06:53some people have put out a number of 10,000. So I'm comfortable with that, right? But I'm not going
06:57to put a price target out there because I don't know the horizon, right? Give the horizon long enough,
07:01then sure. But it's one of those things that you've got to look at the dynamics of the underlying
07:07dynamics. And currently, obviously, there's a headwind to price. Well, we just talked about some of the
07:10underlying dynamics that we think is going to be, you know, it's a different world order going
07:15forward. Is it fair to say that that certainly is supportive of maybe we're at a floor and that
07:23it is supportive for gold to definitely move higher and consistently higher? Well, we have a new world
07:28order every day with a new tweet coming out, with a new statement coming out. What we do know is
07:34that
07:34the market is pricing this in as a shock and not as something structural. So you can agree or disagree
07:39with that. But that's what a little difference, a little more long term implication in Europe than
07:43here based on WTI and Brent. If you look at those sort of things, there will be a way to
07:47muddle
07:47through. If this lasts long enough, there will be substitutions, fracking will increase. It will
07:52we're not going to substitute oil if if this thing lasts only a few weeks. But if the market believes
07:58it's going to last longer, we will rewire the economy and deal with it in one way or the other.
08:03So shock, we move on. That's the oversimplified way of looking at it. But that shock can be very
08:08painful, of course. Yeah. So I'm curious about your view on gold in a portfolio. And everybody's
08:13portfolio is different, obviously. But there are those people are outspoken. Jared Dillion,
08:17for example, he says 20% of your portfolio should be in gold and you should, you know, adjust it
08:22each
08:22year accordingly. There are others who say, OK, throw maybe 5% in your portfolio. Again, different for
08:28everybody. But what's your general rule? Well, you can look at my public disclosures and I have
08:33substantially more in gold mining in particular, substantial gold holdings. But I'm not recommending
08:38everybody else does that. It's investing is about the risk you can afford to take. I happen to think
08:45I understand gold. I understand gold miners. Most people don't understand gold. So if you don't
08:49understand it, don't pile into it too much. The thing about the gold is it has a volatility about that
08:56of the S&P, but that can spike. Now, you've got to be aware of those spikes. Now, anybody who's
09:02looked in recent weeks is aware of that. But there are these extended periods where it doesn't.
09:06And if you're not aware of those spikes, then you can be caught off guard. And so I encourage anybody
09:11to study these things. What is a bad case scenario? Because bad things do happen if you're a longer
09:16term investor. And you've got to be comfortable with that. So if you're comfortable with that,
09:20I happen to think, yes, a substantial location of gold is an important diversifier. And in a world where
09:25bonds might not serve that purpose as much anymore. Obviously, gold is not a direct substitute. But
09:30you have the S&P, very tech heavy. If there's a pullback, where do you hide? And gold is but
09:37one of
09:37the answers to that. Well, it's an interesting environment where we've spent so many years just
09:41talking about, you know, the Max 7, the big tech names, AI, and so on and so forth. We still
09:45talk
09:45about it. But it is interesting to see that in terms of investment space, it feels like, you know,
09:51commodities, basic materials or something that we've moved into, you are obviously in the precious
09:55metal space. When it comes to things like miners, how what's your advice to investors in terms of
10:01how they look at them? And just got about a minute or so. Let me expand on your question. In
10:042011,
10:05Mark Andreessen said software is eating the world. Now software is suffering from AI. Back in 2011,
10:11software was low barriers to entry, high margins. AI is high barriers to entry, who knows what the
10:17margins are. If you look at commodities, mining in particular, well, there are high barriers to
10:22entry, it's expensive. But the margins are amazing, even with the pullback we've had. The miners are
10:29pricing in that the price of gold would be about 35% lower. And so suddenly, we have a somewhat
10:34level playing field between tech and mining. And that's one of the reasons why I think more
10:38investors will pay attention to it.
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