What Breaks The Gold Bull Market? WGC Reveals The ‘Warning Sign’ Hidden In The Data
Summary
Gold Structural Shift: Conversation centers on a structural reweighting toward gold driven by physical demand in Asia, sustained central bank accumulation, and evolving price discovery dynamics.
Regional Flows: Asia shows strong bar/coin and ETF demand while Europe leads recent ETF inflows; North America remains net negative as investors prioritize higher short-term rates.
Central Banks: Ongoing official sector net buying (with China in focus) is highlighted despite data lags; swaps and selective selling for liquidity underscore gold’s role as reserve collateral.
Market Plumbing: London’s role as global clearing hub remains pivotal amid notable trade flows, while elevated Asian premiums and India import bottlenecks signal tight physical markets.
Macro Drivers: Western investor behavior is rate-sensitive and tactical; geopolitical tensions and energy security concerns support gold’s safe-haven bid, with volatility moderating from peak levels.
Europe ETFs: European investors appear to be re-embracing gold for diversification and safety as the valuation trade in equities matures, pushing euro-gold toward record levels.
Silver Perspective: Despite a flagged multi-year deficit and recent price strength, the guest sees silver diverging from gold with focus shifting to supply-demand fundamentals rather than high-beta speculation.
No Specific Tickers: The discussion emphasizes the gold asset class, central banks, and ETFs broadly without pitching individual public companies.
Transcript
Welcome back. I'm Jeremy Saffron. Gold up today, silver also moving higher. And the real story is not just the price. The real story is who controls the metal. Now, for decades, price discovery has been dominated by London and New York. But today, physical demand in Asia, central bank buying, uh, ETF flows, sovereign wealth funds, and and gold swaps are all forcing investors to ask a bigger question. Is the marginal ounce moving east? Now, the World Gold Council's latest data show a market that is not behaving like a normal commodity cycle. Global gold ETFs took in $6.6 billion in April. You can take a look there. Uh but North America remains negative year-to date while Asia is up nearly $15.9 billion. Now, taking a look at India's investment demand that also rose 54% in the first quarter with bar and coin demand nearly matching jewelry demand. So today we got to talk through this in five acts. Price discovery uh incomplete official data from central banks maybe China central bank buying and selling as well as ETF flows and and we got to ask as well what could possibly break this bull market. Now joining me now is Joe Cavaton from the World Gold Council. Always a pleasure to see you. Great to have you back on Joe. >> Great to be here. Thanks for uh having me come on board to talk this whole thing through. A very exciting time as usual for gold. >> It's it's been just a wild year. I thought last year it was a wild year but you know just looking at here at May it's been crazy this past 5 months and I you know to that point let's let's start with that kind of shift in control. We're seeing reports of elevated physical premium in parts of Asia including India where uh just today business standard reported banks have been unable to import gold and silver for 5 weeks because of custom bottlenecks. Um, when you see physical premium consistently gapping away from the spot price, is the physical market starting to I guess have more influence over price discovery than investors are used to? Well, I think the right way to think about it and I think your question is right on in terms of giving everybody a a position to start from >> and that is that you just can't take one factor or one region and determine the price of gold or the outlook for gold based on one factor. >> Gold is global. You and I have talked about that at Nauseium. And actually, it's physical at its heart as well. As much as we talk about financial instruments like ETFs and futures, that physical movement, it matters. And it matters in big markets where demand is significant and high. And it matters in terms of the global dynamic. So we're all talking about the implications of, for example, the conflict in the Middle East between the US and Iran. But you're also now starting to see that those logistical challenges that we experienced during COVID, the beginning of the outside of the conflict having more of another impact on the price of gold. So curtailing the ability to import, having bit of a slowdown in terms of that overall dynamic married with the physical demand for gold, those are going to continue to be factors are going to p price higher away from interest rates. >> Right. Right. Uh I guess we could talk about that too. I mean, you know, we're going to have tomorrow's non-farm payroll numbers out and of course that that matters because if the labor market stays firm, the Fed and other Western central banks have less room to cut. In that environment, I mean, cash and short duration instruments still look attractive. talk to me a little bit here about why western institutional investors add gold here if if they can still you know earn a real time sitting on cash. So I think there are two dynamics at play right now and I think that we still see a significant amount of interest on the part of strategic allocations to gold right I think that fundamental story around where the dollar goes where fiat currency goes the debt levels and the at the sovereign level where they those will overall develop over the years to come but I think the western investor has done a lot to tell us exactly how they're looking at gold in the short term responding to geopolitical events and responding to the conditions of interest rates and looking at that opportunity cost away from gold. >> So you start to see the line for gold looking a little bit more of a flat line in terms of the price performance. Western investors pulled money out and see a rate hold environment at play. The Fed has said it uh across Europe, UK, other Western and also the global G7 central banks have all held or are looking to hold at this point. Maybe even raise rates. That makes bonds much more interesting, cash deposits much more interesting. So maybe that shortterm interest in the gold market fades a bit while people look to the use the most out of that rate environment on the short term. But I don't think it kills our story on the long term at in any way at all. I think much more along the lines of seeing the world continue to see where fiat currency goes in those debt levels that I just mentioned. >> Yeah. Yeah. Speaking of uh you know global I guess and and talking about the world I mean even on the subject of of market plumbing it was interesting. I found it uh where stats Canada came out recently reported a 24% spike in metal exports uh much of it on rot gold moving directly to the UK. If if if more producer country you know gold is kind of moving into London at the same time regional premiums are elevated. What does that tell us about London's role as as the central clearing hub for global gold right now? I think London's central role in and the wholesale market is is very much a significant place for it to continue to be. Um the the price discovery for for many of the western markets, you know, even the global ETFs price off of the London fix. And I think that gold going in and out of London is actually a really interesting dynamic for us to watch. But having that money go have that gold flow going into London tells us that there's still significant wholesale interest whether it's from central banks, trading firms or products that are offering access. And I think that that is a signal that says, hey, look, gold's got a lot of interest. It's got a lot of global interest and it's got a lot of wholesale interest that is going to continue to develop. You know, we could look at I think actually new numbers came out today about uh that I don't want to call it a transparency gap, but the People's Bank of China, they've been adding gold here consecutively for a very long time now. But the world world gold council report clearly notes this only includes publicly reported changes. I mean, you and I have talked about this before, but you know, given that the the council's own trend statistics include estimates for unreported buying, I mean, how should investors think about the gap between China's public reported purchases and and that broader official sector buying that that you know the gold council estimates in in this trends report? So it's a great question and I think that people need to understand that the amount of work we do to validate the data with uh firms like metals focus in terms of our data sourcing uh is pretty comprehensive and we actually qualify a lot of that information in the reporting that we produce on a quarterly basis and on a monthly basis. Mhm. >> But what's important to understand is that trade flows, import export flows, destination of the flows all factor into the quantitative and qualitative data that we have that constitutes what we report. And for first quarter, I think we show 244 tons coming into the central banks. And it's very easy for the media to pick up on the selling activity and maybe some announcements that are made around continuing to grow the different activities in terms of reserve holdings and so forth. But what we do is we try to give the most complete picture and deal with what we know that has been reported through official channels like what the IMF report or V central banks report through the IMF but also that anecdotal color that comes along with the research and the data gathering that we do on the ground. So that number is actually reliable. It's basically taking uh our efforts and our resources to kind of allocate some of this OTC market, this unknown number, and putting it towards where we think it's most likely going. And this is something that's happened in the past in terms of reporting at central banks. They might be slower. They might actually move it from one account to another and ultimately end up uh reporting it over a period of time. So, we do look at the numbers that get reported. We do true up where we need to. And actually at this point um the number is still what we would expect it to be which is central banks continuing to put gold at the forefront of their reserve allocation and actually diversification. >> Yeah. Yeah. Yeah. I mean you know trade flow data can also be noisy as you know. I mean we always try and get through it. Metal can move through Hong Kong, Switzerland, London, Dubai or other hubs before reaching the final buyer. How confident can investors be that these flows are are revealing kind of China's true accumulation rather than just rerouting through the global boolean system? >> Well, I think that we look at the destination for the gold when it comes to what happens in terms of imports into China, whether it's heading towards Shanghai or more retail and uh and investor oriented activities or more towards government and and and sovereign quasi sovereign type activities going towards Beijing. So I think that they should take a high level of comfort and confidence in our number and again what we do is report these numbers and stay very disciplined to restating or revising them if there's further clarity and information that comes out. So, uh, while it is, um, a big number, while it is a number that isn't validated completely with the IMF reported numbers, like I've said, we've had instances in the past where countries true up and do further reporting down the line. >> And I think that again, what we have on the way is our central bank survey report and that'll give us some information in terms of the sentiment from central banks and actually where we do get the validated numbers and we do have the information in the market. We're reporting those numbers clearly and clean for people. I think they should feel good in trusting in the numbers and actually um look at the trend and the trajectory because I think that that's actually telling the story more broadly as well. >> Yeah. You know, I want to pivot to to a detail that caught everyone's eye back in March. I was away, but I was happy to have you back on. I mean, Turkey was a net seller of 60 tons, but they also use an additional 80 tons through gold swaps for liquidity. Uh we also saw Azar Baan sovereign wealth fund sell 22 tons in Q1. Is the central bank story changing from one of pure accumulation to one where gold is being used is is a is a high stakes collateral tool for nations facing dollar shortages. >> I think it's a complement to the story. I think the story is we see the value of having gold. And that central bank survey report that I've talked to talks about the fact that central banks need liquidity more than anything in terms of their number one driver. Even though many will try to tell you it's a dollization or whatever the case may be. So those are factors that are weighing in. The number one factor is a need for liquidity and certainty around the liquidity. And I think what we've been seeing in this first quarter and into April is certainty that these central banks see the value in having gold as a component of their reserves. Whether it's uh Poland, Turkey, um aan as you've mentioned or or other regions that are actually making use of their reserves. I think it speaks volumes about the fact that they see it, trust it, and they can use it to actually help with both domestic and international needs. >> Okay. So, I mean, you know, the market usually treats central bank buying as kind of that one-way bullish flow. If gold is also being swapped or soldiering that stress, shouldn't investors kind of price in the risk that official sector demand can turn into also, you know, official sector supply very quickly? >> Net net selling, net buying are the numbers that people need to pay close attention to. And each individual central bank may have different needs at different times. So I would say pay attention to what each individual central bank is doing, but make sure you pay closer attention to the aggregate flows because I think that's speaking quite aggressively around what the central bank's sentiment will be. And again, I keep pointing to our report and and that I I hate to point to something that hasn't been released just yet, but in June, we'll have our survey results out there. Over the last eight years, what we have had from central banks is a certainty that they're going to diversify away from being reliant on fiat currencies. And I think that that is a continued theme that we'll look to see uh in June when we get our new report out. And actually, again, pay attention to the detail around what's being used domestically and on the short term by individual central banks, but pay close attention to the aggregate. >> Interesting. All right. Uh Joe, I mean, France just showed a very interesting kind of model for gold repatriation. They sell legacy bars in New York, realize a major currency gain, then buy replacement bars in Europe and keep them at home. Is Is this just a technical reserve management uh or is it a blueprint for other central banks that want to reduce US custody exposure without turning into a diplomatic fight? >> Well, I think there's a lot of interesting factors that one could conclude from the different activities on the French on the part of the French. But what I would say for sure is that the Fed note bars that they held in New York were sold for dollars. I think the dollars were were actually held on to by the French and then effectively they may swapped it into a London good delivery bar and actually did do a small transaction which gave them the ability to market to market. >> Remember gold reserves by central banks are often purchased and marked at that purchasing price. So the longer you hold on to it, the higher the price gets, the lower the value is that you're recognizing in your reports. So there's a lot that could be, you know, determined in terms of what the French have done, but moving it into their own central bank for holdings, moving it into a London good delivery bar and marking it to market with a small print gives them a much more uh accurate valuation in terms of the gold reserves that they do hold. >> Yeah. Yeah. It's interesting. I mean, you've been spending a lot of time in in Washington and and the Bank of France says this was not political, but you know, after Russia's reserves were frozen, every central bank understands custody risk differently. If the gold is yours, but it sits in someone else's vault. Is is that still the same quality of reserve asset? >> I think I think that that should be trusted depending on exactly where you're holding it. If you're looking at holding it at the Fed or at the Bank of England, then absolutely you should feel comfortable that your your gold is is held appropriately and sitting in places where it can actually be put into the capital markets. One of the benefits of leaving gold with the Bank of England is you have access to the ability to put the gold into the lending system, for example, and actually facilitate different activities that others in the market might be using and trading against. So I think it definitely helps and actually it keeps you in that chain of custody for the wholesale market. If you want to bring it back home then you have to make sure that you have the storage facility and the ability to bring it um under those costs with insurance and ultimately when you need to monetize it you need to think about those factors of play. But these are all things that central banks are all very quite comfortable with. I don't think leaving it at the Fed or at the Bank of England does much to jeopardize your holdings. >> Yeah. You know, I guess the story is kind of the west is returning here, but but Asia still drives the momentum. I mean, your April ETF report noted a $6.6 billion inflow. Europe led the way with 3.7 billion, and we're seeing Euro denominated gold move back towards basically record levels of 4539 euro we saw earlier this year. I mean, North America is still negative year to date while Asia's up almost 16 billion. Is the west finally chasing the price or is Asia still the only region with true conviction as they say? >> Well, I think that what um what's important to understand here is that the western investor definitely speaks quickly and and pretty pronounced when it comes to the rate environment. Um, what I like about seeing the European flows come back online is that I was something that I've been keeping a close watch on and was a little bit surprised to see um that I thought that the European market was lagging in terms of their allocation to gold and that ability to offset risk assets with the gold holdings in their portfolio. I think what's happening now is that valuation trade that they saw maybe in risk assets, maybe equities being cheap relative to global equities. I think that that's probably run its course. I think at this point they're looking at the safe haven nature of gold and the diversification benefits. As it relates to the eastern investor, I think that you're watching a market where barcoin jewelry um is is actually moving in different directions. Jewelry in particular is slowing down quite substantially, but the adoption of the financial instrument is bringing gold into the investment landscape much more pronounced, particularly in markets like China. I think that the western investors is looking at the longerterm hedge and and the actual offset that they could get with having gold in their portfolio. And I think the eastern or sorry I should say the western investor is actually responding much more likely to the overall rate environment and actually speaking quickly and and looking at what the opportunity costs are on the short term. >> Interesting. Okay. So I mean western investors they move quickly when rates change as we know. But you said you were surprised about Europe. you know, it was kind of lagging gold earlier. Now it's starting to to to flip. Is that a sign that Western institutions are finally accepting gold is is more than than just a tactical trade. >> I I think so, but I think it's still very heavily dependent on the opportunity cost on the short term, right? >> I think that rates will do a lot to kind of eb and flow and have that impact on the western investor in terms of their behavior, in terms of what they're looking to take in to the portfolios. I I think right now um I'm I'm keeping a close watch on what central banks do, how this conflict in the Middle East actually plays out and it impacts our ability to move either further into or out of a transitory kind of inflationary environment that could be very interesting for us on the shorter term. But I think at this stage the western investor and remember the ETF makes up just a component of the overall investment landscape. So it is one component less than 10%. But it does kind of give us a quick and clear transparency into what the sentiment is looking like. But shorter term the rate environment is definitely attractive in particular to North America North American investors. Uh again let's see how the European flows develop over the next couple of months as we see how things develop with the conflict in the Middle East. >> Yeah, it's a good point about the Middle East too because you know you kind of mentioned that the European interest was was also sparked by concerns over energy security. um if if if those geopolitical risks fade, is there a danger that these western fear fear flows kind of reverse just as quickly as they arrived or it sounds like >> we're kind of evened out here. >> So I think it's starting to show itself in the levels of volatility that we have around the gold market. I think we had peaked at about a 30 35% annualized uh fall and I think that those levels are closer to the 20 22% level at this stage. I think that we'll start to see that that be the first area where we we see a little less um risk in the market. I think that we probably won't ever get back to those levels that we had prior to where we are today. But I think that you'll see gold flatline. You'll see the flows in the west be a little bit slower than maybe they have been in terms of the investor flows. And I think that again those vs will come down and you'll start to see um little bit less interest in the gold market from the western market. But the political and geopolitical risks in today's environment are hard to predict and hard to determine. So I don't know if anyone should really just sit back and think that we're out of a world of cycles of geopolitical risks. >> Yeah. >> I think quite the >> Yeah. I mean, you know, we got to talk I got to talk about the other side, too. I mean, what breaks the kind of gold market because I mean, let's talk about the ceiling. Jewelry volume fell 23% in Q1 as consumers were priced out though they spent 31% more in total value. So I mean at what point does this resilience hit a wall and become true demand destruction? >> Well I think the longer we wait for rate cuts I think the longer the conflict persists in the Middle East probably for the foreseeable future. I think that could definitely continue to put put a a headwind uh for the market for gold. I think it keeps the western investor looking at the rate market more aggressively than they may have over the last uh 12 months and I think it also puts us in a position where inflationary pressures start to hit emerging markets. Now what we did see is we did see the jewelry tonnage slow like you've mentioned the dollar spend remain very high um and we have seen an increase in the recycling numbers not to a level where I'm actually worried just yet but I'm keeping a close watch on it. Recycling is obviously the way that a jewelry investor would get out of their holdings. So, you're seeing those numbers kind of leveling off and recycling increasing, but not at an alarming level just yet. If I see that recycling number head up, I start to think that maybe the inflationary pressures in emerging markets, large jewelry consumer markets are starting to hit people in the wallet and that would be something that I'd keep a close watch on. >> And Joe, if if you do see those numbers, you got to text me. We got to we got to be first the story here. Uh, just before I mean, I was I think I was on LinkedIn. I saw a nice friendly post. You were down in Washington uh recently with some colleagues. Uh what are they saying? I mean what's the capital saying right now? >> So I think there's a few things that are being said in Washington. Number one, I think the market is really understanding that critical minerals scarcity and the need for people to accumulate the right kind of resources is paramount. I think that there's a lot of interest on the part of the US government to understand ways to bring those types of business back on shore. It's not only a US phenomenon, but I think it's also something we're hearing and seeing in Canada, but looking at developing mining, permitting, processing, bringing that all home, looking at trade relations in terms of critical minerals, how to get things done in the right way, and even focusing on the illicit finance and the side of the market where gold could be basically uh growing in terms of its source and supply as it relates to artisal and small scale gold mining. this is an area that most governments recognize as a problem and something that they want to cry. So all of those items are are like top of mind having these discussions in Washington very good progress on many fronts and even though gold isn't a critical mineral the absolute understanding that critical minerals and how they're being sourced is actually that education is much better than it's ever been and people are recognizing the significance and strategic nature of gold. So really lots of very interesting discussions taking place for sure. >> Sounds like they're talking about it more and more and uh you know seems like it's seems to be a trendy word down in Washington right now. >> Absolutely. >> Okay. Hey, before I let you go, the Silver Institute's flagging a six-year structural deficit. We're seeing silver surge a little bit alongside gold here. I mean, I know you're with the World Gold Council, but are you seeing a spillover effect where investors are using silver as kind of that higher beta expression of the same monetary trade? I think that that slowed down quite a bit when there were people who were looking and this kind of goes back to the tail end of last year and into the beginning of this first quarter >> when people were looking at the conditions of geopoliticist the unpredictable nature of the rhetoric coming out of the White House for example I think the euphoria around speculating gold pushing our price pushing the silver price much higher um got a to a fever pitch level uh I think that that's calmed down quite a bit now what we're starting to see is actually uh the sensible conversation And these conversations that I just mentioned are critical minerals which silver is starting to take hold and actually where's the supply where's the demand and how should people be basically thinking about the assets. So I think we're diverging a little bit in terms of silver taking the place or gold or the tail wagging the dog or gold pulling silver along. I think that both markets are actually behaving um independently and actually uh the conversation isn't really about one substituting the other just to chase returns. It's around like what what are we thinking and and what are we going to be watching in terms of the structural opportunities for both assets. >> Okay. Well, it did get a little frothy there. So, maybe good to hear this. Um, okay. Final thought. I mean, if viewers remember one thing from this market and and kind of where we started this conversation. I mean, is it is it that gold is rising because of fear or because ownership of the metal is changing? It's it's basically structurally shifting in terms of the overall significance of gold and risk portfolio strategically. That's going to continue to be a growth market for gold. But what we're up against right now are the tactical behaviors that are going to keep our price moving either flatlining or actually ebbing and flowing, you know, up and down. So, I think you're still due for some volatility on the short term, but structurally, again, structurally, I think that there's a market for gold to continue to be on the upward trajectory. >> All right, mate. Uh, we got to have you on during that June report. I know I'll be asking and bugging your team for it. Joe Cavaton from the World Gold Council as always. Uh, thanks for your data. Thanks for your insight and your time, my friend. >> Thank you. >> Thanks, Joe. All right. And thank you for watching Kitco News. I'm Jeremy Safford. Don't forget to subscribe to our channel for more accurate datadriven conversation. about the macro markets. We'll see you next time. Heat. Heat.
What Breaks The Gold Bull Market? WGC Reveals The ‘Warning Sign’ Hidden In The Data
Summary
Transcript
Welcome back. I'm Jeremy Saffron. Gold up today, silver also moving higher. And the real story is not just the price. The real story is who controls the metal. Now, for decades, price discovery has been dominated by London and New York. But today, physical demand in Asia, central bank buying, uh, ETF flows, sovereign wealth funds, and and gold swaps are all forcing investors to ask a bigger question. Is the marginal ounce moving east? Now, the World Gold Council's latest data show a market that is not behaving like a normal commodity cycle. Global gold ETFs took in $6.6 billion in April. You can take a look there. Uh but North America remains negative year-to date while Asia is up nearly $15.9 billion. Now, taking a look at India's investment demand that also rose 54% in the first quarter with bar and coin demand nearly matching jewelry demand. So today we got to talk through this in five acts. Price discovery uh incomplete official data from central banks maybe China central bank buying and selling as well as ETF flows and and we got to ask as well what could possibly break this bull market. Now joining me now is Joe Cavaton from the World Gold Council. Always a pleasure to see you. Great to have you back on Joe. >> Great to be here. Thanks for uh having me come on board to talk this whole thing through. A very exciting time as usual for gold. >> It's it's been just a wild year. I thought last year it was a wild year but you know just looking at here at May it's been crazy this past 5 months and I you know to that point let's let's start with that kind of shift in control. We're seeing reports of elevated physical premium in parts of Asia including India where uh just today business standard reported banks have been unable to import gold and silver for 5 weeks because of custom bottlenecks. Um, when you see physical premium consistently gapping away from the spot price, is the physical market starting to I guess have more influence over price discovery than investors are used to? Well, I think the right way to think about it and I think your question is right on in terms of giving everybody a a position to start from >> and that is that you just can't take one factor or one region and determine the price of gold or the outlook for gold based on one factor. >> Gold is global. You and I have talked about that at Nauseium. And actually, it's physical at its heart as well. As much as we talk about financial instruments like ETFs and futures, that physical movement, it matters. And it matters in big markets where demand is significant and high. And it matters in terms of the global dynamic. So we're all talking about the implications of, for example, the conflict in the Middle East between the US and Iran. But you're also now starting to see that those logistical challenges that we experienced during COVID, the beginning of the outside of the conflict having more of another impact on the price of gold. So curtailing the ability to import, having bit of a slowdown in terms of that overall dynamic married with the physical demand for gold, those are going to continue to be factors are going to p price higher away from interest rates. >> Right. Right. Uh I guess we could talk about that too. I mean, you know, we're going to have tomorrow's non-farm payroll numbers out and of course that that matters because if the labor market stays firm, the Fed and other Western central banks have less room to cut. In that environment, I mean, cash and short duration instruments still look attractive. talk to me a little bit here about why western institutional investors add gold here if if they can still you know earn a real time sitting on cash. So I think there are two dynamics at play right now and I think that we still see a significant amount of interest on the part of strategic allocations to gold right I think that fundamental story around where the dollar goes where fiat currency goes the debt levels and the at the sovereign level where they those will overall develop over the years to come but I think the western investor has done a lot to tell us exactly how they're looking at gold in the short term responding to geopolitical events and responding to the conditions of interest rates and looking at that opportunity cost away from gold. >> So you start to see the line for gold looking a little bit more of a flat line in terms of the price performance. Western investors pulled money out and see a rate hold environment at play. The Fed has said it uh across Europe, UK, other Western and also the global G7 central banks have all held or are looking to hold at this point. Maybe even raise rates. That makes bonds much more interesting, cash deposits much more interesting. So maybe that shortterm interest in the gold market fades a bit while people look to the use the most out of that rate environment on the short term. But I don't think it kills our story on the long term at in any way at all. I think much more along the lines of seeing the world continue to see where fiat currency goes in those debt levels that I just mentioned. >> Yeah. Yeah. Speaking of uh you know global I guess and and talking about the world I mean even on the subject of of market plumbing it was interesting. I found it uh where stats Canada came out recently reported a 24% spike in metal exports uh much of it on rot gold moving directly to the UK. If if if more producer country you know gold is kind of moving into London at the same time regional premiums are elevated. What does that tell us about London's role as as the central clearing hub for global gold right now? I think London's central role in and the wholesale market is is very much a significant place for it to continue to be. Um the the price discovery for for many of the western markets, you know, even the global ETFs price off of the London fix. And I think that gold going in and out of London is actually a really interesting dynamic for us to watch. But having that money go have that gold flow going into London tells us that there's still significant wholesale interest whether it's from central banks, trading firms or products that are offering access. And I think that that is a signal that says, hey, look, gold's got a lot of interest. It's got a lot of global interest and it's got a lot of wholesale interest that is going to continue to develop. You know, we could look at I think actually new numbers came out today about uh that I don't want to call it a transparency gap, but the People's Bank of China, they've been adding gold here consecutively for a very long time now. But the world world gold council report clearly notes this only includes publicly reported changes. I mean, you and I have talked about this before, but you know, given that the the council's own trend statistics include estimates for unreported buying, I mean, how should investors think about the gap between China's public reported purchases and and that broader official sector buying that that you know the gold council estimates in in this trends report? So it's a great question and I think that people need to understand that the amount of work we do to validate the data with uh firms like metals focus in terms of our data sourcing uh is pretty comprehensive and we actually qualify a lot of that information in the reporting that we produce on a quarterly basis and on a monthly basis. Mhm. >> But what's important to understand is that trade flows, import export flows, destination of the flows all factor into the quantitative and qualitative data that we have that constitutes what we report. And for first quarter, I think we show 244 tons coming into the central banks. And it's very easy for the media to pick up on the selling activity and maybe some announcements that are made around continuing to grow the different activities in terms of reserve holdings and so forth. But what we do is we try to give the most complete picture and deal with what we know that has been reported through official channels like what the IMF report or V central banks report through the IMF but also that anecdotal color that comes along with the research and the data gathering that we do on the ground. So that number is actually reliable. It's basically taking uh our efforts and our resources to kind of allocate some of this OTC market, this unknown number, and putting it towards where we think it's most likely going. And this is something that's happened in the past in terms of reporting at central banks. They might be slower. They might actually move it from one account to another and ultimately end up uh reporting it over a period of time. So, we do look at the numbers that get reported. We do true up where we need to. And actually at this point um the number is still what we would expect it to be which is central banks continuing to put gold at the forefront of their reserve allocation and actually diversification. >> Yeah. Yeah. Yeah. I mean you know trade flow data can also be noisy as you know. I mean we always try and get through it. Metal can move through Hong Kong, Switzerland, London, Dubai or other hubs before reaching the final buyer. How confident can investors be that these flows are are revealing kind of China's true accumulation rather than just rerouting through the global boolean system? >> Well, I think that we look at the destination for the gold when it comes to what happens in terms of imports into China, whether it's heading towards Shanghai or more retail and uh and investor oriented activities or more towards government and and and sovereign quasi sovereign type activities going towards Beijing. So I think that they should take a high level of comfort and confidence in our number and again what we do is report these numbers and stay very disciplined to restating or revising them if there's further clarity and information that comes out. So, uh, while it is, um, a big number, while it is a number that isn't validated completely with the IMF reported numbers, like I've said, we've had instances in the past where countries true up and do further reporting down the line. >> And I think that again, what we have on the way is our central bank survey report and that'll give us some information in terms of the sentiment from central banks and actually where we do get the validated numbers and we do have the information in the market. We're reporting those numbers clearly and clean for people. I think they should feel good in trusting in the numbers and actually um look at the trend and the trajectory because I think that that's actually telling the story more broadly as well. >> Yeah. You know, I want to pivot to to a detail that caught everyone's eye back in March. I was away, but I was happy to have you back on. I mean, Turkey was a net seller of 60 tons, but they also use an additional 80 tons through gold swaps for liquidity. Uh we also saw Azar Baan sovereign wealth fund sell 22 tons in Q1. Is the central bank story changing from one of pure accumulation to one where gold is being used is is a is a high stakes collateral tool for nations facing dollar shortages. >> I think it's a complement to the story. I think the story is we see the value of having gold. And that central bank survey report that I've talked to talks about the fact that central banks need liquidity more than anything in terms of their number one driver. Even though many will try to tell you it's a dollization or whatever the case may be. So those are factors that are weighing in. The number one factor is a need for liquidity and certainty around the liquidity. And I think what we've been seeing in this first quarter and into April is certainty that these central banks see the value in having gold as a component of their reserves. Whether it's uh Poland, Turkey, um aan as you've mentioned or or other regions that are actually making use of their reserves. I think it speaks volumes about the fact that they see it, trust it, and they can use it to actually help with both domestic and international needs. >> Okay. So, I mean, you know, the market usually treats central bank buying as kind of that one-way bullish flow. If gold is also being swapped or soldiering that stress, shouldn't investors kind of price in the risk that official sector demand can turn into also, you know, official sector supply very quickly? >> Net net selling, net buying are the numbers that people need to pay close attention to. And each individual central bank may have different needs at different times. So I would say pay attention to what each individual central bank is doing, but make sure you pay closer attention to the aggregate flows because I think that's speaking quite aggressively around what the central bank's sentiment will be. And again, I keep pointing to our report and and that I I hate to point to something that hasn't been released just yet, but in June, we'll have our survey results out there. Over the last eight years, what we have had from central banks is a certainty that they're going to diversify away from being reliant on fiat currencies. And I think that that is a continued theme that we'll look to see uh in June when we get our new report out. And actually, again, pay attention to the detail around what's being used domestically and on the short term by individual central banks, but pay close attention to the aggregate. >> Interesting. All right. Uh Joe, I mean, France just showed a very interesting kind of model for gold repatriation. They sell legacy bars in New York, realize a major currency gain, then buy replacement bars in Europe and keep them at home. Is Is this just a technical reserve management uh or is it a blueprint for other central banks that want to reduce US custody exposure without turning into a diplomatic fight? >> Well, I think there's a lot of interesting factors that one could conclude from the different activities on the French on the part of the French. But what I would say for sure is that the Fed note bars that they held in New York were sold for dollars. I think the dollars were were actually held on to by the French and then effectively they may swapped it into a London good delivery bar and actually did do a small transaction which gave them the ability to market to market. >> Remember gold reserves by central banks are often purchased and marked at that purchasing price. So the longer you hold on to it, the higher the price gets, the lower the value is that you're recognizing in your reports. So there's a lot that could be, you know, determined in terms of what the French have done, but moving it into their own central bank for holdings, moving it into a London good delivery bar and marking it to market with a small print gives them a much more uh accurate valuation in terms of the gold reserves that they do hold. >> Yeah. Yeah. It's interesting. I mean, you've been spending a lot of time in in Washington and and the Bank of France says this was not political, but you know, after Russia's reserves were frozen, every central bank understands custody risk differently. If the gold is yours, but it sits in someone else's vault. Is is that still the same quality of reserve asset? >> I think I think that that should be trusted depending on exactly where you're holding it. If you're looking at holding it at the Fed or at the Bank of England, then absolutely you should feel comfortable that your your gold is is held appropriately and sitting in places where it can actually be put into the capital markets. One of the benefits of leaving gold with the Bank of England is you have access to the ability to put the gold into the lending system, for example, and actually facilitate different activities that others in the market might be using and trading against. So I think it definitely helps and actually it keeps you in that chain of custody for the wholesale market. If you want to bring it back home then you have to make sure that you have the storage facility and the ability to bring it um under those costs with insurance and ultimately when you need to monetize it you need to think about those factors of play. But these are all things that central banks are all very quite comfortable with. I don't think leaving it at the Fed or at the Bank of England does much to jeopardize your holdings. >> Yeah. You know, I guess the story is kind of the west is returning here, but but Asia still drives the momentum. I mean, your April ETF report noted a $6.6 billion inflow. Europe led the way with 3.7 billion, and we're seeing Euro denominated gold move back towards basically record levels of 4539 euro we saw earlier this year. I mean, North America is still negative year to date while Asia's up almost 16 billion. Is the west finally chasing the price or is Asia still the only region with true conviction as they say? >> Well, I think that what um what's important to understand here is that the western investor definitely speaks quickly and and pretty pronounced when it comes to the rate environment. Um, what I like about seeing the European flows come back online is that I was something that I've been keeping a close watch on and was a little bit surprised to see um that I thought that the European market was lagging in terms of their allocation to gold and that ability to offset risk assets with the gold holdings in their portfolio. I think what's happening now is that valuation trade that they saw maybe in risk assets, maybe equities being cheap relative to global equities. I think that that's probably run its course. I think at this point they're looking at the safe haven nature of gold and the diversification benefits. As it relates to the eastern investor, I think that you're watching a market where barcoin jewelry um is is actually moving in different directions. Jewelry in particular is slowing down quite substantially, but the adoption of the financial instrument is bringing gold into the investment landscape much more pronounced, particularly in markets like China. I think that the western investors is looking at the longerterm hedge and and the actual offset that they could get with having gold in their portfolio. And I think the eastern or sorry I should say the western investor is actually responding much more likely to the overall rate environment and actually speaking quickly and and looking at what the opportunity costs are on the short term. >> Interesting. Okay. So I mean western investors they move quickly when rates change as we know. But you said you were surprised about Europe. you know, it was kind of lagging gold earlier. Now it's starting to to to flip. Is that a sign that Western institutions are finally accepting gold is is more than than just a tactical trade. >> I I think so, but I think it's still very heavily dependent on the opportunity cost on the short term, right? >> I think that rates will do a lot to kind of eb and flow and have that impact on the western investor in terms of their behavior, in terms of what they're looking to take in to the portfolios. I I think right now um I'm I'm keeping a close watch on what central banks do, how this conflict in the Middle East actually plays out and it impacts our ability to move either further into or out of a transitory kind of inflationary environment that could be very interesting for us on the shorter term. But I think at this stage the western investor and remember the ETF makes up just a component of the overall investment landscape. So it is one component less than 10%. But it does kind of give us a quick and clear transparency into what the sentiment is looking like. But shorter term the rate environment is definitely attractive in particular to North America North American investors. Uh again let's see how the European flows develop over the next couple of months as we see how things develop with the conflict in the Middle East. >> Yeah, it's a good point about the Middle East too because you know you kind of mentioned that the European interest was was also sparked by concerns over energy security. um if if if those geopolitical risks fade, is there a danger that these western fear fear flows kind of reverse just as quickly as they arrived or it sounds like >> we're kind of evened out here. >> So I think it's starting to show itself in the levels of volatility that we have around the gold market. I think we had peaked at about a 30 35% annualized uh fall and I think that those levels are closer to the 20 22% level at this stage. I think that we'll start to see that that be the first area where we we see a little less um risk in the market. I think that we probably won't ever get back to those levels that we had prior to where we are today. But I think that you'll see gold flatline. You'll see the flows in the west be a little bit slower than maybe they have been in terms of the investor flows. And I think that again those vs will come down and you'll start to see um little bit less interest in the gold market from the western market. But the political and geopolitical risks in today's environment are hard to predict and hard to determine. So I don't know if anyone should really just sit back and think that we're out of a world of cycles of geopolitical risks. >> Yeah. >> I think quite the >> Yeah. I mean, you know, we got to talk I got to talk about the other side, too. I mean, what breaks the kind of gold market because I mean, let's talk about the ceiling. Jewelry volume fell 23% in Q1 as consumers were priced out though they spent 31% more in total value. So I mean at what point does this resilience hit a wall and become true demand destruction? >> Well I think the longer we wait for rate cuts I think the longer the conflict persists in the Middle East probably for the foreseeable future. I think that could definitely continue to put put a a headwind uh for the market for gold. I think it keeps the western investor looking at the rate market more aggressively than they may have over the last uh 12 months and I think it also puts us in a position where inflationary pressures start to hit emerging markets. Now what we did see is we did see the jewelry tonnage slow like you've mentioned the dollar spend remain very high um and we have seen an increase in the recycling numbers not to a level where I'm actually worried just yet but I'm keeping a close watch on it. Recycling is obviously the way that a jewelry investor would get out of their holdings. So, you're seeing those numbers kind of leveling off and recycling increasing, but not at an alarming level just yet. If I see that recycling number head up, I start to think that maybe the inflationary pressures in emerging markets, large jewelry consumer markets are starting to hit people in the wallet and that would be something that I'd keep a close watch on. >> And Joe, if if you do see those numbers, you got to text me. We got to we got to be first the story here. Uh, just before I mean, I was I think I was on LinkedIn. I saw a nice friendly post. You were down in Washington uh recently with some colleagues. Uh what are they saying? I mean what's the capital saying right now? >> So I think there's a few things that are being said in Washington. Number one, I think the market is really understanding that critical minerals scarcity and the need for people to accumulate the right kind of resources is paramount. I think that there's a lot of interest on the part of the US government to understand ways to bring those types of business back on shore. It's not only a US phenomenon, but I think it's also something we're hearing and seeing in Canada, but looking at developing mining, permitting, processing, bringing that all home, looking at trade relations in terms of critical minerals, how to get things done in the right way, and even focusing on the illicit finance and the side of the market where gold could be basically uh growing in terms of its source and supply as it relates to artisal and small scale gold mining. this is an area that most governments recognize as a problem and something that they want to cry. So all of those items are are like top of mind having these discussions in Washington very good progress on many fronts and even though gold isn't a critical mineral the absolute understanding that critical minerals and how they're being sourced is actually that education is much better than it's ever been and people are recognizing the significance and strategic nature of gold. So really lots of very interesting discussions taking place for sure. >> Sounds like they're talking about it more and more and uh you know seems like it's seems to be a trendy word down in Washington right now. >> Absolutely. >> Okay. Hey, before I let you go, the Silver Institute's flagging a six-year structural deficit. We're seeing silver surge a little bit alongside gold here. I mean, I know you're with the World Gold Council, but are you seeing a spillover effect where investors are using silver as kind of that higher beta expression of the same monetary trade? I think that that slowed down quite a bit when there were people who were looking and this kind of goes back to the tail end of last year and into the beginning of this first quarter >> when people were looking at the conditions of geopoliticist the unpredictable nature of the rhetoric coming out of the White House for example I think the euphoria around speculating gold pushing our price pushing the silver price much higher um got a to a fever pitch level uh I think that that's calmed down quite a bit now what we're starting to see is actually uh the sensible conversation And these conversations that I just mentioned are critical minerals which silver is starting to take hold and actually where's the supply where's the demand and how should people be basically thinking about the assets. So I think we're diverging a little bit in terms of silver taking the place or gold or the tail wagging the dog or gold pulling silver along. I think that both markets are actually behaving um independently and actually uh the conversation isn't really about one substituting the other just to chase returns. It's around like what what are we thinking and and what are we going to be watching in terms of the structural opportunities for both assets. >> Okay. Well, it did get a little frothy there. So, maybe good to hear this. Um, okay. Final thought. I mean, if viewers remember one thing from this market and and kind of where we started this conversation. I mean, is it is it that gold is rising because of fear or because ownership of the metal is changing? It's it's basically structurally shifting in terms of the overall significance of gold and risk portfolio strategically. That's going to continue to be a growth market for gold. But what we're up against right now are the tactical behaviors that are going to keep our price moving either flatlining or actually ebbing and flowing, you know, up and down. So, I think you're still due for some volatility on the short term, but structurally, again, structurally, I think that there's a market for gold to continue to be on the upward trajectory. >> All right, mate. Uh, we got to have you on during that June report. I know I'll be asking and bugging your team for it. Joe Cavaton from the World Gold Council as always. Uh, thanks for your data. Thanks for your insight and your time, my friend. >> Thank you. >> Thanks, Joe. All right. And thank you for watching Kitco News. I'm Jeremy Safford. Don't forget to subscribe to our channel for more accurate datadriven conversation. about the macro markets. We'll see you next time. Heat. Heat.