Is The Gold Selloff A Trap? Stöferle Weighs $4,000 Risk vs. $8,900 Target
Summary
Market Outlook: The guest views the current gold pullback as a healthy mid-cycle correction driven by rate-hike repricing and weak seasonality, with a potential test of $4,000 as a buying opportunity.
Gold Remonetization: Core thesis argues gold is being remonetized as trust erodes in bonds and fiat, supported by six vectors including central bank buying, institutional reallocation, balance-sheet effects, and tokenization.
Central Bank Buying: Sustained, sizable central bank demand—especially from emerging markets—acts as a key long-term driver, with purchases continuing despite Western ETF outflows.
Emerging Markets Demand: China and India dominate physical demand, shifting the center of the gold market away from the West; retail in EM and Asian ETFs are buying dips while Western investors sell.
Portfolio Allocation Shift: The bond bear market is pushing institutions toward hard assets, with frameworks like 60/20/20 (equities/bonds/gold) gaining traction among major macro investors and banks.
Miners Strategy: Miners show strong free cash flow, cleaner balance sheets, and disciplined M&A; the recommended approach is to keep cash ready, focus on quality majors and royalty/streaming names, and buy during panic.
Gold Tokenization: Tokenized gold and collateral use are expanding, turning gold from passive reserves into active financial infrastructure, reinforcing the remonetization trend.
Risk Signals & Timing: Watch for ETF outflows, sentiment washes, COT positioning, and capitulation headlines; seasonality suggests potential lows in mid-summer before recovery.
Transcript
Gold tested its lowest level in more than two months before bouncing back just slightly here this morning. Now the immediate explanation is the jobs report from last week. Fed hike uh bets and of course higher yields. But that's the daily tape. Ronnie Stoerless says that the bigger issue is that gold is no longer just reacting to rates. His new in gold we trust report argues gold is being slowly remonetized as bonds lose trust, central banks accumulate metal, and investors rediscover gold as monetary insurance. So today, we're not going to be asking whether gold is having a correction. It is. We're going to be asking whether this correction is a warning that the trade is overheated or the kind of reset that keeps a secular bull market alive. All right, welcome back to Kiko News. I'm Jeremy Saffron. Joining us to break down the Fed, the physical gold market, and of course the latest in gold trust report is Ronald Stoer. He's the managing partner of Incrementum AG and one of the authors of the report's 20th anniversary edition. It's called Back to the Monetary Future. It sounds like a a heck of a movie. Ronnie, welcome back to the program. Good to see you. >> Good to see you, Jeremy. >> Um, you know, before we get into the long-term thesis, I kind of want to start with the tape because the market is testing one of the downside zones from your own report. I mean, gold tested the 20% setback zone from your report before bouncing back around that $4,300 level. currently just a little bit ahead of that. But you know that's that's not a full riskoff panic. Stocks are bouncing today. Oil has paired its surge a little bit and yet gold is still kind of being tested. Now there is a historical parallel where gold often drops early in geopolitical or or o shocks because yields rise and the market assumes the Fed cannot cut. Then as the crisis plays out, gold recovers because the debt and liquidity problem comes back into focus. Is is this what's happening here or is this rate hike repricing doing more damage than the broader risk tape suggests? Well, Jeremy, of course, I mean, um it is uh it kind of hurts um the current correction, >> but on the other hand, uh I think we are getting closer and closer to some sort of a panic level and and I think that um to be honest and and and we wrote that in the in gold with trust report um we shouldn't expect too much uh for gold for the next couple of weeks. We've got weak seasonality. um we've got the big big U-turn when it comes to um to to interest rate expectations. So basically we went from one or two rate cuts this year to one perhaps even two rate hikes this year and up to three rate hikes um um until 2027. So so this has been a huge huge um U-turn when it comes to interest rate expectations. But I think, you know, there's there's lots of reasons that we can discuss, Jeremy. There's obviously the the job numbers that came out much stronger. We've seen the ISM and the city surprise index. Um um with positive surprises. We can talk about the capital cycle that is kind of flipping uh you know not only all those uh huge IPOs now also you know Gulf sovereign funds um >> they have to fund pipelines and infrastructure. O OECD is ramping up um defense spending. So basically all of it competes for for for for capital. Um but I think you know if if you want to draw an analogy I think the best is um if we compare it you know to climbing a mountain climbing Mount Everest which is uh 8 almost 8,900 m high which is almost exactly our long-term price target. I mean you you cannot just run up the Everest. Um, at some point, you know, you have to stop. Um, go to the base camp, uh, rest there for a couple of days, you know, get used to the altitude, get used to the thin air, and then, you know, you can continue climbing. And I think, you know, people tend to forget gold had a had a return of more than 60% in dollar terms last year. I mean, for a pretty big asset class like gold, that's a huge return. Um, and I think now we really have to digest this move. We're sitting now in some sort of a base camp. Uh, of course, I mean, uh, bull markets are more fun than bare markets, but but I think, you know, we're already seeing pretty negative sentiment. We're seeing, um, when it comes to the mining stocks, we're seeing almost some some panic, but a bottom is a process. So, I think, you know, um, lots of damage has been done technically. Um, and I would I I think the market usually wants to see like the round number. So, I think that we will test the $4,000. Um, but I think, you know, you really want to be aggressive buyer at those levels. >> Interesting. That's kind of what I was going to ask you. I mean, you know, cuz other analysts are kind of talking about that $4,000 line is the next major test if the if the Fed stays tight. I mean on the other side of this trade though Ronnie I have to ask you too would anything tell you or what would it tell you you know looking at data if this is no longer a healthy correction. Well, I think you know, first of all, um, commitment of traders report, um, you know, the levels that we saw when gold made new all-time highs and silver made new all-time highs, um, in January, those aren't the the the levels of um, you know, positioning and also sentiment that you see at the very top of a secular bull market. Um then I would say like uh at the end of a big bull market you you you want to see the gold silver ratio significantly lower. Um we we've seen the gold silver ratio trading in the in the high50s but usually you see it you know in the 1980s it was trading at 16 2011 it was trading around 30. So uh silver should have outperformed gold um much much more. And then talking about the mining stocks, we we we've seen some some some really good moves, some some some M&A that makes sense, but that's not how a bull market ends. A bull market ends in eu euphoria. You know, everybody uh uh dancing on the tables going crazy. We haven't seen those um really stupid M&A deals so far. So, so this is telling me, well, we've had a good run. This is some sort of a a healthy, let's say, like midcycle correction that we're seeing. The fact that we've seen the highest outflows from gold ETFs in March, um um I think that this is also telling me that um the marginal buyer um the western financial investor uh already turned very very bearish immediately. But then on the other hand and and this basically confirms my thesis um Asian buyers not only ETF buyers but also central banks continue to buy and they are buying more um um counter cyclical while the western financial investors tend to be more proyical. So I think it's um it is a it is a tough correction. I think it's a correction that many um um would wouldn't have expected but our signals actually for for example our active aum signal already switched to defensive in in January. So in in our funds we were already positioned for for some sort of a a correction. M now I guess we could kind of get into a little bit of of of who's trading gold because I mean your framing suggests gold investors or this era's you know Michael Bur's because the biggest mispricing is not in tech or housing but in money itself. So I mean you know if that's true I got to say why is gold selling off on a rate headline? I mean is the market still treating gold like a commodity when it should be pricing it like money? Well, Jeremy, correlations uh change uh and and and obviously everybody uh would have thought that okay um there's a new new war now now in in in in Iran. Um gold would go through the roof, but of course gold is super liquid. We've had a couple of days when um the daily um liquidity the the daily value of of of traded gold was um 550 billion per day. And usually, you know, if you if you're in panic mode, if you have to um sell something immediately, you sell first of all where you've got some profits on and then secondly um where you have got the the the the lowest bit ask spread. Um so so so we have got the the the highest volatility and I I think this stress volatility is really one of the major drivers um for this correction that started in in in February, beginning of March. So in the report we compare it for example to 2008 2009 um where we also saw a major correction um over the course of these very very turbulent weeks um when when Lehman went down when AIG was was called into question Fenny May Freddy Mack and so on when that happened gold actually sold off and everybody thought well actually it it it should go through the roof but it was really this liquidity um >> Mhm. >> that gold provides it was was was the reason. However, this also laid the foundation for the next leg up, >> right? >> Because what's usually happening when when we're seeing those sorts of um um uh of of panic in the market, um more fiscal stimulus to come, uh more intervention by central banks, um uh lower rates usually. Now this time around it's different because you know Kevin Walsh uh is is uh now heading the Federal Reserve. Um and of course he does not want to appear um he doesn't want to show any weakness. So so we said at the beginning of this year we said well um Walsh probably wants to be rather on the hawkish side than on the more davish side when he goes into his his new role. Um, obviously Kevin Walsh is Donald Trump's guy, but let's not forget that Jay Powell was also um Trump's guy at the very beginning. Um, >> and I think if we if we if we compare Folk to to to to Kevin Wash, you know, if if Folk held a bazooka in 1980, uh, Kevin Walsh is only holding a water pistol. So, I think the the whole market kind of knows that there's no way that he can aggressively hike interest rates, but he has to pretend. Um so so from my point of view the fact that Worsh is is already referring to this trimmed PCE which is a a very strange inflation indicator from my point of view because it I I looked that up. It really didn't see um the 2021 inflation wave at all. So, I think I I I don't know if it's really the the the right um the the right indicator to follow, but Kevin Walsh already said that trimmed PC is his favorite uh inflation indicator. And and I think that you know the fact that the the Federal Reserve is now what is it 63 month something like that uh above the uh 2% inflation target. This is already telling us that they don't care about the 2% inflation target anymore. That structurally higher inflation rates are uh accepted by the Federal Reserve, but they still kind of um want to uh show the market that they care about the 2%. Well, everybody who's got um um yeah, some brain cells left knows that they don't care about it anymore. So, so I think you know correlations correlations change um the usual uh reflects by market participants um um you know uh new war terrorist attack whatever by gold um it's not supported by data. We we did a couple of charts on that. Um usually um you only later on see the consequences in the form of higher debt, higher inflation and usually higher higher uh lower interest rates. >> Mhm. Now you know I guess it brings us to obviously talking about that that medium-term case to kind of reach $8,900 and that target obviously it assumes financial stress is eventually followed by central banks flooding the system with liquidity. Now, right now, I mean, as you mentioned, right, markets are pricing in that rate hike. And if the new Fed chair tightens into this inflation instead, I mean, what is the weakest link? Do you think it's Treasury market liquidity? Do you think it's this private credit, the the consumer we keep hearing about? Is it the banking system? Or is it just political tolerance for higher interest costs like you're talking about? Well, it's it's kind of, you know, in the in the report. I I think Jeremy, it's the the the if if you really zoom out. Um I can give you a number of reasons why gold could go higher or lower for for a very short term. >> Um however, I think what's really most important um is the question, is this just a normal gold cycle? >> Yeah. >> Or is it a monetary cycle? Is it a remonetization cycle? And um if you say yes, it's a remonetization cycle, then you probably say, well, actually, I couldn't care less if gold is trading at 4,300 or 4,800. Um, in monetary terms, it's still very, very, very cheap. So, in the report, we came out with uh we we we described those um what we call six different vectors of the remonetization of gold. And those are really the long-term drivers that we see because again we think that um you know this this erosion of trust that we're seeing you know in the political sphere but also when it comes to central banks when it comes to to science to the media um and also to fiat currencies is is a process where you know um uh uh gradually then suddenly and I think that we are Now in the suddenly stage where at some point there will be let's call it a reorganization of our monetary system and I think that we are at the beginning or already in the middle of such a reorganization of our monetary system. Now, being from Austria, if uh unfortunately my my grandparents aren't alive anymore, but they always gave me like little gold coins for every um um major event like you know, for for Christmas or whatever, little little gold coins. And you know, they lived through four different uh currency regimes and and and uh um for for them gold was just a monetary insurance policy. Now you if you're a Canadian, especially American or British, then obviously, you know, those things that we've got in our monetary DNA sounds kind of awkward because it hasn't happened uh in the last century basically. But in many many other countries, this is just normal. It happens every couple of decades. If you're in emerging markets, um you're quite used to high inflation numbers, to a rubbish currency, you're uh one of the most uh important decisions for your asset allocation is obviously your view on future inflation, how to hedge against inflation. Um and I think that this kind of world view is now coming to um from emerging markets um to western countries. And I think that um that's really the uh the the main reason that you know really confirms my long-term remonetization thesis and those six different gold vectors. Not all of them will play out. Um, >> but I think if if if it's just two, three, perhaps four of them playing out, then I think we will see significantly higher prices. >> So, I mean, Ronnie, let's let's stick on the theme of of remonetization a bit because we can move on from the Fed to kind of the bond market. I mean, if treasuries no longer protect capital after inflation, the next question is where that money where does it go? I mean, your report argues the next major buyer of gold could come from that roughly $140 trillion bond market. Now, you're not talking about the gold bud adding to coins, you know, like your like your parents. You're talking about bond managers who realize his hedge stopped working. I mean, with Treasury yields hitting a twoe high and and what would kind of make a serious institutional investor take money out of government bonds, put it into gold, even with yields elevated? >> Yeah. I mean, um, the the fact that we're seeing a huge bare market, um, in in government bonds, not only in the US, but basically basically worldwide. Um, I think that's that's already, you know, kind of a confirmation of our thesis. Now, I've got this little post-it note on my on my screen which says, "Scare your investors out of bonds." and um a mentor of mine who you know when I quit my job in 2012 and started incrementum and continued writing on the in gold we trust report he was a very very um successful investor very entrepreneurial guy and he said scare your investors out of bonds that's that's one of the most important things he was way too early but I think now is really the time you said it already Jeremy um there's 140 trillion invested um in fixed income. Now you know if there is only like if we say that uh the investable gold market is roughly 15 trillion so just a 2% reallocation of roughly 2 trillion would be like 15th of uh the whole uh investable gold market which is quite significant. Now, let's not forget, you know, global government debt basically tripled in the last two decades while GDP um barely doubled. We're seeing that, >> you know, um um when it when I talk to to institutional players, of course, they've got their mandates. Um they still ask me, well, you know, but gold doesn't pay any interest. And I say, yeah, but gold was up 60% last year. So um who cares about 2 or 3% yield? Um but I think that you've got quite a lot of what I call closed gold bucks um in big institutions. They actually know what's going on but still they are due to career risk um due to um perhaps also financial repression to some degree not able or not allowed to hold higher percentages in gold. But the longer um this turmoil in in in in in in bond in the bond market continues, I think the higher the pressure will be and um the more um bond investors will start to reallocate at least some capital into hard assets be it gold, silver, commodities, Bitcoin, whatever. So, so I think this new 604 6040 portfolio that we um already um uh basically described in our 2024 uh 2024 report. Well, more and more mainstream uh houses like big institutional players um are basically going into the same direction. Uh there was Mike Wilson, CIO at Morgan Stanley. And Morgan Stanley is still slightly larger than Incrementum. I have to say they came out with the 60 2020 20 portfolio. 60% equities, 20% bonds and 20% gold. So that's Morgan Stanley. Then we had Stan Draen Miller. Um we have Chad uh Jeff Gandluck. We've got um Ray Dalio. all those very very successful macro investors basically saying well you know scare your investors out of bonds and diversify into hard assets. So I think that's really the the big secular trend that we have to deal with and uh we've got a couple of charts on that that basically showing that uh it has only you know only yet begun. We're seeing when it comes to pension funds to family offices to um to ultra high netw worth individuals uh insurance companies still gold allocations between zero basically and one or 2%. Um family offices hold less than 2% of their total assets in gold. Um pension funds even less. So I think there's really way to go. Um I'm I think we won't go to those uh 20%. But I if we if we go to 5% and we've been at 8% in 1980, that will be you know an enormous amount of capital flows into gold. >> Now I mean the core theme of the new report is is the creeping remonetization of gold of course and you're talking about it there. I mean remonetization is not a slogan. Is the clearest proof central bank buying this goldbacked bonds conversation, gold revaluation? I mean, is it tokenized or, you know, western investors kind of finally treating gold as collateral again? And I'm curious cuz you just brought up there, Rody, quite a few that you're kind of feeling like what the proof in the pudding here is. Rank that for us. I mean, which one of those do you think matters most over the next 12 months? >> Well, I don't think there's going to be a a big conference like Brett in the Woods. um it's it's not going to happen. I I I think we're more seeing some sort of a silent remonetization of gold. >> And you know, there's there's a couple of of of of the obvious ones. Uh obviously, you know, central banks buying like crazy. We had three years in a row central banks buying more than thousand tons. Now, last year, everybody was disappointed because central bank gold demand was only 860 tons. But due to the rise in gold uh that was in in in in absolute terms that was a new all-time high >> first quarter of this year more than 250 tons again. So I think this will continue because um emerging market um uh gold allocation is still significantly lower than the gold allocation of of of western countries. Now, obviously, it started in 2022 with the sanction against Russia. And I think that's you can compare it to, you know, traveling somewhere abroad. Um, you only have one credit card. You know, if you lose it, if it gets stolen, if it doesn't work anymore, you need a plan B. And I think that gold is this monetary plan B for central banks, especially central banks in emerging markets. Mhm. >> Then the second point is is is is this private remonetization that we talked about previously. So family offices, pension funds, high netw worth individuals um that are slowly now discovering gold as a strategic monetary asset again. So this will go hand inhand with more turmoil in in fixed income. Then I think one one factor that is that is sort of misunderstood is this balance sheet uh management we're seeing a silent um uh um um recapitalization of central bank balance sheets. Now we've seen it uh in in Germany where they basically they u um uh one representative of the Bundes Bank said well actually you can treat those 360 billion that we've got basically in uh in profits from the surge in gold uh uh from our gold reserves. We can basically treat that as some sort of equity uh in the whole euro system. That's more than 1.2 two trillion um that this surge in gold prices actually helped the balance sheet and then um the big question is obviously um if there's going to be a remonetiz or a revaluation of US um gold holdings we all know still you know they've got it at uh $42 in their books if they would revalue to current prices well that's more than 1.1 um trillion um just from the revaluation to current prices. So I think that's that's becoming more and more important and I think that's a perhaps it's a slightly nerdy topic but for central banks actually they're super happy that the price of gold is rising because it makes their balance sheets stronger. >> And then you've got this um digit digitization and tokenization. Well, we've got a big chapter on Tedar in the gold report and a exclusive interview with uh Juan Sattorii who is the head of special projects at Tedar. Um Tedar is basically building a new like a parallel universe and uh you know they're already holding um almost 200 tons of gold. They're very aggressive. They told me that um in some month last year they were the second largest gold buyer worldwide. They're storing everything in their gold vaults in Switzerland deep in the Swiss Alps. Um so I think this is another very very important driver that they're bringing gold into the 21st century and then perhaps some sort of a wild card perhaps at some point the west um could start buying again. And we we say that those what we call the gold light countries um perhaps at some point they will start buying gold again. Um Canada Canadian central bank does doesn't hold too much gold unfortunately but there's lots of gold being produced in Canada lots of gold in the ground perhaps they will say well actually if you're mining gold in Canada you have first have to offer it to the central bank. There are other gold light countries like Australia but also Japan, the UK perhaps at some point to reestablish trust in their currencies into their bond market. They will start buying gold again. So those are those six uh factors and drivers of remonetization. It's a really big big chapter in the report and again you know they're ind to some degree independent from each other but then they also they strengthen um um um um um themselves. So I I think that with you know reading um reading the reports that I'm reading following what's going on in geopolitics for us it's pretty clear that gold is um um in such a remonetization uh cycle. >> Yeah it's actually an interesting point. I mean you can connect those two ideas the balance sheets and tokenization. I mean, if gold is being revalued on central bank balance sheets and at the same time physical gold is being tokenized for collateral or I guess for settlement. I mean, we're watching gold move from a passive reserve asset into active financial infrastructure again. >> Yes. Like it always has been basically. So, I think the the the >> the anomaly um um um uh in terms of monetary history isn't what's going on. It's basically what we've saw what what we've seen the last uh 54 years. So we are basically going back to the to the normal setup and and you know I think that's that's also that refers to the light motive. If you if you want to understand the future of gold and the future of our monetary system you have to understand the past and then I think it's it becomes pretty obvious. I want to ask you quickly on on gold, Ronnie, because we could kind of take that point uh global because China becomes critical. I mean, if Western investors are still trading gold off Fed expectations, China appears to at least be treating gold very differently as a strategic reserve asset, but also, I guess, not a a yield trade, right? I mean, China's central bank kept buying gold last month, extending that streak that's now well over a year. But there's new reporting this morning talking about how Shanghai retail buyers of gold suddenly dropped sharply as households waited for a better entry point. I'm asking because we always talk about the institutions or the central banks as well as the retail. But what matters more here? Is it the price sensitive household buyer or the strategic central bank buying? Um I I think last year was was the year when when actually um kind of a new stage of the bull market started uh because last year was the first year when when gold ETFs really became uh an important driver on the demand side. Now um again March um 86 tons of outflows from gold ETFs. So real panic from western um uh gold investors. But then on the other hand, we saw um big purchases by by by Asian ETF buyers and also pretty solid demand um by physical buyers in emerging markets. So I I think that you know um with the with the data from China um we all know that China owns significantly more gold than they officially uh publish. We all know that um um China basically since the Shanghai gold exchange um was started um uh imported I think what was it 28,000 tons of gold um that's that's a big big number. We know that um we we we we quote an analyst uh in the report saying that the Indian housewife is actually the smartest hedge hedge fund manager because they're buying gold um uh they're buying every gold dip. So I think again if we zoom out and we can discuss uh weekly fluctuations um but I think it's it's it's it's kind of useless. If we zoom out uh it's crystal clear with China and India being responsible for more than 50% of physical demand. It's crystal clear that western investors um don't influence the gold market that much anymore. So the center of the gold world clearly has moved from the west to emerging markets and I think that's it has always been like that. Gold always went where you know prosperity is where the real growth is where where you're seeing high savings rates. So um just travel to um to to to to Shanghai to Mumbai to Dubai although perhaps at the at the moment it's perhaps a bit risky but uh you can you can really see that uh gold has a completely um um completely different importance and significance for people there and that's not only retail demand but also institutional investors. So, um, that's I stick to my long-term thesis, um, that we laid out in the new gold playbook. Um, focus more on the demand from the long-term demand from emerging markets and less on what's going on on Wall Street. >> Ronnie, you and I need to talk about miners, of course, for our audience. But before we do that, just on this, I want to bring out kind of an outside framework here because it connects China, gold, the currency system. Luke Groman, who's a guest on this show, you also just recently interviewed him, right? uh he floated a thought experiment today on X and and I'm going to show this post. His estimates uh basically that that China imported roughly 939 tons of gold in 2025. Now his math suggests that if gold were priced at around 39,000 an ounce, China's roughly $1.2 trillion trade surplus effectively disappears. Now the number is extreme but the the point is bigger. The West wants China to rebalance but does not want the dollar, euro or pound to repric against gold. Is gold becoming the pressure valve for a trade system? Politicians refuse to kind of rebalance honestly. I mean, I guess I could ask you in in plain English, is the argument that gold can do uh part of the currency adjustment that politicians and central banks do not want to directly? >> Yes. Um, I think it's if you want to trade balance, let gold go. So, so as Luke said, um, gold has been the arbiter for 5,000 years. And, and I think that, you know, he what what you showed in in this tweet, there was just the imports, but let's not forget that, um, China is for many years now the largest gold producer and not one ounce of gold actually, um, uh, leaves China at the moment. So, um I know that those numbers that Luke's uh um um um suggesting like in the in the in the $20,000 US level, whatever that that sounds like crazy um for for most people. However, um we did some a couple of similar calculations in the report. Um for example, the shadow gold price. So if we would actually back the monetary base um with gold again, we would easily be above $20,000 uh US and that's just for the US. If we do that on an international basis, we would go to signific significantly higher levels. So um I think and and that's that's really the the fascinating thing. Um and and we have by the way we've got a great interview with Luke Roman and also Craig Tindel who's uh like very very knowledgeable when it comes to uh commodity flows uh in this year's report. But I think um um Jeremy what's what's so fascinating is previously politicians they never talked about gold. They couldn't care less about gold. Now Donald Trump comes in and you know his first words as a as a president was welcome to the golden age. Now, uh I don't know if that was really about our gold or it's just like, you know, to kick off his speech, but then there's people like Scott Bassent saying that, you know, he wants to be a part of um a Breton Woods realignment. Um Scott Bassent saying that his largest gold position, his largest private investment is actually gold. Um uh Dr. Trudy Shelton, she um we also did an interview with her. She said she knows Scott Bessent very very well. Uh and Scott Besson knows everything about history and about monetary history. Um then you've got the fact that Kevin Walsh um uh uh Scott Basson and also uh Stan Draken Miller were trading alongside and I think those those gentlemen they really understand gold. So um I think that Trump is quite vocal. I mean he he talking about interest rates briefly he said last week I think that US interest rates should be should be below 1%. Um so he's putting some pressure on on Kevin Walsh obviously but Trump was also quite vocal saying that the US dollar is overvalued and um that he wants obviously this uh reindustrialization or this renaissance of US manufacturing. Now obviously he he wants and he needs a weaker US dollar. Um and I don't know what what what Trump and Xiinping talked about uh at their summit. Um it seemed that from a if if you listen to diplomatic analysts and uh political analysts well actually it was kind of a no event and most people said that that Xiinping actually showed um how how powerful China nowadays is. Uh and that was um I think the >> um there were a couple of smaller smaller details that clearly showed that China is is regarding themselves in a in a in a better position than than than the US and I think that gold definitely plays a role in that. Now, now if they should really um um um balance the trade surplus um against its gold imports, yes, we can talk about 20 uh $26,000 US uh about uh those price levels. The big question for me is um if it's really, you know, um um um if if if this also kind of explains the dollar's pretty odd behavior recently. So it hasn't really spiked um um um during the the Iran war, but it also hasn't really collapsed. In fact, quite recently, it showed some strength again. So um that that's kind of the the big big question that I have if if if this really um if if the development of the US dollar is basically confirming that that story that that Luke is talking about. >> Yeah. Yeah. Well, it's been completely fascinating to watch, especially with the gold re-evaluation topics happening. Um, listen, our time is going too fast and I want to kind of stay on that theme, but I need to talk to you about the miners, Rody. I need to talk to you about the miners. I mean, this is where the thesis has to prove itself for equity investors. Higher gold prices help, but the sector has disappointed investors before, as you know. So, I mean, last time we had you on the show, you you told you told mining CEOs to stop talking like geologists and start explaining cash flow. I mean, producers are generating strong free cash flow right now. The sector is still roughly about 1% though of the global equity market. Has the sector learned that lesson or are miners still kind of too complicated for the generalists? >> I think the sector did a really good job. I mean, the the they they kind of learned the lesson from from the previous bare market. So, I'm seeing pristine balance sheets. I'm seeing, you know, so much value on the balance sheets uh of miners, but I also said um a couple of weeks ago, the easy money has been made. Um now, it's really time to be active to uh you know, do your homework. Um you know, in in in my gold fund, we've got more than 50% uh uh cash now. So, so we're not fully allocated. We we we we took some profits in the the small cap names, in the silver silver names, and we're now mostly in the in the large cap producers, uh in the royalty and streaming space, but we will aggressively be allocating capital again. Uh once we see signs that we really um have kind of panic um uh in the market, we'll put in lots of stink bits. Um, and I feel really comfortable as a contrarian um, uh, uh, in that space because I mean, let's not forget um, Jeremy, we've seen GDX free cash flow margin from from 4.2% in in 2023 now at 25%. Um, the top 10 gold producers tripled their um, free cash flow to almost 30 billion last year. first quarter of this year was was was was tremendous. The margins are up uh almost sixfold uh since uh 20 2015 and that almost almost you know it was basically just the leverage on rising gold prices. It wasn't the the volume that has risen. Um but then we're seeing and that's I said that at the very beginning so far um mining executives haven't gone crazy with with M&A. So that's that's a sign that, you know, we haven't seen uh the top in the cycle yet. Um we will see crazy M&A at the very end. But what I'm telling and and I just had a a call with a very very large mining company um and they're somewhat frustrated, disappointed that um the generalists um don't really come in and um this is always you you know the big mining conferences um precious metal summit uh Denver gold verig you name it the story is always now the generalists are army. To be honest, we haven't really seen many generalists and and perhaps it's like a little bit like the the the play waiting for God. Uh we know that Godo never showed up. So, so I hope and that's really what what I think um that we are doing with the gold we trust report that you are also doing and many other good people in this industry. We really have to make a positive case for gold outside of our gold bubble. um really talk to generalist investors, go to conferences where there are no gold investors, where you probably will face lots of tough questions. But I think that's really what the industry has to do and then get rid of all the geological terms and just um you know come up with a proper narrative uh show the balance sheet um um tell investors what you're planning and then then just execute and deliver. Uh I think as easy as that. Um and we've got one concept in the report. We call it the corporate corporate gold standard. I developed that um together with uh Chris Richie and um Alexander Scandalon. And we said, well, why shouldn't gold and silver miners uh not hold 5 to 10% of of their product that they're producing on their balance sheets? Um perhaps that could make a difference. So it's a >> it's a it's a thought experiment. Um and we we we've got a big chapter about that and I think it's >> you know the sector has to become more innovative more creative and again talk to the generalists but really really simplify the message and you know uh simplify the slide decks and just just get better >> get better at explaining the story. I mean, so your message is not chase the sector here. It's it's keep cash ready, know your list, buy quality when panic creates mispricing. I mean, Ronnie, that's that's very actionable. I mean, if you have some cash to deploy, what would kind of qualify that panic for you? Is it gold testing 4,000? Is it miners completely breaking even harder than they have? Is it ETFs? Is it sentiment just completely washing out? >> Well, you know, timing a bottom is is is tough. So, so you have to have a a structured process and and obviously, you know, um the moment when you when you hit the buy button, it >> this is like, you know, you're facing your your worst fears and you feel horrible. Um but a good trade shouldn't be easy. So, so I think you know if you have a um a playbook in mind and if you if if you really have a structured process like we have um it makes it easier. So we've got all the quality names that we want to own. We've got uh certain uh limits where we would buy or aggressively buy them. Uh we put in some stink bitits in names that we we really like. We're doing lots of calls with with mining companies and I I think that you know probably we would see again the market wants to see the the the round number the which would be 4,000 in gold. I think um perhaps we we will test that. >> Um >> that could happen. seasonality. Usually we see like a bottom mid June uh and then um kind of a kind of a bounce and then the lows usually um late July, mid August from a seasonal point of view. Um and this is basically what we already wrote in in in this year's report. Don't expect too much from gold. Again, we have to digest this move those 60% performance last year. I mean, year to date, let's not forget gold is still slightly up year to date. So, it's actually not that bad, but our reference point is obviously the 5,500 all-time high. So, zoom out, you know, um prepare a game plan and then execute. >> Hey, I mean, if the if the generalist kind of finally comes in and buys a sector, does he does he buy the simplest story first, royalty companies and majors, or or does the real torque still sit in developers and juniors? I know you answered it a little bit there, but what are your thoughts? No, they they generalists, you know, they they need liquidity. Um, and even we I mean, we are we're not the largest gold fund yet. Um, we sometimes really have uh, you know, uh, it's not easy getting in, but even tougher to get out of some uh, midcap names. Yeah. And I'm not talking about uh, smaller junior mining companies. So, so if I am really a large institutional player, generalist, uh you know, there's basically no other way than just uh buying into the the liquid uh large caps. But usually as the bull market progresses, you know, the risk risk appetite rises uh and then at some point there will also be um uh more liquidity in the in the in the uh midcap space and in the smaller names. But that's not where the the the big capital is allocated first, obviously. >> Now, I got to I got to ask you here because we got to talk about validation or or I guess overheating, too. I mean, your your $4,800 target arrived early. Now, that's a win, but it also kind of creates a problem because when a long-term target hits years ahead of schedule, how do you separate validation from overheating? Um so to to to explain the $4,800 was uh our call that we made in the gold trust report 2020. Now um I cannot say all the things that we've actually heard um you know uh all the criticism um when we came out with that uh with that price level when we in 2020 said this is going going to be an inflationary decade. It's going to be a golden decade. Um, you wouldn't believe uh how much criticism we faced. Um, now we came up with our gold valuation model and said at the end of this decade 4,800 is our base case scenario. Back then it was highly contrarian. Now in this so-called public participation phase based on the DAO theory um obviously you know gold has become more mainstream when it's it's not a contrarian buy anymore. There are more momentum players. Wall Street banks became more positive. They raised their forecast and so on. Um but again we're not in this um final um crazy phase the distribution phase based on the DAO theory. Um so so we also explained in our um in our model um our inflationary price target which is $8,900 US. Now 8,900 still sounds very very high but that's actually from here until 2030 that's a 14.5% kager uh which is below the 19.7% kagger that we realized when this golden decade began. So, I think we're still right on track um for this 8,900 target, but but again, um Jeremy, we we can you come up with uh all sorts of different uh price targets. >> Um but I think >> you have to ask yourself the question, is this a normal gold cycle or is it really a remonetization cycle? And if you say it's a remonetization cycle of gold where gold really gains monetary importance on a global level then I think that gold is still dirt cheap. >> Yeah. Yeah. And I mean you know obviously KCO viewers this is why you tune in. We're still the number one network in this space for a reason. And to that point for investors watching this past selloff, I mean with the miners, with some of the metals, even though I know year to date still not doing too too shabby, but what are the three kind of signals you would watch before adding exposure to say gold, silver miners? Well, um first of all, obviously, um extreme levels when it comes to outflows from from from ETFs, from gold ETFs, but also um mining ETFs, GDX, GDXJ, uh SILJ. Um then, um I I really like the the the the sentiment um uh indices by Sentiment Trader, for example. um more panic when it comes to uh the commitment of traders report where I already see a pretty positive setup. Um probably at at some point really, you know, more uh commentary on Twitter by large names, you know, uh the gold bubble has has popped. Um you know, the we we all know the usual suspects. Um I don't know if it's going to be uh Rubini or uh somebody else working at CNBC um but stuff like that. But again, you know, none of us Yeah. will probably um buy the bottom. But therefore, it's important to really have a process and then make like, you know, um have like a risk budget and then you really um step by step um um um buy into the market. >> All right. Ronnie Stoer, managing partner at Incrementum AG. Uh, the 20th anniversary in Gold We Trust report is now out. Uh, fantastic job. Good work. I I thought that was a great report. Appreciate you coming on. >> Thank you very much, Jeremy. It's been a pleasure. We're already working on next year's report. >> Larry, I'm looking forward to it. And I'll see you on the road, I'm sure, at one of these things here soon. Thanks, Ronnie. >> Absolutely. Take care. >> All right. And thank you for watching Kinko News. I'm Jeremy Saffron. Be sure to like, subscribe, and share your thoughts in the comments below on whether this gold pullback is a warning or a buying opportunity. We'll see you next time. Heat. Heat.
Is The Gold Selloff A Trap? Stöferle Weighs $4,000 Risk vs. $8,900 Target
Summary
Transcript
Gold tested its lowest level in more than two months before bouncing back just slightly here this morning. Now the immediate explanation is the jobs report from last week. Fed hike uh bets and of course higher yields. But that's the daily tape. Ronnie Stoerless says that the bigger issue is that gold is no longer just reacting to rates. His new in gold we trust report argues gold is being slowly remonetized as bonds lose trust, central banks accumulate metal, and investors rediscover gold as monetary insurance. So today, we're not going to be asking whether gold is having a correction. It is. We're going to be asking whether this correction is a warning that the trade is overheated or the kind of reset that keeps a secular bull market alive. All right, welcome back to Kiko News. I'm Jeremy Saffron. Joining us to break down the Fed, the physical gold market, and of course the latest in gold trust report is Ronald Stoer. He's the managing partner of Incrementum AG and one of the authors of the report's 20th anniversary edition. It's called Back to the Monetary Future. It sounds like a a heck of a movie. Ronnie, welcome back to the program. Good to see you. >> Good to see you, Jeremy. >> Um, you know, before we get into the long-term thesis, I kind of want to start with the tape because the market is testing one of the downside zones from your own report. I mean, gold tested the 20% setback zone from your report before bouncing back around that $4,300 level. currently just a little bit ahead of that. But you know that's that's not a full riskoff panic. Stocks are bouncing today. Oil has paired its surge a little bit and yet gold is still kind of being tested. Now there is a historical parallel where gold often drops early in geopolitical or or o shocks because yields rise and the market assumes the Fed cannot cut. Then as the crisis plays out, gold recovers because the debt and liquidity problem comes back into focus. Is is this what's happening here or is this rate hike repricing doing more damage than the broader risk tape suggests? Well, Jeremy, of course, I mean, um it is uh it kind of hurts um the current correction, >> but on the other hand, uh I think we are getting closer and closer to some sort of a panic level and and I think that um to be honest and and and we wrote that in the in gold with trust report um we shouldn't expect too much uh for gold for the next couple of weeks. We've got weak seasonality. um we've got the big big U-turn when it comes to um to to interest rate expectations. So basically we went from one or two rate cuts this year to one perhaps even two rate hikes this year and up to three rate hikes um um until 2027. So so this has been a huge huge um U-turn when it comes to interest rate expectations. But I think, you know, there's there's lots of reasons that we can discuss, Jeremy. There's obviously the the job numbers that came out much stronger. We've seen the ISM and the city surprise index. Um um with positive surprises. We can talk about the capital cycle that is kind of flipping uh you know not only all those uh huge IPOs now also you know Gulf sovereign funds um >> they have to fund pipelines and infrastructure. O OECD is ramping up um defense spending. So basically all of it competes for for for for capital. Um but I think you know if if you want to draw an analogy I think the best is um if we compare it you know to climbing a mountain climbing Mount Everest which is uh 8 almost 8,900 m high which is almost exactly our long-term price target. I mean you you cannot just run up the Everest. Um, at some point, you know, you have to stop. Um, go to the base camp, uh, rest there for a couple of days, you know, get used to the altitude, get used to the thin air, and then, you know, you can continue climbing. And I think, you know, people tend to forget gold had a had a return of more than 60% in dollar terms last year. I mean, for a pretty big asset class like gold, that's a huge return. Um, and I think now we really have to digest this move. We're sitting now in some sort of a base camp. Uh, of course, I mean, uh, bull markets are more fun than bare markets, but but I think, you know, we're already seeing pretty negative sentiment. We're seeing, um, when it comes to the mining stocks, we're seeing almost some some panic, but a bottom is a process. So, I think, you know, um, lots of damage has been done technically. Um, and I would I I think the market usually wants to see like the round number. So, I think that we will test the $4,000. Um, but I think, you know, you really want to be aggressive buyer at those levels. >> Interesting. That's kind of what I was going to ask you. I mean, you know, cuz other analysts are kind of talking about that $4,000 line is the next major test if the if the Fed stays tight. I mean on the other side of this trade though Ronnie I have to ask you too would anything tell you or what would it tell you you know looking at data if this is no longer a healthy correction. Well, I think you know, first of all, um, commitment of traders report, um, you know, the levels that we saw when gold made new all-time highs and silver made new all-time highs, um, in January, those aren't the the the levels of um, you know, positioning and also sentiment that you see at the very top of a secular bull market. Um then I would say like uh at the end of a big bull market you you you want to see the gold silver ratio significantly lower. Um we we've seen the gold silver ratio trading in the in the high50s but usually you see it you know in the 1980s it was trading at 16 2011 it was trading around 30. So uh silver should have outperformed gold um much much more. And then talking about the mining stocks, we we we've seen some some some really good moves, some some some M&A that makes sense, but that's not how a bull market ends. A bull market ends in eu euphoria. You know, everybody uh uh dancing on the tables going crazy. We haven't seen those um really stupid M&A deals so far. So, so this is telling me, well, we've had a good run. This is some sort of a a healthy, let's say, like midcycle correction that we're seeing. The fact that we've seen the highest outflows from gold ETFs in March, um um I think that this is also telling me that um the marginal buyer um the western financial investor uh already turned very very bearish immediately. But then on the other hand and and this basically confirms my thesis um Asian buyers not only ETF buyers but also central banks continue to buy and they are buying more um um counter cyclical while the western financial investors tend to be more proyical. So I think it's um it is a it is a tough correction. I think it's a correction that many um um would wouldn't have expected but our signals actually for for example our active aum signal already switched to defensive in in January. So in in our funds we were already positioned for for some sort of a a correction. M now I guess we could kind of get into a little bit of of of who's trading gold because I mean your framing suggests gold investors or this era's you know Michael Bur's because the biggest mispricing is not in tech or housing but in money itself. So I mean you know if that's true I got to say why is gold selling off on a rate headline? I mean is the market still treating gold like a commodity when it should be pricing it like money? Well, Jeremy, correlations uh change uh and and and obviously everybody uh would have thought that okay um there's a new new war now now in in in in Iran. Um gold would go through the roof, but of course gold is super liquid. We've had a couple of days when um the daily um liquidity the the daily value of of of traded gold was um 550 billion per day. And usually, you know, if you if you're in panic mode, if you have to um sell something immediately, you sell first of all where you've got some profits on and then secondly um where you have got the the the the lowest bit ask spread. Um so so so we have got the the the highest volatility and I I think this stress volatility is really one of the major drivers um for this correction that started in in in February, beginning of March. So in the report we compare it for example to 2008 2009 um where we also saw a major correction um over the course of these very very turbulent weeks um when when Lehman went down when AIG was was called into question Fenny May Freddy Mack and so on when that happened gold actually sold off and everybody thought well actually it it it should go through the roof but it was really this liquidity um >> Mhm. >> that gold provides it was was was the reason. However, this also laid the foundation for the next leg up, >> right? >> Because what's usually happening when when we're seeing those sorts of um um uh of of panic in the market, um more fiscal stimulus to come, uh more intervention by central banks, um uh lower rates usually. Now this time around it's different because you know Kevin Walsh uh is is uh now heading the Federal Reserve. Um and of course he does not want to appear um he doesn't want to show any weakness. So so we said at the beginning of this year we said well um Walsh probably wants to be rather on the hawkish side than on the more davish side when he goes into his his new role. Um, obviously Kevin Walsh is Donald Trump's guy, but let's not forget that Jay Powell was also um Trump's guy at the very beginning. Um, >> and I think if we if we if we compare Folk to to to to Kevin Wash, you know, if if Folk held a bazooka in 1980, uh, Kevin Walsh is only holding a water pistol. So, I think the the whole market kind of knows that there's no way that he can aggressively hike interest rates, but he has to pretend. Um so so from my point of view the fact that Worsh is is already referring to this trimmed PCE which is a a very strange inflation indicator from my point of view because it I I looked that up. It really didn't see um the 2021 inflation wave at all. So, I think I I I don't know if it's really the the the right um the the right indicator to follow, but Kevin Walsh already said that trimmed PC is his favorite uh inflation indicator. And and I think that you know the fact that the the Federal Reserve is now what is it 63 month something like that uh above the uh 2% inflation target. This is already telling us that they don't care about the 2% inflation target anymore. That structurally higher inflation rates are uh accepted by the Federal Reserve, but they still kind of um want to uh show the market that they care about the 2%. Well, everybody who's got um um yeah, some brain cells left knows that they don't care about it anymore. So, so I think you know correlations correlations change um the usual uh reflects by market participants um um you know uh new war terrorist attack whatever by gold um it's not supported by data. We we did a couple of charts on that. Um usually um you only later on see the consequences in the form of higher debt, higher inflation and usually higher higher uh lower interest rates. >> Mhm. Now you know I guess it brings us to obviously talking about that that medium-term case to kind of reach $8,900 and that target obviously it assumes financial stress is eventually followed by central banks flooding the system with liquidity. Now, right now, I mean, as you mentioned, right, markets are pricing in that rate hike. And if the new Fed chair tightens into this inflation instead, I mean, what is the weakest link? Do you think it's Treasury market liquidity? Do you think it's this private credit, the the consumer we keep hearing about? Is it the banking system? Or is it just political tolerance for higher interest costs like you're talking about? Well, it's it's kind of, you know, in the in the report. I I think Jeremy, it's the the the if if you really zoom out. Um I can give you a number of reasons why gold could go higher or lower for for a very short term. >> Um however, I think what's really most important um is the question, is this just a normal gold cycle? >> Yeah. >> Or is it a monetary cycle? Is it a remonetization cycle? And um if you say yes, it's a remonetization cycle, then you probably say, well, actually, I couldn't care less if gold is trading at 4,300 or 4,800. Um, in monetary terms, it's still very, very, very cheap. So, in the report, we came out with uh we we we described those um what we call six different vectors of the remonetization of gold. And those are really the long-term drivers that we see because again we think that um you know this this erosion of trust that we're seeing you know in the political sphere but also when it comes to central banks when it comes to to science to the media um and also to fiat currencies is is a process where you know um uh uh gradually then suddenly and I think that we are Now in the suddenly stage where at some point there will be let's call it a reorganization of our monetary system and I think that we are at the beginning or already in the middle of such a reorganization of our monetary system. Now, being from Austria, if uh unfortunately my my grandparents aren't alive anymore, but they always gave me like little gold coins for every um um major event like you know, for for Christmas or whatever, little little gold coins. And you know, they lived through four different uh currency regimes and and and uh um for for them gold was just a monetary insurance policy. Now you if you're a Canadian, especially American or British, then obviously, you know, those things that we've got in our monetary DNA sounds kind of awkward because it hasn't happened uh in the last century basically. But in many many other countries, this is just normal. It happens every couple of decades. If you're in emerging markets, um you're quite used to high inflation numbers, to a rubbish currency, you're uh one of the most uh important decisions for your asset allocation is obviously your view on future inflation, how to hedge against inflation. Um and I think that this kind of world view is now coming to um from emerging markets um to western countries. And I think that um that's really the uh the the main reason that you know really confirms my long-term remonetization thesis and those six different gold vectors. Not all of them will play out. Um, >> but I think if if if it's just two, three, perhaps four of them playing out, then I think we will see significantly higher prices. >> So, I mean, Ronnie, let's let's stick on the theme of of remonetization a bit because we can move on from the Fed to kind of the bond market. I mean, if treasuries no longer protect capital after inflation, the next question is where that money where does it go? I mean, your report argues the next major buyer of gold could come from that roughly $140 trillion bond market. Now, you're not talking about the gold bud adding to coins, you know, like your like your parents. You're talking about bond managers who realize his hedge stopped working. I mean, with Treasury yields hitting a twoe high and and what would kind of make a serious institutional investor take money out of government bonds, put it into gold, even with yields elevated? >> Yeah. I mean, um, the the fact that we're seeing a huge bare market, um, in in government bonds, not only in the US, but basically basically worldwide. Um, I think that's that's already, you know, kind of a confirmation of our thesis. Now, I've got this little post-it note on my on my screen which says, "Scare your investors out of bonds." and um a mentor of mine who you know when I quit my job in 2012 and started incrementum and continued writing on the in gold we trust report he was a very very um successful investor very entrepreneurial guy and he said scare your investors out of bonds that's that's one of the most important things he was way too early but I think now is really the time you said it already Jeremy um there's 140 trillion invested um in fixed income. Now you know if there is only like if we say that uh the investable gold market is roughly 15 trillion so just a 2% reallocation of roughly 2 trillion would be like 15th of uh the whole uh investable gold market which is quite significant. Now, let's not forget, you know, global government debt basically tripled in the last two decades while GDP um barely doubled. We're seeing that, >> you know, um um when it when I talk to to institutional players, of course, they've got their mandates. Um they still ask me, well, you know, but gold doesn't pay any interest. And I say, yeah, but gold was up 60% last year. So um who cares about 2 or 3% yield? Um but I think that you've got quite a lot of what I call closed gold bucks um in big institutions. They actually know what's going on but still they are due to career risk um due to um perhaps also financial repression to some degree not able or not allowed to hold higher percentages in gold. But the longer um this turmoil in in in in in in bond in the bond market continues, I think the higher the pressure will be and um the more um bond investors will start to reallocate at least some capital into hard assets be it gold, silver, commodities, Bitcoin, whatever. So, so I think this new 604 6040 portfolio that we um already um uh basically described in our 2024 uh 2024 report. Well, more and more mainstream uh houses like big institutional players um are basically going into the same direction. Uh there was Mike Wilson, CIO at Morgan Stanley. And Morgan Stanley is still slightly larger than Incrementum. I have to say they came out with the 60 2020 20 portfolio. 60% equities, 20% bonds and 20% gold. So that's Morgan Stanley. Then we had Stan Draen Miller. Um we have Chad uh Jeff Gandluck. We've got um Ray Dalio. all those very very successful macro investors basically saying well you know scare your investors out of bonds and diversify into hard assets. So I think that's really the the big secular trend that we have to deal with and uh we've got a couple of charts on that that basically showing that uh it has only you know only yet begun. We're seeing when it comes to pension funds to family offices to um to ultra high netw worth individuals uh insurance companies still gold allocations between zero basically and one or 2%. Um family offices hold less than 2% of their total assets in gold. Um pension funds even less. So I think there's really way to go. Um I'm I think we won't go to those uh 20%. But I if we if we go to 5% and we've been at 8% in 1980, that will be you know an enormous amount of capital flows into gold. >> Now I mean the core theme of the new report is is the creeping remonetization of gold of course and you're talking about it there. I mean remonetization is not a slogan. Is the clearest proof central bank buying this goldbacked bonds conversation, gold revaluation? I mean, is it tokenized or, you know, western investors kind of finally treating gold as collateral again? And I'm curious cuz you just brought up there, Rody, quite a few that you're kind of feeling like what the proof in the pudding here is. Rank that for us. I mean, which one of those do you think matters most over the next 12 months? >> Well, I don't think there's going to be a a big conference like Brett in the Woods. um it's it's not going to happen. I I I think we're more seeing some sort of a silent remonetization of gold. >> And you know, there's there's a couple of of of of the obvious ones. Uh obviously, you know, central banks buying like crazy. We had three years in a row central banks buying more than thousand tons. Now, last year, everybody was disappointed because central bank gold demand was only 860 tons. But due to the rise in gold uh that was in in in in absolute terms that was a new all-time high >> first quarter of this year more than 250 tons again. So I think this will continue because um emerging market um uh gold allocation is still significantly lower than the gold allocation of of of western countries. Now, obviously, it started in 2022 with the sanction against Russia. And I think that's you can compare it to, you know, traveling somewhere abroad. Um, you only have one credit card. You know, if you lose it, if it gets stolen, if it doesn't work anymore, you need a plan B. And I think that gold is this monetary plan B for central banks, especially central banks in emerging markets. Mhm. >> Then the second point is is is is this private remonetization that we talked about previously. So family offices, pension funds, high netw worth individuals um that are slowly now discovering gold as a strategic monetary asset again. So this will go hand inhand with more turmoil in in fixed income. Then I think one one factor that is that is sort of misunderstood is this balance sheet uh management we're seeing a silent um uh um um recapitalization of central bank balance sheets. Now we've seen it uh in in Germany where they basically they u um uh one representative of the Bundes Bank said well actually you can treat those 360 billion that we've got basically in uh in profits from the surge in gold uh uh from our gold reserves. We can basically treat that as some sort of equity uh in the whole euro system. That's more than 1.2 two trillion um that this surge in gold prices actually helped the balance sheet and then um the big question is obviously um if there's going to be a remonetiz or a revaluation of US um gold holdings we all know still you know they've got it at uh $42 in their books if they would revalue to current prices well that's more than 1.1 um trillion um just from the revaluation to current prices. So I think that's that's becoming more and more important and I think that's a perhaps it's a slightly nerdy topic but for central banks actually they're super happy that the price of gold is rising because it makes their balance sheets stronger. >> And then you've got this um digit digitization and tokenization. Well, we've got a big chapter on Tedar in the gold report and a exclusive interview with uh Juan Sattorii who is the head of special projects at Tedar. Um Tedar is basically building a new like a parallel universe and uh you know they're already holding um almost 200 tons of gold. They're very aggressive. They told me that um in some month last year they were the second largest gold buyer worldwide. They're storing everything in their gold vaults in Switzerland deep in the Swiss Alps. Um so I think this is another very very important driver that they're bringing gold into the 21st century and then perhaps some sort of a wild card perhaps at some point the west um could start buying again. And we we say that those what we call the gold light countries um perhaps at some point they will start buying gold again. Um Canada Canadian central bank does doesn't hold too much gold unfortunately but there's lots of gold being produced in Canada lots of gold in the ground perhaps they will say well actually if you're mining gold in Canada you have first have to offer it to the central bank. There are other gold light countries like Australia but also Japan, the UK perhaps at some point to reestablish trust in their currencies into their bond market. They will start buying gold again. So those are those six uh factors and drivers of remonetization. It's a really big big chapter in the report and again you know they're ind to some degree independent from each other but then they also they strengthen um um um um um themselves. So I I think that with you know reading um reading the reports that I'm reading following what's going on in geopolitics for us it's pretty clear that gold is um um in such a remonetization uh cycle. >> Yeah it's actually an interesting point. I mean you can connect those two ideas the balance sheets and tokenization. I mean, if gold is being revalued on central bank balance sheets and at the same time physical gold is being tokenized for collateral or I guess for settlement. I mean, we're watching gold move from a passive reserve asset into active financial infrastructure again. >> Yes. Like it always has been basically. So, I think the the the >> the anomaly um um um uh in terms of monetary history isn't what's going on. It's basically what we've saw what what we've seen the last uh 54 years. So we are basically going back to the to the normal setup and and you know I think that's that's also that refers to the light motive. If you if you want to understand the future of gold and the future of our monetary system you have to understand the past and then I think it's it becomes pretty obvious. I want to ask you quickly on on gold, Ronnie, because we could kind of take that point uh global because China becomes critical. I mean, if Western investors are still trading gold off Fed expectations, China appears to at least be treating gold very differently as a strategic reserve asset, but also, I guess, not a a yield trade, right? I mean, China's central bank kept buying gold last month, extending that streak that's now well over a year. But there's new reporting this morning talking about how Shanghai retail buyers of gold suddenly dropped sharply as households waited for a better entry point. I'm asking because we always talk about the institutions or the central banks as well as the retail. But what matters more here? Is it the price sensitive household buyer or the strategic central bank buying? Um I I think last year was was the year when when actually um kind of a new stage of the bull market started uh because last year was the first year when when gold ETFs really became uh an important driver on the demand side. Now um again March um 86 tons of outflows from gold ETFs. So real panic from western um uh gold investors. But then on the other hand, we saw um big purchases by by by Asian ETF buyers and also pretty solid demand um by physical buyers in emerging markets. So I I think that you know um with the with the data from China um we all know that China owns significantly more gold than they officially uh publish. We all know that um um China basically since the Shanghai gold exchange um was started um uh imported I think what was it 28,000 tons of gold um that's that's a big big number. We know that um we we we we quote an analyst uh in the report saying that the Indian housewife is actually the smartest hedge hedge fund manager because they're buying gold um uh they're buying every gold dip. So I think again if we zoom out and we can discuss uh weekly fluctuations um but I think it's it's it's it's kind of useless. If we zoom out uh it's crystal clear with China and India being responsible for more than 50% of physical demand. It's crystal clear that western investors um don't influence the gold market that much anymore. So the center of the gold world clearly has moved from the west to emerging markets and I think that's it has always been like that. Gold always went where you know prosperity is where the real growth is where where you're seeing high savings rates. So um just travel to um to to to to Shanghai to Mumbai to Dubai although perhaps at the at the moment it's perhaps a bit risky but uh you can you can really see that uh gold has a completely um um completely different importance and significance for people there and that's not only retail demand but also institutional investors. So, um, that's I stick to my long-term thesis, um, that we laid out in the new gold playbook. Um, focus more on the demand from the long-term demand from emerging markets and less on what's going on on Wall Street. >> Ronnie, you and I need to talk about miners, of course, for our audience. But before we do that, just on this, I want to bring out kind of an outside framework here because it connects China, gold, the currency system. Luke Groman, who's a guest on this show, you also just recently interviewed him, right? uh he floated a thought experiment today on X and and I'm going to show this post. His estimates uh basically that that China imported roughly 939 tons of gold in 2025. Now his math suggests that if gold were priced at around 39,000 an ounce, China's roughly $1.2 trillion trade surplus effectively disappears. Now the number is extreme but the the point is bigger. The West wants China to rebalance but does not want the dollar, euro or pound to repric against gold. Is gold becoming the pressure valve for a trade system? Politicians refuse to kind of rebalance honestly. I mean, I guess I could ask you in in plain English, is the argument that gold can do uh part of the currency adjustment that politicians and central banks do not want to directly? >> Yes. Um, I think it's if you want to trade balance, let gold go. So, so as Luke said, um, gold has been the arbiter for 5,000 years. And, and I think that, you know, he what what you showed in in this tweet, there was just the imports, but let's not forget that, um, China is for many years now the largest gold producer and not one ounce of gold actually, um, uh, leaves China at the moment. So, um I know that those numbers that Luke's uh um um um suggesting like in the in the in the $20,000 US level, whatever that that sounds like crazy um for for most people. However, um we did some a couple of similar calculations in the report. Um for example, the shadow gold price. So if we would actually back the monetary base um with gold again, we would easily be above $20,000 uh US and that's just for the US. If we do that on an international basis, we would go to signific significantly higher levels. So um I think and and that's that's really the the fascinating thing. Um and and we have by the way we've got a great interview with Luke Roman and also Craig Tindel who's uh like very very knowledgeable when it comes to uh commodity flows uh in this year's report. But I think um um Jeremy what's what's so fascinating is previously politicians they never talked about gold. They couldn't care less about gold. Now Donald Trump comes in and you know his first words as a as a president was welcome to the golden age. Now, uh I don't know if that was really about our gold or it's just like, you know, to kick off his speech, but then there's people like Scott Bassent saying that, you know, he wants to be a part of um a Breton Woods realignment. Um Scott Bassent saying that his largest gold position, his largest private investment is actually gold. Um uh Dr. Trudy Shelton, she um we also did an interview with her. She said she knows Scott Bessent very very well. Uh and Scott Besson knows everything about history and about monetary history. Um then you've got the fact that Kevin Walsh um uh uh Scott Basson and also uh Stan Draken Miller were trading alongside and I think those those gentlemen they really understand gold. So um I think that Trump is quite vocal. I mean he he talking about interest rates briefly he said last week I think that US interest rates should be should be below 1%. Um so he's putting some pressure on on Kevin Walsh obviously but Trump was also quite vocal saying that the US dollar is overvalued and um that he wants obviously this uh reindustrialization or this renaissance of US manufacturing. Now obviously he he wants and he needs a weaker US dollar. Um and I don't know what what what Trump and Xiinping talked about uh at their summit. Um it seemed that from a if if you listen to diplomatic analysts and uh political analysts well actually it was kind of a no event and most people said that that Xiinping actually showed um how how powerful China nowadays is. Uh and that was um I think the >> um there were a couple of smaller smaller details that clearly showed that China is is regarding themselves in a in a in a better position than than than the US and I think that gold definitely plays a role in that. Now, now if they should really um um um balance the trade surplus um against its gold imports, yes, we can talk about 20 uh $26,000 US uh about uh those price levels. The big question for me is um if it's really, you know, um um um if if if this also kind of explains the dollar's pretty odd behavior recently. So it hasn't really spiked um um um during the the Iran war, but it also hasn't really collapsed. In fact, quite recently, it showed some strength again. So um that that's kind of the the big big question that I have if if if this really um if if the development of the US dollar is basically confirming that that story that that Luke is talking about. >> Yeah. Yeah. Well, it's been completely fascinating to watch, especially with the gold re-evaluation topics happening. Um, listen, our time is going too fast and I want to kind of stay on that theme, but I need to talk to you about the miners, Rody. I need to talk to you about the miners. I mean, this is where the thesis has to prove itself for equity investors. Higher gold prices help, but the sector has disappointed investors before, as you know. So, I mean, last time we had you on the show, you you told you told mining CEOs to stop talking like geologists and start explaining cash flow. I mean, producers are generating strong free cash flow right now. The sector is still roughly about 1% though of the global equity market. Has the sector learned that lesson or are miners still kind of too complicated for the generalists? >> I think the sector did a really good job. I mean, the the they they kind of learned the lesson from from the previous bare market. So, I'm seeing pristine balance sheets. I'm seeing, you know, so much value on the balance sheets uh of miners, but I also said um a couple of weeks ago, the easy money has been made. Um now, it's really time to be active to uh you know, do your homework. Um you know, in in in my gold fund, we've got more than 50% uh uh cash now. So, so we're not fully allocated. We we we we took some profits in the the small cap names, in the silver silver names, and we're now mostly in the in the large cap producers, uh in the royalty and streaming space, but we will aggressively be allocating capital again. Uh once we see signs that we really um have kind of panic um uh in the market, we'll put in lots of stink bits. Um, and I feel really comfortable as a contrarian um, uh, uh, in that space because I mean, let's not forget um, Jeremy, we've seen GDX free cash flow margin from from 4.2% in in 2023 now at 25%. Um, the top 10 gold producers tripled their um, free cash flow to almost 30 billion last year. first quarter of this year was was was was tremendous. The margins are up uh almost sixfold uh since uh 20 2015 and that almost almost you know it was basically just the leverage on rising gold prices. It wasn't the the volume that has risen. Um but then we're seeing and that's I said that at the very beginning so far um mining executives haven't gone crazy with with M&A. So that's that's a sign that, you know, we haven't seen uh the top in the cycle yet. Um we will see crazy M&A at the very end. But what I'm telling and and I just had a a call with a very very large mining company um and they're somewhat frustrated, disappointed that um the generalists um don't really come in and um this is always you you know the big mining conferences um precious metal summit uh Denver gold verig you name it the story is always now the generalists are army. To be honest, we haven't really seen many generalists and and perhaps it's like a little bit like the the the play waiting for God. Uh we know that Godo never showed up. So, so I hope and that's really what what I think um that we are doing with the gold we trust report that you are also doing and many other good people in this industry. We really have to make a positive case for gold outside of our gold bubble. um really talk to generalist investors, go to conferences where there are no gold investors, where you probably will face lots of tough questions. But I think that's really what the industry has to do and then get rid of all the geological terms and just um you know come up with a proper narrative uh show the balance sheet um um tell investors what you're planning and then then just execute and deliver. Uh I think as easy as that. Um and we've got one concept in the report. We call it the corporate corporate gold standard. I developed that um together with uh Chris Richie and um Alexander Scandalon. And we said, well, why shouldn't gold and silver miners uh not hold 5 to 10% of of their product that they're producing on their balance sheets? Um perhaps that could make a difference. So it's a >> it's a it's a thought experiment. Um and we we we've got a big chapter about that and I think it's >> you know the sector has to become more innovative more creative and again talk to the generalists but really really simplify the message and you know uh simplify the slide decks and just just get better >> get better at explaining the story. I mean, so your message is not chase the sector here. It's it's keep cash ready, know your list, buy quality when panic creates mispricing. I mean, Ronnie, that's that's very actionable. I mean, if you have some cash to deploy, what would kind of qualify that panic for you? Is it gold testing 4,000? Is it miners completely breaking even harder than they have? Is it ETFs? Is it sentiment just completely washing out? >> Well, you know, timing a bottom is is is tough. So, so you have to have a a structured process and and obviously, you know, um the moment when you when you hit the buy button, it >> this is like, you know, you're facing your your worst fears and you feel horrible. Um but a good trade shouldn't be easy. So, so I think you know if you have a um a playbook in mind and if you if if you really have a structured process like we have um it makes it easier. So we've got all the quality names that we want to own. We've got uh certain uh limits where we would buy or aggressively buy them. Uh we put in some stink bitits in names that we we really like. We're doing lots of calls with with mining companies and I I think that you know probably we would see again the market wants to see the the the round number the which would be 4,000 in gold. I think um perhaps we we will test that. >> Um >> that could happen. seasonality. Usually we see like a bottom mid June uh and then um kind of a kind of a bounce and then the lows usually um late July, mid August from a seasonal point of view. Um and this is basically what we already wrote in in in this year's report. Don't expect too much from gold. Again, we have to digest this move those 60% performance last year. I mean, year to date, let's not forget gold is still slightly up year to date. So, it's actually not that bad, but our reference point is obviously the 5,500 all-time high. So, zoom out, you know, um prepare a game plan and then execute. >> Hey, I mean, if the if the generalist kind of finally comes in and buys a sector, does he does he buy the simplest story first, royalty companies and majors, or or does the real torque still sit in developers and juniors? I know you answered it a little bit there, but what are your thoughts? No, they they generalists, you know, they they need liquidity. Um, and even we I mean, we are we're not the largest gold fund yet. Um, we sometimes really have uh, you know, uh, it's not easy getting in, but even tougher to get out of some uh, midcap names. Yeah. And I'm not talking about uh, smaller junior mining companies. So, so if I am really a large institutional player, generalist, uh you know, there's basically no other way than just uh buying into the the liquid uh large caps. But usually as the bull market progresses, you know, the risk risk appetite rises uh and then at some point there will also be um uh more liquidity in the in the in the uh midcap space and in the smaller names. But that's not where the the the big capital is allocated first, obviously. >> Now, I got to I got to ask you here because we got to talk about validation or or I guess overheating, too. I mean, your your $4,800 target arrived early. Now, that's a win, but it also kind of creates a problem because when a long-term target hits years ahead of schedule, how do you separate validation from overheating? Um so to to to explain the $4,800 was uh our call that we made in the gold trust report 2020. Now um I cannot say all the things that we've actually heard um you know uh all the criticism um when we came out with that uh with that price level when we in 2020 said this is going going to be an inflationary decade. It's going to be a golden decade. Um, you wouldn't believe uh how much criticism we faced. Um, now we came up with our gold valuation model and said at the end of this decade 4,800 is our base case scenario. Back then it was highly contrarian. Now in this so-called public participation phase based on the DAO theory um obviously you know gold has become more mainstream when it's it's not a contrarian buy anymore. There are more momentum players. Wall Street banks became more positive. They raised their forecast and so on. Um but again we're not in this um final um crazy phase the distribution phase based on the DAO theory. Um so so we also explained in our um in our model um our inflationary price target which is $8,900 US. Now 8,900 still sounds very very high but that's actually from here until 2030 that's a 14.5% kager uh which is below the 19.7% kagger that we realized when this golden decade began. So, I think we're still right on track um for this 8,900 target, but but again, um Jeremy, we we can you come up with uh all sorts of different uh price targets. >> Um but I think >> you have to ask yourself the question, is this a normal gold cycle or is it really a remonetization cycle? And if you say it's a remonetization cycle of gold where gold really gains monetary importance on a global level then I think that gold is still dirt cheap. >> Yeah. Yeah. And I mean you know obviously KCO viewers this is why you tune in. We're still the number one network in this space for a reason. And to that point for investors watching this past selloff, I mean with the miners, with some of the metals, even though I know year to date still not doing too too shabby, but what are the three kind of signals you would watch before adding exposure to say gold, silver miners? Well, um first of all, obviously, um extreme levels when it comes to outflows from from from ETFs, from gold ETFs, but also um mining ETFs, GDX, GDXJ, uh SILJ. Um then, um I I really like the the the the sentiment um uh indices by Sentiment Trader, for example. um more panic when it comes to uh the commitment of traders report where I already see a pretty positive setup. Um probably at at some point really, you know, more uh commentary on Twitter by large names, you know, uh the gold bubble has has popped. Um you know, the we we all know the usual suspects. Um I don't know if it's going to be uh Rubini or uh somebody else working at CNBC um but stuff like that. But again, you know, none of us Yeah. will probably um buy the bottom. But therefore, it's important to really have a process and then make like, you know, um have like a risk budget and then you really um step by step um um um buy into the market. >> All right. Ronnie Stoer, managing partner at Incrementum AG. Uh, the 20th anniversary in Gold We Trust report is now out. Uh, fantastic job. Good work. I I thought that was a great report. Appreciate you coming on. >> Thank you very much, Jeremy. It's been a pleasure. We're already working on next year's report. >> Larry, I'm looking forward to it. And I'll see you on the road, I'm sure, at one of these things here soon. Thanks, Ronnie. >> Absolutely. Take care. >> All right. And thank you for watching Kinko News. I'm Jeremy Saffron. Be sure to like, subscribe, and share your thoughts in the comments below on whether this gold pullback is a warning or a buying opportunity. We'll see you next time. Heat. Heat.