Core Thesis: The guest makes a sustained case for owning gold as a monetary asset to hedge inflation, currency devaluation, and macro uncertainty.
Access Vehicles: He contrasts physical gold, gold ETFs, and miners, personally favoring physical while acknowledging ETFs as a valid, liquid option.
Portfolio Construction: Emphasis on real assets (including gold and real estate) as ballast against equity risk, with examples of sizable personal allocation to real assets.
Macro Drivers: Discussion centers on deficits, higher-for-longer rates, geopolitical tensions, and oil shocks; these underpin long-term support for gold despite near-term volatility.
Central Banks: Extensive review of central bank buying dynamics, reporting, and potential scenarios (including distressed selling) that can impact gold’s price path.
Market Structure: The gold market is becoming more mainstream, with rising speculation and global flows (notably Asia), implying higher but acceptable volatility.
Ecosystem Players: Firms like BlackRock, Vanguard, State Street, and Goldman Sachs are cited in the context of ETFs, distribution, and access; no single stock is pitched.
Policy and Access: Potential regulatory changes (e.g., enabling gold in 40 Act funds) could broaden access and institutional adoption, supporting the long-term thesis.
Transcript
I'm Steven Feldman. As many of you know, I'm the CEO of Wealthon. A guy who's happiest sitting in his unfancy corner office running businesses and protecting his privacy. Lord knows nobody thought the world needed another macro or investing podcasts. But with a rare combination of hubris and executive privilege, I created one anyway. I called it open position. And I mean that in both senses. Every guest on this show carries an open position in markets. But what I really want to know is where they're exposed in their thinking, their convictions, their lives, their other open positions. How they decide what they stand for and what they're solving for. Not just in their portfolios, in everything. After the first episode with Anthony Scaramucci, my favorite comment said, "It felt like being at a dinner party with both of us. That's exactly the goal every time. Now, let's get into it. My guest is Joe Cavaton, someone I've known for over a decade. He's the senior market strategist for America's at the World Gold Council. And before I go any further, I want to pet an elephant in the room. Joe works for the World Gold Council, and it's his job to be an advocate for gold. I am the co-founder and CEO of GBI, a physical precious metal infrastructure. My business does better when people buy gold. So, one of the things that we're going to talk about and again petting that elephant in the room is to try to figure out if we are talking our book. Joe, you and I uh we've known each other for a while and interestingly we both have conventional finance backgrounds. >> Correct. >> Uh you take a job at the World Gold Council. There's nothing more gold in it. Is it because the only one who gave you an offer or is it because you wanted to be in that asset class? >> So the real truth the first of all thanks for having me on. It's great to be here. >> It's good to do it this way. >> It it is. >> So the the the simple answer is I was intrigued more than anything. So the World Gold Council as a membership organization representing the world's largest mining companies also advocating for gold and education on gold also has a funding source that comes from two very pronounced ETFs of which at the time was one. And they intrigued me because they had an ETF strategy that they needed help with, but they also wanted to get a little bit of the markets DNA into the organization. a lot of mining and precious metals DNA, but that DNA of what you've just talked about, what you have as well, that market DNA, that was what was looking what was being offered as well as the opportunity to talk about gold. So, I had an opportunity to get back into the market with gold, but also upstream talking about mining, you know, talking about refining, talking about a supply chain, talking about things that I did when I was a long time ago when I was a banker. And that plus the ability to work on ETFs, the markets, talk about this asset class, which is, you know what, unique. Now, look, this is factual. It's the only precious metal that has the size and the scope and the behavioral patterns that I think we'll unpack here today that'll actually serve you really well as a monetary metal. Purely as a monetary medal. >> Hey, you you almost got to talk at your book for a sec cuz we're going to pull you back. Okay. Right. So when you so you walk in the door, you you you in general you see the challenge of the job. Yep. >> Uh and like many people you take a job because you may not be expert in what they do, but there's an opportunity that you sense. It's more than just a paycheck and benefits. But do you walk in the job with an institutional background saying, "Oh, gold is sound money. It's a monetary asset." Or does that something you had to learn on the job? or was part of the attraction of the job that there was a certain environment and there was an unmet need and you were going to help create that uh to meet that unmet need. >> So remember we when I was with Black Rockck had a gold product, we had a silver product. We were actually pioneering these types of products. >> Were you involved in those projects? >> Absolutely. Absolutely. So we do know we do those those products. We do know those >> those those those assets. We do know what the price behavior in terms of the cost and the management fees. We all had comprehensive discussions about that. Change the underlying benchmark from the comx price to the LBMA fix to give more continuity and linkage not a necessary differentiator but linkage back to the large liquid OTC market. So there was definite familiarity to it. there was definite discussion in that context of how precious metals, real assets fit portfolio allocation. So there was definitely a knowledge, but you're also in a world at a large asset manager where you're pushing bonds and you're talking about global equities. And so you're all over the place trying to figure out valuations and how you can help people deploy their money to get into these asset pools and deploy their money and and pick up ETFs. So you have a lot on your plate, but gold was on that plate. And so it wasn't completely unfamiliar to me. not unfamiliar, but did it feel like a did it feel like a mission? Who, you know, it's an interesting question for almost anybody who takes a job in financial services in a niche, right? You don't have to even be a gold person. If you show up and my alma mo Goldman Sachs and you're on a bond desk, you might even not even know what a bond was when you got on the desk. >> Sure. >> Five years later, you're making a living and you're telling people bonds are great, >> right? >> You're a bond guy. You're talking your book. you were in the gold and silver ETF business before you even get was was it did it feel like it wasn't working at Black Rockck? Were you able to if your mission was I'm going to protect customers because they're underallocated to gold, a very important asset in a portfolio? Was it that piece? Were you trying to say my job is well done when more people own this or my job is well done when minor shares go up? What what what was the job well done for you? That actually is a great question. The answer to that question was pretty simple. What's your problem and how can I help you solve it? And that was why when moving away from BlackRock to the World Gold Council, that same that same question, that same approach started to make a lot more sense for me with a narrower focus in terms of what your objective is in terms of an asset pool. And then you started to think about, okay, so what am I hearing when it comes to problems? Well, I'm worried about inflation or I'm worried about, you know, devaluation of the dollar or I'm worried about liquidity risks when markets are selling off. all these factors and you start saying okay now am I positioning this asset gold as a commodity or is it as a precious metal or is it as a you know a dollar monetary type metal and we started trying to apply all these different lenses and so in a in a in a way I took the same behavior at bio rock and applied it here to a narrower scope of an asset >> and actually learned a whole heck of a lot with the team listening the clients and asking the right questions and starting to say Okay, so people are concerned about longerterm inflationary considerations. How do we help them with that? Well, we can solve that problem. We're not going to be the only way to solve that problem, but we can fit into the mix. We can be part of the opportunity to solve your problem. Now, candidly, you know, I've had those moments and so have my colleagues where we walked in. I I remember a story that was shared with me by one of my colleagues where he was at an event, listened to one of these very prominent pension managers on stage talk about all the challenges he has and and my colleague walked up to him and simply said, "Hey, I've got a solution for you." And he's like, "What is it?" Handed him his card, said gold. He said, "We don't buy commodities." Handed it right back to him. So, we're up against it, but actually we've made a lot of progress over the years, and it's not easy. >> No, I I keep pushing it. I I I share that sentiment and and I'm sure the audience, you know, doesn't want to have a career session. They want to get to the meat of it for two people who are in the gold space. We we'll get into it in a second, but I would say that one of the single most frustrations of being in the gold business is almost it's not even that people don't like gold, it's just a general close-mindedness and a a narrative that got created a bit. And you know if you read what I've written over many years and it's gratifying that much of it has been right and I wasn't talking my book was that take the 6040 mix and you know in that 60 and 40 there's nothing that says you know gold but you take ask those same people you say well do you have life insurance and they'll say oh I have life insurance but why well salesman came up and you know showed me the risk I have no interest in dying uh but I have interest in protecting my family and I would say Do you have any interest in protecting your portfolio the same exact way? What if you die the day that the stock market's down? Don't you want to have some asset? And but honestly, it's taken a decade to break through. I be in Asia, they have it culturally, we don't >> and and the only thing that's ever hurt my feelings during this whole time is to me to do the honest work, not be talking my book. I did the job because I believed in it. Not talk my book and have people accuse me of talking my book. Meanwhile, if everybody had listened to me in 2022, you'd be up 100 to 200%. But there's that. >> Let let me let me actually just give you just a few additional thoughts on this because, you know, we do hear this whole we we we don't like to talk our book, but we we do get the you're the barber that tells me I need a haircut. That's the kind of expression that we hear. I like that a little bit more than tonight for me. >> So, so let's let's talk about a couple of other asset classes. You ever talk to an emerging markets uh portfolio manager? >> Not often. They don't. Okay. They don't get honestly. >> If you did have the opportunity to talk to them, guess what? If you loved it at these prices, you're going to really love a 45 down. And by the way, this is the future. >> Yes. >> They're going to they're going to keep pushing their agenda. Everyone does. It's just a question of how and what they're pushing. So, I I do think if if margins on gold were 4% that it would be like crypto. would be like you would have all these we'd be sponsoring we'd be on F1 cars and people would look at the brand. I think the problem is that gold branding is you know we needed higher margins to invest in marketing. That's what the crypto guys >> Well I think actually to your point on this one of the things that I would say and this is not necessarily just looking at the big worldwide asset management companies or financial institutions that don't necessarily promote gold. I'd put a little bit of put a little bit of this back onto the gold market itself. Uh, a lot of people that we engage with need a lot of encouragement to make change. >> Yes. >> Change because it's easy to be lazy. >> It's it's hard to kind of do something different. >> Look, we do a lot of work with the London market and you know there's there's comfort in what's small, safe, good enough today. And and you got to sometimes you have to push that. under our leadership, David Tate, he's pushing the agenda to simply say, "Hey, look, if you want to die on the vine, die on the vine. But we don't think you need to. There's an opportunity to make change." And that's >> pretty substantial work and that takes a lot of time. So, you got to keep at it >> and it's going to last longer than you and I. >> You bet. >> But, but you have concerns. Gold's only a few thousand to keep pushing the industry for change. >> Before we get into the interesting piece, we're making we're titillating. We're letting people understand where we think gold is going and what this current situation is. So the you've worked in the ETF business. >> Yes. >> And in gold ETFs, you uh you work now for miners. That's technically their product, but the World Gold Council is a mining organization, not truly a gold organization where you get right down to it, but that's the product, >> right? >> And then there's physical gold. So there's physical gold, ETF, and miners. You have I don't know what your net worth is, but you have an investable portfolio and it's $100. I hope you're doing much better than that. Out of that $100, tell me what you have in each of those three sleeves. >> So, in my portfolio, the least allocated asset is bonds. >> Mhm. I'd say to you, I'm 60 on equity and I am probably 30 on real assets. 10 on bonds. >> Okay. >> And real assets include gold and and real estate. >> Okay. And between in gold is how about ETFs, physical gold, miners? In your articulation in your portfolio, what's the dominant one of those three? >> How would you feel if I told you I don't own ETFs? >> Okay. I'd say you are a smart smart man, Joe Cavatony. That's what I would >> You want to know what though? Let me be Let me tell you why I don't why I I I don't choose to own ETFs. I can own ETFs if I'd like to. I just don't because I actually have an affinity and a place in our lives for a physical goal. And that's exactly what I have and and I have it actually in kilo bar format. So my wife and I kilo is $150,000 give or take then. >> Now it is. Yeah. So Joe's, you know, Joe's now rich. >> No, I tell you what it but more important to that is is the fact that it makes up between real assets and equities. I have a kind of a different profile than most people. I don't necessarily feel the need to hang on to bonds at this age. I'm happy to take a little bit of equity risk and offset it with real assets. >> Well, well, I like to hear about the real asset side. You know, Wealthon has really leaned into real assets. Like that's if financial education content is the major, you know, that's the theme. Our uh that's our business. Our major is now real assets. And so uh a lot of you know starting in we started out really just macro and now we're saying well how do you turn that macro thought in or news event into an insight and what does that mean for investing and especially what does it mean for real assets and it's a pretty good segue because the world is a macro world. became I I I you know I I I'm a I think of myself as a professional investor in my life even though I'm a business runner now but even in that business world I'm allocating capital I'm allocating risk you know guys like Buffett say you know it doesn't matter what's going on in the world it's about the companies that matter right you they'll perform they won't perform Costco is likely to perform in any market and now I'm going to pick Costco Coke you know that's the way he picks and I think that works in many markets but I think we're in almost like an ultra macro market and gold is one of those assets that uh expresses itself best in a macro market. I think what happened with my and the setup is I think what happened is the macro met momentum >> and then went to 5500. >> Sure. >> Okay. Take it from there. So 5500 momentum macro but still no bombs dropped in Iran yet. So tell me tell me what's happened and what your interpretation what's happened from 5500 to 4500. >> So I think there's a few things to to unpack there and like when you think about the moving drivers for the gold market. You've got tactical movers and then you've got the strategic movers. We would agree that the macro is the strategic mover for gold and that case is still fundamentally there. >> Yep. But what I think you've got playing out over the last, let's call it 5 months is a little bit of excitement, a little bit of energy around rate cuts, a little bit of expectation that that the world's really going to move towards a much more favorable environment for the gold market and actually leverage trades, momentum, speculation, hedging, and jumping ahead really in big time. Our signals are telling us that momentum was a a factor here. I think we're we're off on our modeling a little bit and I think all models always need to be tweaked. >> I definitely think they're they're they were understating the amount of momentum and speculation that was taking place. >> You have silver which was finally catching up to gold. I think that that excitement brought that level of I don't want to say gambling, but I would say that momentum into the speculation that was taking place. We were hearing of levered trades, accumulator products in the Asian markets, lots of people plowing in, getting really excited about the whole idea. Well, the whole time the fundamental case for gold was still going on structurally and we were bought up 30% in January. People ask me, were you surprised by the 20% correction? No, I was surprised by the unexpected, unrealistic 30% run in the price. >> Yes. >> And I think the other thing to take into consideration, Steve, is that this is a global market. There's a lot of volume, but these pools of liquidity can be fragmented. >> Yes. >> You know, 35 days are the 50 days that we've t traded this year. Little over 50 days and a little over 35 days. Most of that's been pushed up by the Asian market, the Asian time zone. Yeah. So that's what's pushing us up and that speculation definitely played into it. Now as things started to change and we started to see and hear that the Armada, we were warned twice that the Armada was making its way to Iran, right? Making its way to the Middle East, things happened. The conflict kicked into gear. So the 30% the bubble come off. The second wave is now what we've been seeing, which is the Armada's moved. you know has moved and it's attacked and actually we now have conflict in the Middle East. The oil industry the impact of oil on markets in particular Asian markets emerging markets economically is much more substantial than we could ever found and that's actually put a significant amount of question concern and issue on the deleveraging that's taking place out there. People are pulling out of risk assets and they're worried substantially because high oil prices will impact those markets more than you can imagine. I I have to unpack that a little bit because I I'd say that I wasn't following 100% so I I want to help interpret for the audience. >> Sure. >> So it's in this deleveraging and so now there's a do you think that so are we saying is that when gold stopped going up for whatever reason because there was a hint that rates would be higher for longer and that's one of the things regardless of real rates regardless of how those increased rates increase debts and deficits and debts. So it was like there was momentum and waiting for a narrative to change it. >> Sure. >> Okay. And I they found it and then it corrected because it had gone too far too fast. And but are you saying when the bombs dropped and oil went up that the Asian demand which would typically be oh my god bombs buy was oh my god everything's down we have to liquidate. And the only thing we can liquidate easily which is up and still have a gain and feel pretty good about is gold. Is that what happened? >> So yes, two things. Immediately on the bomb stroing the geopolitical reaction took place. So you did see the pop in the gold price and then the reality sets in and then the real fundamentals of what this could look like for us economically longer term inflation. >> Yes. >> Cost that's what kicked in second. So you have that immediate reaction flight to safety safe haven asset. I I don't like to refer to gold as a safe haven asset. I think it's definitely a comfort factor that people take from gold knowing that they can react and have it. But I also think that that geopolitical reaction kicked in and then it popped right back off and you saw the realization of what does it mean if the oil from the Middle East is constrained for consumption around the globe. More impact overseas than in the US. We're going to feel it at the pump here, but they're going to feel it across the economies. They are heavily oil dependent in emerging market economies. >> So, in your mind though, this isn't this this is like a a discretionary item demand in Asia. So, if Asian people, the Asian world isn't feeling uh affluent. They're going to buy less gold. They're not moving around. They're just saying, "I'm under pressure. I'm actually a net seller because I'm getting out of the markets. I'm going to sell everything that's not bolted down." I've always wondered is that there so there's two things which is I'm selling I'm not buying and I'm reallocating. >> Sure. >> And I think what you're saying is people actually are selling because they are have liquidity issues >> in other parts of their portfolio. >> There's definitely think about the fastest area of growth that we've seen since 1990. So in 1990 what 85% of the demand for gold that we would track at the Royal Gold Council was in the form of jewelry mostly in unbankable markets and also for that matter the North American markets. Whereas the fastest growth then in investment in investment vehicles. So you've got record flows in ETFs in China. You've got a physical market that's seen record flows in terms of the Shanghai gold exchange. You have futures contracts and you've got pensions or I should say insurance companies that are all coming online allocating in traditional mechanisms using financial instruments and physical gold. >> Y >> that's the investment landscape. This is not the dowies and I'm holding it as part of my >> you know my physical ownership. So these are people that are actually investing more properly and thinking about portfolios more properly. And I've just talked to China, but there's Asia, which includes Hong Kong, it includes the wealth platforms, India, etc. So >> I feel like I'm interrupting you, but I want to turn this a bit to u the central bank. So okay, so that the most non-momentum buyer on the planet >> is the central bank and and certainly buyers of size. And again, you know, it's interesting because we're always trying to relate these conversations to our audiences. Are they on the one side, there's the guys who've got like the Robin Hood apps and they're day trading and they tell people on dating shows that's what they do for a living. >> Y >> on the other side of this is central banks who are only in what I would call harvest wealth, excuse me, a preserve wealth mode. They are the most conservative. It's almost they're running it like reserves. They're >> actually it is reserves. It's right full stop reserve. So they're running 100% for safety. I doubt there was a central bank that sold during this period of time unless they were under unbelievable distress. >> Maybe Pakistan, but I'm not positive anyone would be selling. And so, how do you reconcile the fact that the the person who is going to take the most risk? They're all net buyers around the world, but that doesn't seem to be the piece that penetrates the retail investors who's trying to do not necessarily the same thing. They're not just saying, "I just need to preserve wealth. I have to be bulletproof." But shouldn't those people at least take the signal and say, "Well, if I'm 10% gold, I have enough ballast in my portfolio. maybe I could take more risk and do something else. >> Are these markets completely disconnected? I think the World Gold Council is probably in the best position to understand that. >> Yeah, I don't I don't think they're disconnected at all. So, so let's let's start first by let's talk a little bit about central banks. So, recognized as a reserve asset is a key factor here. What is by the IMF and other governing bodies recognized as a reserve asset? Gold is, silver is not. So, you're going to continue to see the central banking community on a global scale allocating to gold as a component of their reserve portfolio. Now, they've signaled to us a couple of different key factors. Number one, and by the way, the audience needs to understand this because this is lowhanging fruit for the media. Oh, central banks are buying because we publish a number every month and a bunch of people publish surveys. So, everybody goes after the low hanging fruit say, oh, if central banks are buying, so let's talk about what that means. That means that they're actually looking at their homegrown inflationary concerns, the need for a liquid instrument, concerns around geopolitical risks, trade related activities around the globe, as well as sanctions, asset freezers, challenges with big nations like the US. So, they're looking at a myriad of different factors, including whether or not fiat currencies are the only thing they should be holding in their reserves or dollar-based assets. Now, they're signaling to us over the next 5 years a decline in the dependency on fiat currencies, the dollar and the euro in particular. And we've seen that gold's already surpassed the level of euro, likely surpass the level of treasuries, but it's hard to gauge. And gold's a really key component for them. Yep. >> Now, to your point around selling, this is where the media doesn't do as good a job in terms of reporting because central banks don't go out and tell everybody what they're doing in terms of selling. They're not required. Is there some accord though about selling? >> They have they have a requirement to report what their net holdings are and their activity is according to the IMF. They have to disclose what they're doing if it's at a formal level for reserves. Y >> okay so you hear Tanzania, you hear Ghana and these are countries that actually holding gold's probably a good thing for them and they have reported and made the signal that they are selling in the market. There are a few of the the Stan nations that we would say Kazakhstan and others that may have a program where they're buying buying buying accumulating enough. Yes. And then selling into the market. >> But then you hear things from Poland very unclear whether they're buying or selling or they're adding or they're not. They were quite clear that they took their reserve level up to almost 30%. But the recent round of news on the Polish central bank is not completely clear as to what exactly they might be up to. Even today as we record this podcast, the central bank in Turkeykey's out saying, "Hey, look, we might be in in for holding, you know, the position of supporting our tur Turkish backing up the currency." How they achieve that, whether it's through sales or different swap activities to be seen. But here's the deal. They they are holding this asset and they don't have a viable alternative as a reserve. So the expectation is that they're going to continue to move. Now, they move slow and they accumulate. They don't have the ability to go, I'm going to take 10%, 20%, 50%. And you also have a market that was up 62% last year, >> right? >> So now they've went from 20 to, you know, 40%. And and they've got to manage all of that, >> right? If a month ago they went sold gold and bought oil, they'd look brilliant. But no, they're not hudge funds, >> right? They aren't. And they don't move like that, right? But they are pretty pretty smart. And when they see dips in the market, we hear in the market that they often step in and can continue to accumulate. >> Well, let's go. Let's let's let's park that over there for the side now. So now you're talking about how the retail side should be interpreting all of this and understanding all of this, right? >> So I think the first thing that the retail side really needs to understand is that gold's global and and actually behaviors by global investors is going to move the market more so than maybe just a simple signal from the Fed, which we got, which moved the market more than than many expected, they're not going to cut rates this year, right? So, so people need to understand that they're woven with gold into a really cool, sophisticated global market and that this asset is going to actually achieve what I think is important, which is the long-term strategic growth of a portfolio, but it's going to have a bumpy ride along the way. And that's brought to you by more investment, more global consumption, and people who have much easier ways of getting in and out of these instruments a lot quicker. Yeah. And it's a big enough market that it attracts a lot more noise these days. More speculation, more punting in terms of people who are getting involved. More hedging. Yes. >> More derivatives, more likelihood to be push product that actually has leverage in it. >> So these are all the good things that come along when when you become a grown-up capital markets. >> Yeah. Yeah. >> But this is also going to create a higher level of volatility in the market. >> And you know, I read something in one of the it wasn't wasn't my idea. It was someone else's. said that there's the difference between an institutional investor and a retail investor or the individual investor the wealthy owned investor is the institutional investor is measured on performance. >> Sure. >> Target returns >> and so and if you don't per beat an index you are uh you're going to have outflows and your business model won't work. So you have to take a different risk >> an individual in so so an institution might have said at 5500 sell I made a lot it's great I'll redeploy I'll hold cash not the dumbest idea they're not really in the allocated portfolio business they're in the alpha business I don't know anybody of my age or wealth level who thinks that way I think most of us we are I mean maybe this is my own anxiety from my own upbringing is first of all don't end up under a bridge, right? Like that's like you know we ask in this show >> what what are we solving for? Like this is the part where just sort of raw more raw. If someone said to me I'll never own I'll never make more than 8% here going forward in in a year but I'll never lose more than 3% in a year. like a structure note like a Goldman structure note they'll probably there's got to be someone at Goldman saying if I just sell them an 83 down I can make two >> no so uh the that and and and I've again in my in my time as somebody in the space only with investors not the stackers not the people >> it's always been frustrating when I say like well what exactly are you solving for you have a portfolio you don't necessarily want play such defense that you buy bonds and you lock in three taxable. So you're making like 1.8. You're not even keeping up with inflation. But yet people seem pretty allergic. And I and I I've been in dinner parties people say, "Oh, did I miss it?" I'm like, "Oh my god, >> if you're if you're going to give it to your children and when you you know, you might have missed it this week." >> I said, "But then my of course my snarky answer is did why did you stop reading the newspaper? Why did you stop? Did do you understand math? Because if you tell it to >> the interest and the debt and the deficit and so we're we're of the same vintage and and I also that then that anxiety that came along with trying to tell my parents exactly what I was going to do when they dropped a bunch of money on a college education and getting a job that that definitely kept me from being under the bridge, you know, you know, brother, can you spare a dime kind of lifestyle. But but um but all joking aside, you know, when you when you when you think about how an investor should consider this like like most investors that we talk to that are actually running their own money may not necessarily have that I need to return 7% or I need to pay off 4% on an annual basis. That's when the conversation gets a little more complicated because then they start to say, "Well, any dollar of an investment that I have in my portfolio doesn't generate cash flow, not income, cash flow or requires principal sale to generate cash flow becomes potentially a drag on my portfolio." Most people don't think that way on your audience. Most people are saying, "I've got a portfolio of money. I want to preserve my my assets. I want to keep things nice and tight," which is what I look this how I look at it. You look at it, they look at it. And this is a completely acceptable way for them to say, "What do I need in this portfolio that's going to behave the way I want it to?" And if I do need it, I know I'm going to get out of it, and it's going to be liquid. And that's a key component there, right? I love playing around in financial instruments that are different and unique. And you, you know, maybe I dabble a little bit in crypto, but but you know what? Up up today, down tomorrow, price go up is the bet. And that's the rationale. That's a completely different dynamic for this. I put this in the camp with the homes that I own, the properties that I own, the real estate that I own because I know does anybody sit at the dinner table and say, "Oh, Manhattan apartments are up 20% this year. Did did I miss it?" >> No. Cuz they need it. They want it. And actually the rationale for it >> provides a different service. >> Provides a different end. >> So the service I tell people with with physical gold is it's providing a service for you. It's providing you with balance for your portfolio, lack of correlation, long-term inflation hedge, long-term appreciation, but the ability to sleep at night. You got it. And so, you don't have to worry about the you should you should get your get rid of your tent and your sleeping bag because you're not going to be on your >> Actually, you can use those for fun things. But listen, >> and sleeping bag, >> one thing, one thing I want to make sure it's quite clear. So, so the World Gold Council, myself included, we don't care how you choose to buy your gold. Buy it in physical, buy it in jewelry if you want. I wouldn't necessarily myself buy a grill to wear to a party, but it would look good, but I wouldn't do it. You have solved the cool problem. >> We we take everybody through the pros and cons of owning everything and help them make a right decision. And I think that if you want to own it in physical like I do, fantastic. If you want to use ETFs, have at it. Okay. What I don't want you to do is to think it's too hard to own and pass it up. The other thing we do, and this is the key, we'll take a look at what you own. We'll help you get to an adviser that'll look at what you owned and actually run what gold means at different levels as an allocation against your portfolio. And if it makes perfect sense at 2%, 10%, we'll give you the information. Act on it if you'd like. >> We're going to have to license the widget for the platform. >> You got that? >> All right. Excellent. >> Well, the key use your research. >> The key is the key is we'll help you understand what it does for your portfolio. And if it doesn't add return while lowering risk, then maybe it's not for you. >> Okay. All right. Let's uh you know, it's interesting in the wealthy audience. I think there's a bit of what's I don't know this the notion of a positive adverse selection. I think a lot of people are who end up coming to wealthon think more like this discussion than the people who are like, hey, you know, I'm going to go buy Nvidia and hope it goes high. I'm 100% all risk on. I think, you know, people who come to the channel, they're definitely definitionally taking the time to to educate themselves in their spare time by watching videos of strangers to tell them about macro. So, I think I I'm not being uh arrogant about I think it's a more thoughtful audience. I think it's a more well-healed audience. You know, we don't have people here who are in crypto apps betting, you know, five bucks and they're probably not in poly market in meaningful ways either. So, I think that resonates. So I want to get to a ne an important next question. There's certainly enough videos in the world that talk about the bull case or we would say the bull macro case for gold is extremely intact. >> Uh and unlike other periods where you could quote tame inflation by jacking up interest rates to the point where real rates are very high which is doomsday for gold. Sure. If you do that in this environment on $39 trillion dollars of debt, you it's every every hundred basis points if you were to do a pole vulkar and go up 10 points. >> Sure. >> It'd be 10 points on $40 billionish dollars and you would have another $4 billion of incremental debt service per point. >> Yeah. >> Okay. So, it's not possible that we could do it. >> I meant four trillion billions into trillions. 15 years ago that case was not as clear as it is today which is again why back in >> 18 years ago >> and by the way if I could say anything important to the audience I think I just said billions instead of trillions these numbers are in trillions >> trillions um this when when you read this in the press I at least want people to think about it when Paul vulkar raised rates GDP debt to GDP was 30%. The impact of raising rates was meaningful. The country, even in a near near recession, was running a pretty much a balanced budget each year, if not a surplus, even in that market. >> Right here, we're running a $2 trillion deficit. A trillion of that is interest. And if you raise rates even 1% more, you're going to add $400 billion dollar of interest on a rolling basis, which just compounds the amount of deficit and then compounds the debt and you're in this sort of doop. That is just math. You don't have to be a Democrat or Republican. Sure. You don't have to be uh uh someone preserving wealth. You don't have to be somebody whose only growth go. That is true math. And that goal is a monetary asset. you said against the dollar, against the euro, against the yen, against this maybe not the Swiss Frank, but against everything else. That's what gold is competing with. All this sovereign sovereign debt, sovereign default risk and debates, which is almost now inescapable because we're we're trapped. >> So it's it's a terrible problem. >> Terrible problem. And actually a political cycle in the US or or political timelines in the US in terms of elected officials not designed to tackle the problem >> makes it more unsolvable because you turn it into a political problem. It's completely >> and what do you think in a a conflict in the Middle East with Iran as to our level of debt and our cost structure and offsetting anything that we might hear about what tariffs have actually done for us over the last you know year. Uh I mean this problem is here to stay for for for now. That's at the heart of everything. That's the fundamental case for why gold >> can you construct a bare case even in your like >> yeah I think constructive I think what happens >> I think that that actually there's a few things that worry me that actually are are potentially headwinds for gold. Now structurally I think that case remains but price performance can be completely impacted and we just touched on it a little bit. If the central banking community says, "Look, things are dire and I need to really find ways to fund our economy, deal with homegrown challenges, not worry about sanctions." That's that's what everybody wants to tell you is driving central banks to buy. They're worried about what's happening with their local currency, their low local inflation rates. >> The oil at $120 a barrel, that's a problem for them. If that's sustained and this this becomes a global crisis, if they need to turn to the liquid instrument, they could be moving quickly to sell a lot of gold. That could actually provide substantial headwind to gold. >> That would be the buy opportunity of a lifetime. >> And actually, you're right. You you would have to be in a position to understand that you'll have to weather a bit of price movement. Yes, >> we've seen a little bit of this, but this would be additional because that would turn >> that would turn monetary stress into default risk, >> right? >> And so definitionally, if you're saying there's ab there's sovereign default risk become so meaningful that central banks now have to sell their gold, their one ballasted asset, the one that they've been accumulating. >> That's right. That that's like when the CEO of a company with horrible finances goes in there and says listen we're just going to sell a little division to stave off bankrupt and then you know what's that saying that some economist says bankruptcies happen slowly then all of a sudden do do I think we're there no but I think that there's the potential for that and that's why we keep close watch on what the central bank behaviors are monthtomonth quarterly and annually and actually that's why we do the survey to also gauge how we can help them understand when and how to continue to think about the gold market going forward. So, I think that we're not there, but that's a signal to keep a close watch on. But I also think that the media has grabbed a lot of the data that everybody's producing. Oh, 1,000 tons, 1,000 tons. Everybody's telling you how big the space is. And then when we get to 890 tons and 2025, everyone's like, "Oh my gosh, the market's well off." It's like, that's a big number still. It's like a quarter of the demand, and that's actually at record setting or near record setting levels. So, we're still seeing a healthy appetite for gold from the central banking community. But watch the space because this is where US rates and what happens in the US market isn't the only thing that could provide headlines. Now, the second thing that we haven't seen enough of in particular in markets that are seeing these high prices is recycling. And what is recycling telling us on a global basis? Recycling of gold, which can be as much as a third of the demand or the supply I should say, coming into the gold market. That tells me that the large emerging markets that have huge amounts of gold held in the form of jewelry in their savings, unbankable people save through jewelry. They're coming to the market saying, "I need it. I need money and I need to monetize this." That shows up in the form of recycling. The recycling numbers have been a lot smaller than we would have expected, which tells us two things. number one, they're feeling pretty healthy in those, you know, markets where people use jewelry as a savings and secondly that that actually maybe they see continual appreciation as well in the price of gold. So that's actually a good signal for us. Yeah. >> But if we start to see an increase in that that means again in those markets where those consumers use jewelry are saying I need money. >> Yeah. >> Right. That's another big headway. I >> a few more risks that are out there. But but >> you know, you see it a lot in these emerging markets. You know, the Chinese are gigantic buyers of this and then you you read articles, I don't know how many years ago, probably eight years ago now, saying, well, they're moving into property and then they got slammed in property and you know, then >> and now you look at the volatility in the stock market and you were in Alibaba and then the government says something and then the stock is half of where it was, you know, three years ago >> and there's that gold and it has performed. Uh, interestingly I sometimes feel like the risk is the price like strangely because how many Americans are momentum buyers and they're so quick to pull a trigger that if for whatever reason the price went down it would get beat up badly by US retail like see I told you it was a niche accident the Bitcoin people would say it was a stupid idea to own a barbaric relic and this and that >> and then you know you can go into a bit of a winter because people just don't like the price action even if the fundamentals are good long term and I still think these the macro piece is what gives you the conviction to buy when things are low >> and that's not changing anyway you were going to finish here as I've interrupt but you you brought it you brought it to the the the kind of other factor that's at play here >> and and and I kind of keep a very close watch on how predominantly the US economy and the US outlook is going to develop I I personally have a view that that the real game is just a USChina game full stop. And I watched both those markets. You know, I sat in Asia for 18 years of my career and and and was fascinated by the entire region in particular, the prowess of China. The fact that the president's moving the meeting with Xi, he's attempting to move the meeting with Xi, President Trump, um means he's not ready. Means that the game's still a foot. There's an attempt to try and figure out how to get the US economy to land the stick the landing as they say. Come out on top, look good, the numbers are feeling good, growth in the economy, the debts under control. I don't see that being a likely scenario to develop. That's another environment for people having just lots of comfort in risk assets and moving into risk. just don't see us having that comfort of sticking a landing for an economic no inflation, no no recession, no stagflation, jobs are growing, companies are firing on all pistons. You know, I still think there's huge opportunity for risk assets and investment, but I still feel like things are going to be chaotic at least for a year if not longer in terms of policies and behaviors and attempts to kind of try and deal with trade related issues. I just don't see how we're going to nail it. Particularly when the Fed's sitting back saying, "I was looking like I'm going to cut rates." With one move in the month, they basically said, "Don't expect a cut this year." >> See, I I I I see it shortterm the same. I see it medium-term different. I I think whether it was intentional or unintentional, the damage that has been done to existing systems and we talked about monetary systems are no longer on a pendulum. >> They're on a shift. Mhm. >> And and I think the investment world is stuck a little bit in the old operating system and now we have a new operating system and that new operating system is uh an absurd global debt position where if this war lasts two more months, Pakistan will be bankrupt, Egypt will be bankrupt. And I'm not playing I'm not being uh alarmist. I mean they are already in at IMF and thinking about restructuring. You're going to see >> sovereign default accelerate. >> You see the world, you know, you see uh NATO alliance, the thing that kept the world safe for 80 years, mess around with one of those countries, World War II is going to be 13 minutes long and everybody loses. And so you knew that nothing would ever happen. You couldn't go take Greenland. So you've you've upset that apple cart. You've upset global trade and you have and then all of a sudden in the middle of all these distractions the thing that everybody needs to manage but there's no regulation that I'm aware of is artificial intelligence which is coming to eat white collar jobs at a pace that we it'll be head spinning when it it's barely hit escape velocity. >> Sure. But if you are an entry-level coder, if you are an Uber driver, Whimo is coming. These things are going to reorder society uh and investing in a way that I don't think people are really balanced to do. And here's the here's the thing that troubles me. I liking this show to talk about, you know, what keeps you up at night? What do you solve for? One of the things that really bothers me >> is when I have this conversation at a dinner party, I'm viewed as a pessimist. or I was at another place and and I was talking about this and my wife was engaged and we were very animated about what's going on in the world. Not a big fan of it. And one of the other people said, "Well, enough about that. You know, how are your kids?" And I'm saying to myself, "Yeah, because Americans don't really want to hear unhappy things. We, you know, no one here lived through war unless you're older in a Vietnamese in a Vietnam, some of the closer war, that's 1% of society is is our soldier class. the other 99 don't do anything don't do any service and so it's sort of uh it's a challenge it's been a big challenge and actually have been a bit disappointing for me in my career do you face any of this or is am I being too sensitive >> well I don't think you're being too sensitive Steve I've never known you to be a sensitive too sensitive of a guy sensitive the accusation I did too sensitive >> no one calls me sweet eater but that's okay >> I don't think So I I think you're spot on in terms of Americans not liking bad news. That's uh that's just the reality of a pioneering spirit in this country where we can always win. Are you a Jets fan? >> Of course. >> Yeah, they well known. Check my LinkedIn. Long-suffering, very loyal, loyal to a fault. >> So you're guilty of exactly what you just accused these people of Jets. >> Yes. Yeah. But it's only football. >> Always an optimist. >> It's always football. It's only football. You know, I can but but but again bringing it back to a more serious tone, of course people people like to hear about winning stories. They like to hear about things working and at some point you swallow your medicine. >> Yeah. >> Right. And actually we are we are swallowing our medicine. And I think actually the things that we've seen that have changed and I'll make it simple for everybody to understand. Most institutional money employs consultants, investment consultants to help them out. And guess what? they're finally coming around and saying, "Yeah, we need to look at real assets, including gold, maybe some other precious metals." And you're like, "Well, that's a win. We're not going to get a big high five for that win, but at least they're now moving into this discussion much more sensibly." You I've been at conference after conference where they said, "Well, we don't understand the asset." That's a lazy excuse. Or, "We don't think it works." That's also a lazy excuse. We can help you figure it out. And by the way, so can Black Rockck, so can State Street. So can every other asset manager out there. just put the time in. >> And so >> we do find ourselves telling people the Y gold section came out of our brochure. >> Sure. We we we don't feel at least to the institutional counterpart do >> you know in retail you do but you're not really fighting an educated mind I think those people don't know much about anything and yet there's people who want to do the work and there's people who you know want to look at the ads on Yahoo Finance and invest because something is they're tracing things that want that are going to go up. Let me tell you how I how I deal with some of those similar situations when I'm in that social setting, that dinner party, and somebody tells me, you know, they invest in equities. And you know, I was at an event one time and somebody was talking at nauseium about picking out of the 60% of their portfolio in equities and allocation of Indian equities, which was about 2% of the 60% and how they have to spend six months on the ground doing due diligence and all this work that they go into it. And I just looked at him and I said, "You simply will spend that much time for that little amount of exposure in your equity portfolio, that little sleep. And you won't give me a week on gold? Shame on you. That's what they need to hear. >> Why wouldn't you look at it? Why Why would you Hey, I've got something that might work for you." Oh, no. No thanks. I don't want to hear about that. That's crazy. Just take take a day. Take a week. >> I I think it's the brand. I think first of all it's it's a brand that's viewed get Americans are about happiness and winning stories and American exceptionalism. >> Hey, but isn't that a gold medal? I mean, come on. We we have gold stories that are winners. But I think the actual >> Egypt Ela video did it for me. >> I think the worst thing the worst thing is is everybody in America not only has a winning story kind of a mantra to their attitude, they also everybody has an opinion like ourselves included, right? And we all have an opinion and that opinion has a right. Yes, but that all joking aside that that is actually that's actually that's part of the challenge. People have a fixed idea of what they think gold should be doing and how it should be doing it, right? Hanging on to this idea that it's just a safe haven asset. Okay. Well, when people get rich, they spend money and they spend money on things that are nice. That includes gold. Economic prosperity is actually a good environment for gold to grow. >> I I I agree. All right. We've probably exhausted the gold uh Yes. >> the gold thinking for the audience today. So, uh, what's what's what's keeping you at up at night, whether you read it in the paper or you hear it at an executive team meeting at the World Gold Council, what do you take home and like >> Yeah. You know what keeps me up at night? Um, two simple things. I think we're a structural shift in the gold market. And I think that I'm worrying that people aren't necessarily understanding that. We had years of gold being interesting but not as interesting and as well accepted as it is today worldwide. >> Y >> so everyone's like well these volatility numbers are concerning. When I see gold's volatility it's much higher than it than it than it should be. I'm like okay well what should it be? And and I I think that we need to accept the fact that when you become more mainstream, when investment dollars globally become more active in the market, there's not a problem with having a higher level of volatility like other assets do as well. You just need to get people to get that through their head and understand it. >> Yeah. >> Just because it was a 10% annualized wall or 15% annualized vault 15 years ago doesn't mean that's where it needs to be today. You have a lot more action. You have a lot more attention. You have a lot more interest. a lot more consumers. So, it's definitely something that keeps me awake because I'm trying to think about how do you change that mindset because even the industry talks that way and that's a bad way to think. Like we're we're mainstream. You know, I've been on stage and I've said to people, why are you upset over volatility in our prices? This is a good thing. We're on the front page of the paper. People are talking about us and they're using the asset. Enjoy the moment. So, that's one thing that keeps me awake. And the second structurally something juicier. Well, it is. It is. But you're going to probably not be excited about this. I get excited about this work because China's a huge gold market. India's a huge gold market. Asia's a huge gold market. The Middle East is a huge gold market. London's a huge gold market. And it's still too fragmented for us. >> Gold is gold no matter where you have it. The gold you sell your clients, the gold we use and the hold in the ETF, it's the same thing. That's the beauty of it. I think that we need to be faster as an industry fixing these pockets and these clumsy things that go on in terms of moving gold around really bring it together and and and create a much more funible gold market. And I think that that worries me because it the longer we take to do that, the slower we go to get that done, the more relaxed the industry is to adopt technology and change and transparency, the more risk we run that the BIS and others say, "Hey, you're not a high quality liquid asset. Therefore, banks can't trade in it without heavy capital charges." >> Then you have people closing desks. You have people stepping back and liquidity starts to languish. things start to happen that you don't want when you're actually growing as an industry. And that's the thing that bothers me the most and keeps me up the most is the speed with which this industry wants change. >> You know, it's it's very interesting how two long-term market participants uh see the issue differently. Uh if we were in two separate rooms, you said, "Well, what's standing in the way of global adoption?" uh you would you just said what it would be like there's it's got to have you know a lot of transparency across markets easily of moving metals around etc etc it has to have like an institutional you know the same sort of institutional infrastructure that other assets have and frankly that's what we think GBI and GBI direct does but um which is great by >> and and and and we do we have cleansed it for large broker dealers and wealth managers who can now you access, right? Trusted access. >> I I think I think it's trust and access. I think the that no service was done by this question. Is there gold in Fort Knox? And so people doubt from the very fundamental thing is it there? We had a guy come to us today to propose a loan system for the gold that we store on behalf of clients on the platform. Like just offer it as another product. I said, 'There'll be no take up. He said, ' What do you mean there'll be no take up? It's a very liquid asset. I said, people aren't buying it to borrow against it. They're just happy they know it's there, that it's trusted, liquid, and we can deliver it to them as long as they can prove their address anywhere around the world. So, for us, we said if we want the adoption, it would be like there would be every broker dealer would have it. It would be simple as poss. Um, you would be out in every pension fund talking about how every TAM should have it. And if it was owned and trusted more, then there'd be nothing anybody could do. It'd be more embedded. >> Sure. >> And so, you know, but it it takes a lifetime to get there, especially in the United States. And I thank I thank the crypto bros for raising the profile of sound money. And they said it was Bitcoin, but little did they know it would maybe it was certainly gold, maybe both. And they were putting a lot of marketing dollars into that messaging. Uh I thanked our political parties for never being able to balance a budget, never always wanted to cut taxes. So there's no notion that any fiscal or monetary discipline in this country. And that's and that hits the news all the time. >> Sure. And so those things those two things have one is out of our control but one is in our control as an industry. So you solve the platform I'll solve getting it in a very effective way all around the world. You could help me do that. We do pay commissions. Uh but I know you can't get one. All right. Personal question. So you and I we mentioned there were we're you know peers in our career long long history on Wall Street turned into uh a medals and real asset entrepreneur and you work for an organization where you did something entrepreneurial in it. Um okay what are you solving for now? You have a lot of you got you said homes. So it sounds like you got a couple you got real estate you got gold physical gold. Yay. uh and you have a lot of respect uh in this industry. Probably the most consistent and uh fact-based voice that exists here. You know, a lot of people want to yell, but you're sitting on top of an organization that measures. >> Yeah. >> So, what takes you home? What do you uh what do you want to do from now? So, I've actually been asked by the organization to direct my energy to see if we could have more impact um on a policy side. And actually, it's some it's a it's a line of work regulatory from a policy perspective that's actually uh been something I've had to do in times, but I'm giving it a lot more concerted effort. >> Yeah. So that component which is bringing that education to people who really do need it which legislators and administration in Washington simply say hey look let's let's get into the brass tax here >> and and listen to what has to be heard so that we can tackle down opportunities and challenges. I'll give you one opportunity if we can open up mutual funds 40 act registered investment companies. There's an open piece of legislation in the Senate now. We're getting a companion bill in the house to open up 40 act to recognize gold, silver, platinum, and platium as good income for registered investment companies, mutual funds. That means that you can now call Vanguard and simply say, why does my retirement account hold gold? >> Right? And and Vanguard can say, "Why don't we hold gold?" And actually, that's a big opportunity. You talk to the people on the hill on that and guess what they say? That makes a lot of sense. Why isn't that the case? Don't know, but let's fix it now. >> Yeah. Now on the flip side, we know that gold can be used by a lot of bad actors for a lot of bad things. So we are supporting legislation that is addressing directly addressing gold at the artisal and smallcale gold mining level funded by nefarious actors to support the you know illicit finance drug dealers who are using bad practices like mercury in other types of processing for for the ore using child labor just really bad stuff that's a potential risk that if we don't tackle that down and get some clear answers to that could be a big black eye for the industry. We don't want to end up like blood diamonds. >> Yeah. >> So, we need to fix that. >> So, those are two bodies. I was I I'll close this by saying >> on the second one, um I would say I would I'll ask you to consider a a piece of that mission that's good for gold, but that's just good. >> It is. >> Right. And I think I think what's ending up happening a little bit and I talked about a lot about this with Anthony which is we don't you know we're not it's good in a strange bittersweet way it's our asset class is performs price performs better when there's bad things going on. The budget was balanced and our government was awesome and the world was at peace. No one would really want it except for jewelry because it's pretty, you know, not so much of a store of value. But I think when you get to our position, part of what you want to have in your corporate interest is something that's good for the world because you're not going to run for you might be a policy pro, but you're not going to run for Congress. Me neither. And so you want to at least when you're not necessarily solving for maximizing the amount of money you have because you know your kids college is paid for, then you start to say is your work important and meaningful? And of the two things, yeah, I'd love to see gold in mutual funds. By the way, if you want to make it convertible to physical wear your backend, please do. >> Absolutely. And >> I think people would want, you know, to be able to take the delivery out of it, but it's complex, right? It's 401ks. It's Vanguard. >> But let's just start with one simple move. Get it in there. >> Um, but the idea is to solve for something a little different. I'm I'm no longer figuring out I want to maximize return. I already said that. I want to make sure that I that me I'm safe, my family is safe, and if I have a little extra time, I would like to have a job that allows me to do something good in the world and still get paid. And it was the second piece of what you said. You know, the reason you want that to happen is, of course, because you don't want gold to be a blood diamond, but that's the second piece. The first piece is you'd like to not see naroterrorism, you know, finance. You want to see people mercury poisoned. I I don't want >> that is an awesome goal. >> Our organization, nobody wants bad people to profit off a $5,000 gold price. Oh, and by the way, the humanitarian side is equally as important. And that's actually key. >> But but remember, at the heart of all of this, this is the thing that actually drives me is having the ability to do my absolute best to make sure it's simple to understand and clear for people. And actually, sometimes people want to over complicate things. sometimes they can't help but over complicate things. That's the real drive. I've got kids. You've got kids. We've all, you know, got a lives of family. The key thing is to say, "Hey, look, let me just make this easy for you to understand there." And that's what's key about this for the gold market. Just make sure people don't go off with old ideas, feel uncomfortable to have the conversation at a dinner party, just get it, look at it, make a decision on it, move on, and then revisit it. Yeah. >> When you need to. Just don't don't let it drop by the wayside. because it's something different or hard. It's It's not. It's actually pretty simple to understand. >> I agree. >> And it's fun. >> Okay, that was a lot. That was a lot. >> I think uh I I make a bet that most of your podcast talking gold, you don't get to this place. Um but it's been a joy. Thank you. I really appreciate it. >> Thank you very much. >> All right. Great. Thanks. >> That was great. And I hope everyone enjoyed it as much as I did. Uh, I want to thank Joe now for his time, his intellect, his insight, and letting me peel the onion just a little bit. Something I'm not sure he was wholly used to. Uh, I hope it was useful to all of us. I'm Steven Feldman. This is Open Position.
Gold's Volatility Is Actually A Good Thing
Summary
Transcript
I'm Steven Feldman. As many of you know, I'm the CEO of Wealthon. A guy who's happiest sitting in his unfancy corner office running businesses and protecting his privacy. Lord knows nobody thought the world needed another macro or investing podcasts. But with a rare combination of hubris and executive privilege, I created one anyway. I called it open position. And I mean that in both senses. Every guest on this show carries an open position in markets. But what I really want to know is where they're exposed in their thinking, their convictions, their lives, their other open positions. How they decide what they stand for and what they're solving for. Not just in their portfolios, in everything. After the first episode with Anthony Scaramucci, my favorite comment said, "It felt like being at a dinner party with both of us. That's exactly the goal every time. Now, let's get into it. My guest is Joe Cavaton, someone I've known for over a decade. He's the senior market strategist for America's at the World Gold Council. And before I go any further, I want to pet an elephant in the room. Joe works for the World Gold Council, and it's his job to be an advocate for gold. I am the co-founder and CEO of GBI, a physical precious metal infrastructure. My business does better when people buy gold. So, one of the things that we're going to talk about and again petting that elephant in the room is to try to figure out if we are talking our book. Joe, you and I uh we've known each other for a while and interestingly we both have conventional finance backgrounds. >> Correct. >> Uh you take a job at the World Gold Council. There's nothing more gold in it. Is it because the only one who gave you an offer or is it because you wanted to be in that asset class? >> So the real truth the first of all thanks for having me on. It's great to be here. >> It's good to do it this way. >> It it is. >> So the the the simple answer is I was intrigued more than anything. So the World Gold Council as a membership organization representing the world's largest mining companies also advocating for gold and education on gold also has a funding source that comes from two very pronounced ETFs of which at the time was one. And they intrigued me because they had an ETF strategy that they needed help with, but they also wanted to get a little bit of the markets DNA into the organization. a lot of mining and precious metals DNA, but that DNA of what you've just talked about, what you have as well, that market DNA, that was what was looking what was being offered as well as the opportunity to talk about gold. So, I had an opportunity to get back into the market with gold, but also upstream talking about mining, you know, talking about refining, talking about a supply chain, talking about things that I did when I was a long time ago when I was a banker. And that plus the ability to work on ETFs, the markets, talk about this asset class, which is, you know what, unique. Now, look, this is factual. It's the only precious metal that has the size and the scope and the behavioral patterns that I think we'll unpack here today that'll actually serve you really well as a monetary metal. Purely as a monetary medal. >> Hey, you you almost got to talk at your book for a sec cuz we're going to pull you back. Okay. Right. So when you so you walk in the door, you you you in general you see the challenge of the job. Yep. >> Uh and like many people you take a job because you may not be expert in what they do, but there's an opportunity that you sense. It's more than just a paycheck and benefits. But do you walk in the job with an institutional background saying, "Oh, gold is sound money. It's a monetary asset." Or does that something you had to learn on the job? or was part of the attraction of the job that there was a certain environment and there was an unmet need and you were going to help create that uh to meet that unmet need. >> So remember we when I was with Black Rockck had a gold product, we had a silver product. We were actually pioneering these types of products. >> Were you involved in those projects? >> Absolutely. Absolutely. So we do know we do those those products. We do know those >> those those those assets. We do know what the price behavior in terms of the cost and the management fees. We all had comprehensive discussions about that. Change the underlying benchmark from the comx price to the LBMA fix to give more continuity and linkage not a necessary differentiator but linkage back to the large liquid OTC market. So there was definite familiarity to it. there was definite discussion in that context of how precious metals, real assets fit portfolio allocation. So there was definitely a knowledge, but you're also in a world at a large asset manager where you're pushing bonds and you're talking about global equities. And so you're all over the place trying to figure out valuations and how you can help people deploy their money to get into these asset pools and deploy their money and and pick up ETFs. So you have a lot on your plate, but gold was on that plate. And so it wasn't completely unfamiliar to me. not unfamiliar, but did it feel like a did it feel like a mission? Who, you know, it's an interesting question for almost anybody who takes a job in financial services in a niche, right? You don't have to even be a gold person. If you show up and my alma mo Goldman Sachs and you're on a bond desk, you might even not even know what a bond was when you got on the desk. >> Sure. >> Five years later, you're making a living and you're telling people bonds are great, >> right? >> You're a bond guy. You're talking your book. you were in the gold and silver ETF business before you even get was was it did it feel like it wasn't working at Black Rockck? Were you able to if your mission was I'm going to protect customers because they're underallocated to gold, a very important asset in a portfolio? Was it that piece? Were you trying to say my job is well done when more people own this or my job is well done when minor shares go up? What what what was the job well done for you? That actually is a great question. The answer to that question was pretty simple. What's your problem and how can I help you solve it? And that was why when moving away from BlackRock to the World Gold Council, that same that same question, that same approach started to make a lot more sense for me with a narrower focus in terms of what your objective is in terms of an asset pool. And then you started to think about, okay, so what am I hearing when it comes to problems? Well, I'm worried about inflation or I'm worried about, you know, devaluation of the dollar or I'm worried about liquidity risks when markets are selling off. all these factors and you start saying okay now am I positioning this asset gold as a commodity or is it as a precious metal or is it as a you know a dollar monetary type metal and we started trying to apply all these different lenses and so in a in a in a way I took the same behavior at bio rock and applied it here to a narrower scope of an asset >> and actually learned a whole heck of a lot with the team listening the clients and asking the right questions and starting to say Okay, so people are concerned about longerterm inflationary considerations. How do we help them with that? Well, we can solve that problem. We're not going to be the only way to solve that problem, but we can fit into the mix. We can be part of the opportunity to solve your problem. Now, candidly, you know, I've had those moments and so have my colleagues where we walked in. I I remember a story that was shared with me by one of my colleagues where he was at an event, listened to one of these very prominent pension managers on stage talk about all the challenges he has and and my colleague walked up to him and simply said, "Hey, I've got a solution for you." And he's like, "What is it?" Handed him his card, said gold. He said, "We don't buy commodities." Handed it right back to him. So, we're up against it, but actually we've made a lot of progress over the years, and it's not easy. >> No, I I keep pushing it. I I I share that sentiment and and I'm sure the audience, you know, doesn't want to have a career session. They want to get to the meat of it for two people who are in the gold space. We we'll get into it in a second, but I would say that one of the single most frustrations of being in the gold business is almost it's not even that people don't like gold, it's just a general close-mindedness and a a narrative that got created a bit. And you know if you read what I've written over many years and it's gratifying that much of it has been right and I wasn't talking my book was that take the 6040 mix and you know in that 60 and 40 there's nothing that says you know gold but you take ask those same people you say well do you have life insurance and they'll say oh I have life insurance but why well salesman came up and you know showed me the risk I have no interest in dying uh but I have interest in protecting my family and I would say Do you have any interest in protecting your portfolio the same exact way? What if you die the day that the stock market's down? Don't you want to have some asset? And but honestly, it's taken a decade to break through. I be in Asia, they have it culturally, we don't >> and and the only thing that's ever hurt my feelings during this whole time is to me to do the honest work, not be talking my book. I did the job because I believed in it. Not talk my book and have people accuse me of talking my book. Meanwhile, if everybody had listened to me in 2022, you'd be up 100 to 200%. But there's that. >> Let let me let me actually just give you just a few additional thoughts on this because, you know, we do hear this whole we we we don't like to talk our book, but we we do get the you're the barber that tells me I need a haircut. That's the kind of expression that we hear. I like that a little bit more than tonight for me. >> So, so let's let's talk about a couple of other asset classes. You ever talk to an emerging markets uh portfolio manager? >> Not often. They don't. Okay. They don't get honestly. >> If you did have the opportunity to talk to them, guess what? If you loved it at these prices, you're going to really love a 45 down. And by the way, this is the future. >> Yes. >> They're going to they're going to keep pushing their agenda. Everyone does. It's just a question of how and what they're pushing. So, I I do think if if margins on gold were 4% that it would be like crypto. would be like you would have all these we'd be sponsoring we'd be on F1 cars and people would look at the brand. I think the problem is that gold branding is you know we needed higher margins to invest in marketing. That's what the crypto guys >> Well I think actually to your point on this one of the things that I would say and this is not necessarily just looking at the big worldwide asset management companies or financial institutions that don't necessarily promote gold. I'd put a little bit of put a little bit of this back onto the gold market itself. Uh, a lot of people that we engage with need a lot of encouragement to make change. >> Yes. >> Change because it's easy to be lazy. >> It's it's hard to kind of do something different. >> Look, we do a lot of work with the London market and you know there's there's comfort in what's small, safe, good enough today. And and you got to sometimes you have to push that. under our leadership, David Tate, he's pushing the agenda to simply say, "Hey, look, if you want to die on the vine, die on the vine. But we don't think you need to. There's an opportunity to make change." And that's >> pretty substantial work and that takes a lot of time. So, you got to keep at it >> and it's going to last longer than you and I. >> You bet. >> But, but you have concerns. Gold's only a few thousand to keep pushing the industry for change. >> Before we get into the interesting piece, we're making we're titillating. We're letting people understand where we think gold is going and what this current situation is. So the you've worked in the ETF business. >> Yes. >> And in gold ETFs, you uh you work now for miners. That's technically their product, but the World Gold Council is a mining organization, not truly a gold organization where you get right down to it, but that's the product, >> right? >> And then there's physical gold. So there's physical gold, ETF, and miners. You have I don't know what your net worth is, but you have an investable portfolio and it's $100. I hope you're doing much better than that. Out of that $100, tell me what you have in each of those three sleeves. >> So, in my portfolio, the least allocated asset is bonds. >> Mhm. I'd say to you, I'm 60 on equity and I am probably 30 on real assets. 10 on bonds. >> Okay. >> And real assets include gold and and real estate. >> Okay. And between in gold is how about ETFs, physical gold, miners? In your articulation in your portfolio, what's the dominant one of those three? >> How would you feel if I told you I don't own ETFs? >> Okay. I'd say you are a smart smart man, Joe Cavatony. That's what I would >> You want to know what though? Let me be Let me tell you why I don't why I I I don't choose to own ETFs. I can own ETFs if I'd like to. I just don't because I actually have an affinity and a place in our lives for a physical goal. And that's exactly what I have and and I have it actually in kilo bar format. So my wife and I kilo is $150,000 give or take then. >> Now it is. Yeah. So Joe's, you know, Joe's now rich. >> No, I tell you what it but more important to that is is the fact that it makes up between real assets and equities. I have a kind of a different profile than most people. I don't necessarily feel the need to hang on to bonds at this age. I'm happy to take a little bit of equity risk and offset it with real assets. >> Well, well, I like to hear about the real asset side. You know, Wealthon has really leaned into real assets. Like that's if financial education content is the major, you know, that's the theme. Our uh that's our business. Our major is now real assets. And so uh a lot of you know starting in we started out really just macro and now we're saying well how do you turn that macro thought in or news event into an insight and what does that mean for investing and especially what does it mean for real assets and it's a pretty good segue because the world is a macro world. became I I I you know I I I'm a I think of myself as a professional investor in my life even though I'm a business runner now but even in that business world I'm allocating capital I'm allocating risk you know guys like Buffett say you know it doesn't matter what's going on in the world it's about the companies that matter right you they'll perform they won't perform Costco is likely to perform in any market and now I'm going to pick Costco Coke you know that's the way he picks and I think that works in many markets but I think we're in almost like an ultra macro market and gold is one of those assets that uh expresses itself best in a macro market. I think what happened with my and the setup is I think what happened is the macro met momentum >> and then went to 5500. >> Sure. >> Okay. Take it from there. So 5500 momentum macro but still no bombs dropped in Iran yet. So tell me tell me what's happened and what your interpretation what's happened from 5500 to 4500. >> So I think there's a few things to to unpack there and like when you think about the moving drivers for the gold market. You've got tactical movers and then you've got the strategic movers. We would agree that the macro is the strategic mover for gold and that case is still fundamentally there. >> Yep. But what I think you've got playing out over the last, let's call it 5 months is a little bit of excitement, a little bit of energy around rate cuts, a little bit of expectation that that the world's really going to move towards a much more favorable environment for the gold market and actually leverage trades, momentum, speculation, hedging, and jumping ahead really in big time. Our signals are telling us that momentum was a a factor here. I think we're we're off on our modeling a little bit and I think all models always need to be tweaked. >> I definitely think they're they're they were understating the amount of momentum and speculation that was taking place. >> You have silver which was finally catching up to gold. I think that that excitement brought that level of I don't want to say gambling, but I would say that momentum into the speculation that was taking place. We were hearing of levered trades, accumulator products in the Asian markets, lots of people plowing in, getting really excited about the whole idea. Well, the whole time the fundamental case for gold was still going on structurally and we were bought up 30% in January. People ask me, were you surprised by the 20% correction? No, I was surprised by the unexpected, unrealistic 30% run in the price. >> Yes. >> And I think the other thing to take into consideration, Steve, is that this is a global market. There's a lot of volume, but these pools of liquidity can be fragmented. >> Yes. >> You know, 35 days are the 50 days that we've t traded this year. Little over 50 days and a little over 35 days. Most of that's been pushed up by the Asian market, the Asian time zone. Yeah. So that's what's pushing us up and that speculation definitely played into it. Now as things started to change and we started to see and hear that the Armada, we were warned twice that the Armada was making its way to Iran, right? Making its way to the Middle East, things happened. The conflict kicked into gear. So the 30% the bubble come off. The second wave is now what we've been seeing, which is the Armada's moved. you know has moved and it's attacked and actually we now have conflict in the Middle East. The oil industry the impact of oil on markets in particular Asian markets emerging markets economically is much more substantial than we could ever found and that's actually put a significant amount of question concern and issue on the deleveraging that's taking place out there. People are pulling out of risk assets and they're worried substantially because high oil prices will impact those markets more than you can imagine. I I have to unpack that a little bit because I I'd say that I wasn't following 100% so I I want to help interpret for the audience. >> Sure. >> So it's in this deleveraging and so now there's a do you think that so are we saying is that when gold stopped going up for whatever reason because there was a hint that rates would be higher for longer and that's one of the things regardless of real rates regardless of how those increased rates increase debts and deficits and debts. So it was like there was momentum and waiting for a narrative to change it. >> Sure. >> Okay. And I they found it and then it corrected because it had gone too far too fast. And but are you saying when the bombs dropped and oil went up that the Asian demand which would typically be oh my god bombs buy was oh my god everything's down we have to liquidate. And the only thing we can liquidate easily which is up and still have a gain and feel pretty good about is gold. Is that what happened? >> So yes, two things. Immediately on the bomb stroing the geopolitical reaction took place. So you did see the pop in the gold price and then the reality sets in and then the real fundamentals of what this could look like for us economically longer term inflation. >> Yes. >> Cost that's what kicked in second. So you have that immediate reaction flight to safety safe haven asset. I I don't like to refer to gold as a safe haven asset. I think it's definitely a comfort factor that people take from gold knowing that they can react and have it. But I also think that that geopolitical reaction kicked in and then it popped right back off and you saw the realization of what does it mean if the oil from the Middle East is constrained for consumption around the globe. More impact overseas than in the US. We're going to feel it at the pump here, but they're going to feel it across the economies. They are heavily oil dependent in emerging market economies. >> So, in your mind though, this isn't this this is like a a discretionary item demand in Asia. So, if Asian people, the Asian world isn't feeling uh affluent. They're going to buy less gold. They're not moving around. They're just saying, "I'm under pressure. I'm actually a net seller because I'm getting out of the markets. I'm going to sell everything that's not bolted down." I've always wondered is that there so there's two things which is I'm selling I'm not buying and I'm reallocating. >> Sure. >> And I think what you're saying is people actually are selling because they are have liquidity issues >> in other parts of their portfolio. >> There's definitely think about the fastest area of growth that we've seen since 1990. So in 1990 what 85% of the demand for gold that we would track at the Royal Gold Council was in the form of jewelry mostly in unbankable markets and also for that matter the North American markets. Whereas the fastest growth then in investment in investment vehicles. So you've got record flows in ETFs in China. You've got a physical market that's seen record flows in terms of the Shanghai gold exchange. You have futures contracts and you've got pensions or I should say insurance companies that are all coming online allocating in traditional mechanisms using financial instruments and physical gold. >> Y >> that's the investment landscape. This is not the dowies and I'm holding it as part of my >> you know my physical ownership. So these are people that are actually investing more properly and thinking about portfolios more properly. And I've just talked to China, but there's Asia, which includes Hong Kong, it includes the wealth platforms, India, etc. So >> I feel like I'm interrupting you, but I want to turn this a bit to u the central bank. So okay, so that the most non-momentum buyer on the planet >> is the central bank and and certainly buyers of size. And again, you know, it's interesting because we're always trying to relate these conversations to our audiences. Are they on the one side, there's the guys who've got like the Robin Hood apps and they're day trading and they tell people on dating shows that's what they do for a living. >> Y >> on the other side of this is central banks who are only in what I would call harvest wealth, excuse me, a preserve wealth mode. They are the most conservative. It's almost they're running it like reserves. They're >> actually it is reserves. It's right full stop reserve. So they're running 100% for safety. I doubt there was a central bank that sold during this period of time unless they were under unbelievable distress. >> Maybe Pakistan, but I'm not positive anyone would be selling. And so, how do you reconcile the fact that the the person who is going to take the most risk? They're all net buyers around the world, but that doesn't seem to be the piece that penetrates the retail investors who's trying to do not necessarily the same thing. They're not just saying, "I just need to preserve wealth. I have to be bulletproof." But shouldn't those people at least take the signal and say, "Well, if I'm 10% gold, I have enough ballast in my portfolio. maybe I could take more risk and do something else. >> Are these markets completely disconnected? I think the World Gold Council is probably in the best position to understand that. >> Yeah, I don't I don't think they're disconnected at all. So, so let's let's start first by let's talk a little bit about central banks. So, recognized as a reserve asset is a key factor here. What is by the IMF and other governing bodies recognized as a reserve asset? Gold is, silver is not. So, you're going to continue to see the central banking community on a global scale allocating to gold as a component of their reserve portfolio. Now, they've signaled to us a couple of different key factors. Number one, and by the way, the audience needs to understand this because this is lowhanging fruit for the media. Oh, central banks are buying because we publish a number every month and a bunch of people publish surveys. So, everybody goes after the low hanging fruit say, oh, if central banks are buying, so let's talk about what that means. That means that they're actually looking at their homegrown inflationary concerns, the need for a liquid instrument, concerns around geopolitical risks, trade related activities around the globe, as well as sanctions, asset freezers, challenges with big nations like the US. So, they're looking at a myriad of different factors, including whether or not fiat currencies are the only thing they should be holding in their reserves or dollar-based assets. Now, they're signaling to us over the next 5 years a decline in the dependency on fiat currencies, the dollar and the euro in particular. And we've seen that gold's already surpassed the level of euro, likely surpass the level of treasuries, but it's hard to gauge. And gold's a really key component for them. Yep. >> Now, to your point around selling, this is where the media doesn't do as good a job in terms of reporting because central banks don't go out and tell everybody what they're doing in terms of selling. They're not required. Is there some accord though about selling? >> They have they have a requirement to report what their net holdings are and their activity is according to the IMF. They have to disclose what they're doing if it's at a formal level for reserves. Y >> okay so you hear Tanzania, you hear Ghana and these are countries that actually holding gold's probably a good thing for them and they have reported and made the signal that they are selling in the market. There are a few of the the Stan nations that we would say Kazakhstan and others that may have a program where they're buying buying buying accumulating enough. Yes. And then selling into the market. >> But then you hear things from Poland very unclear whether they're buying or selling or they're adding or they're not. They were quite clear that they took their reserve level up to almost 30%. But the recent round of news on the Polish central bank is not completely clear as to what exactly they might be up to. Even today as we record this podcast, the central bank in Turkeykey's out saying, "Hey, look, we might be in in for holding, you know, the position of supporting our tur Turkish backing up the currency." How they achieve that, whether it's through sales or different swap activities to be seen. But here's the deal. They they are holding this asset and they don't have a viable alternative as a reserve. So the expectation is that they're going to continue to move. Now, they move slow and they accumulate. They don't have the ability to go, I'm going to take 10%, 20%, 50%. And you also have a market that was up 62% last year, >> right? >> So now they've went from 20 to, you know, 40%. And and they've got to manage all of that, >> right? If a month ago they went sold gold and bought oil, they'd look brilliant. But no, they're not hudge funds, >> right? They aren't. And they don't move like that, right? But they are pretty pretty smart. And when they see dips in the market, we hear in the market that they often step in and can continue to accumulate. >> Well, let's go. Let's let's let's park that over there for the side now. So now you're talking about how the retail side should be interpreting all of this and understanding all of this, right? >> So I think the first thing that the retail side really needs to understand is that gold's global and and actually behaviors by global investors is going to move the market more so than maybe just a simple signal from the Fed, which we got, which moved the market more than than many expected, they're not going to cut rates this year, right? So, so people need to understand that they're woven with gold into a really cool, sophisticated global market and that this asset is going to actually achieve what I think is important, which is the long-term strategic growth of a portfolio, but it's going to have a bumpy ride along the way. And that's brought to you by more investment, more global consumption, and people who have much easier ways of getting in and out of these instruments a lot quicker. Yeah. And it's a big enough market that it attracts a lot more noise these days. More speculation, more punting in terms of people who are getting involved. More hedging. Yes. >> More derivatives, more likelihood to be push product that actually has leverage in it. >> So these are all the good things that come along when when you become a grown-up capital markets. >> Yeah. Yeah. >> But this is also going to create a higher level of volatility in the market. >> And you know, I read something in one of the it wasn't wasn't my idea. It was someone else's. said that there's the difference between an institutional investor and a retail investor or the individual investor the wealthy owned investor is the institutional investor is measured on performance. >> Sure. >> Target returns >> and so and if you don't per beat an index you are uh you're going to have outflows and your business model won't work. So you have to take a different risk >> an individual in so so an institution might have said at 5500 sell I made a lot it's great I'll redeploy I'll hold cash not the dumbest idea they're not really in the allocated portfolio business they're in the alpha business I don't know anybody of my age or wealth level who thinks that way I think most of us we are I mean maybe this is my own anxiety from my own upbringing is first of all don't end up under a bridge, right? Like that's like you know we ask in this show >> what what are we solving for? Like this is the part where just sort of raw more raw. If someone said to me I'll never own I'll never make more than 8% here going forward in in a year but I'll never lose more than 3% in a year. like a structure note like a Goldman structure note they'll probably there's got to be someone at Goldman saying if I just sell them an 83 down I can make two >> no so uh the that and and and I've again in my in my time as somebody in the space only with investors not the stackers not the people >> it's always been frustrating when I say like well what exactly are you solving for you have a portfolio you don't necessarily want play such defense that you buy bonds and you lock in three taxable. So you're making like 1.8. You're not even keeping up with inflation. But yet people seem pretty allergic. And I and I I've been in dinner parties people say, "Oh, did I miss it?" I'm like, "Oh my god, >> if you're if you're going to give it to your children and when you you know, you might have missed it this week." >> I said, "But then my of course my snarky answer is did why did you stop reading the newspaper? Why did you stop? Did do you understand math? Because if you tell it to >> the interest and the debt and the deficit and so we're we're of the same vintage and and I also that then that anxiety that came along with trying to tell my parents exactly what I was going to do when they dropped a bunch of money on a college education and getting a job that that definitely kept me from being under the bridge, you know, you know, brother, can you spare a dime kind of lifestyle. But but um but all joking aside, you know, when you when you when you think about how an investor should consider this like like most investors that we talk to that are actually running their own money may not necessarily have that I need to return 7% or I need to pay off 4% on an annual basis. That's when the conversation gets a little more complicated because then they start to say, "Well, any dollar of an investment that I have in my portfolio doesn't generate cash flow, not income, cash flow or requires principal sale to generate cash flow becomes potentially a drag on my portfolio." Most people don't think that way on your audience. Most people are saying, "I've got a portfolio of money. I want to preserve my my assets. I want to keep things nice and tight," which is what I look this how I look at it. You look at it, they look at it. And this is a completely acceptable way for them to say, "What do I need in this portfolio that's going to behave the way I want it to?" And if I do need it, I know I'm going to get out of it, and it's going to be liquid. And that's a key component there, right? I love playing around in financial instruments that are different and unique. And you, you know, maybe I dabble a little bit in crypto, but but you know what? Up up today, down tomorrow, price go up is the bet. And that's the rationale. That's a completely different dynamic for this. I put this in the camp with the homes that I own, the properties that I own, the real estate that I own because I know does anybody sit at the dinner table and say, "Oh, Manhattan apartments are up 20% this year. Did did I miss it?" >> No. Cuz they need it. They want it. And actually the rationale for it >> provides a different service. >> Provides a different end. >> So the service I tell people with with physical gold is it's providing a service for you. It's providing you with balance for your portfolio, lack of correlation, long-term inflation hedge, long-term appreciation, but the ability to sleep at night. You got it. And so, you don't have to worry about the you should you should get your get rid of your tent and your sleeping bag because you're not going to be on your >> Actually, you can use those for fun things. But listen, >> and sleeping bag, >> one thing, one thing I want to make sure it's quite clear. So, so the World Gold Council, myself included, we don't care how you choose to buy your gold. Buy it in physical, buy it in jewelry if you want. I wouldn't necessarily myself buy a grill to wear to a party, but it would look good, but I wouldn't do it. You have solved the cool problem. >> We we take everybody through the pros and cons of owning everything and help them make a right decision. And I think that if you want to own it in physical like I do, fantastic. If you want to use ETFs, have at it. Okay. What I don't want you to do is to think it's too hard to own and pass it up. The other thing we do, and this is the key, we'll take a look at what you own. We'll help you get to an adviser that'll look at what you owned and actually run what gold means at different levels as an allocation against your portfolio. And if it makes perfect sense at 2%, 10%, we'll give you the information. Act on it if you'd like. >> We're going to have to license the widget for the platform. >> You got that? >> All right. Excellent. >> Well, the key use your research. >> The key is the key is we'll help you understand what it does for your portfolio. And if it doesn't add return while lowering risk, then maybe it's not for you. >> Okay. All right. Let's uh you know, it's interesting in the wealthy audience. I think there's a bit of what's I don't know this the notion of a positive adverse selection. I think a lot of people are who end up coming to wealthon think more like this discussion than the people who are like, hey, you know, I'm going to go buy Nvidia and hope it goes high. I'm 100% all risk on. I think, you know, people who come to the channel, they're definitely definitionally taking the time to to educate themselves in their spare time by watching videos of strangers to tell them about macro. So, I think I I'm not being uh arrogant about I think it's a more thoughtful audience. I think it's a more well-healed audience. You know, we don't have people here who are in crypto apps betting, you know, five bucks and they're probably not in poly market in meaningful ways either. So, I think that resonates. So I want to get to a ne an important next question. There's certainly enough videos in the world that talk about the bull case or we would say the bull macro case for gold is extremely intact. >> Uh and unlike other periods where you could quote tame inflation by jacking up interest rates to the point where real rates are very high which is doomsday for gold. Sure. If you do that in this environment on $39 trillion dollars of debt, you it's every every hundred basis points if you were to do a pole vulkar and go up 10 points. >> Sure. >> It'd be 10 points on $40 billionish dollars and you would have another $4 billion of incremental debt service per point. >> Yeah. >> Okay. So, it's not possible that we could do it. >> I meant four trillion billions into trillions. 15 years ago that case was not as clear as it is today which is again why back in >> 18 years ago >> and by the way if I could say anything important to the audience I think I just said billions instead of trillions these numbers are in trillions >> trillions um this when when you read this in the press I at least want people to think about it when Paul vulkar raised rates GDP debt to GDP was 30%. The impact of raising rates was meaningful. The country, even in a near near recession, was running a pretty much a balanced budget each year, if not a surplus, even in that market. >> Right here, we're running a $2 trillion deficit. A trillion of that is interest. And if you raise rates even 1% more, you're going to add $400 billion dollar of interest on a rolling basis, which just compounds the amount of deficit and then compounds the debt and you're in this sort of doop. That is just math. You don't have to be a Democrat or Republican. Sure. You don't have to be uh uh someone preserving wealth. You don't have to be somebody whose only growth go. That is true math. And that goal is a monetary asset. you said against the dollar, against the euro, against the yen, against this maybe not the Swiss Frank, but against everything else. That's what gold is competing with. All this sovereign sovereign debt, sovereign default risk and debates, which is almost now inescapable because we're we're trapped. >> So it's it's a terrible problem. >> Terrible problem. And actually a political cycle in the US or or political timelines in the US in terms of elected officials not designed to tackle the problem >> makes it more unsolvable because you turn it into a political problem. It's completely >> and what do you think in a a conflict in the Middle East with Iran as to our level of debt and our cost structure and offsetting anything that we might hear about what tariffs have actually done for us over the last you know year. Uh I mean this problem is here to stay for for for now. That's at the heart of everything. That's the fundamental case for why gold >> can you construct a bare case even in your like >> yeah I think constructive I think what happens >> I think that that actually there's a few things that worry me that actually are are potentially headwinds for gold. Now structurally I think that case remains but price performance can be completely impacted and we just touched on it a little bit. If the central banking community says, "Look, things are dire and I need to really find ways to fund our economy, deal with homegrown challenges, not worry about sanctions." That's that's what everybody wants to tell you is driving central banks to buy. They're worried about what's happening with their local currency, their low local inflation rates. >> The oil at $120 a barrel, that's a problem for them. If that's sustained and this this becomes a global crisis, if they need to turn to the liquid instrument, they could be moving quickly to sell a lot of gold. That could actually provide substantial headwind to gold. >> That would be the buy opportunity of a lifetime. >> And actually, you're right. You you would have to be in a position to understand that you'll have to weather a bit of price movement. Yes, >> we've seen a little bit of this, but this would be additional because that would turn >> that would turn monetary stress into default risk, >> right? >> And so definitionally, if you're saying there's ab there's sovereign default risk become so meaningful that central banks now have to sell their gold, their one ballasted asset, the one that they've been accumulating. >> That's right. That that's like when the CEO of a company with horrible finances goes in there and says listen we're just going to sell a little division to stave off bankrupt and then you know what's that saying that some economist says bankruptcies happen slowly then all of a sudden do do I think we're there no but I think that there's the potential for that and that's why we keep close watch on what the central bank behaviors are monthtomonth quarterly and annually and actually that's why we do the survey to also gauge how we can help them understand when and how to continue to think about the gold market going forward. So, I think that we're not there, but that's a signal to keep a close watch on. But I also think that the media has grabbed a lot of the data that everybody's producing. Oh, 1,000 tons, 1,000 tons. Everybody's telling you how big the space is. And then when we get to 890 tons and 2025, everyone's like, "Oh my gosh, the market's well off." It's like, that's a big number still. It's like a quarter of the demand, and that's actually at record setting or near record setting levels. So, we're still seeing a healthy appetite for gold from the central banking community. But watch the space because this is where US rates and what happens in the US market isn't the only thing that could provide headlines. Now, the second thing that we haven't seen enough of in particular in markets that are seeing these high prices is recycling. And what is recycling telling us on a global basis? Recycling of gold, which can be as much as a third of the demand or the supply I should say, coming into the gold market. That tells me that the large emerging markets that have huge amounts of gold held in the form of jewelry in their savings, unbankable people save through jewelry. They're coming to the market saying, "I need it. I need money and I need to monetize this." That shows up in the form of recycling. The recycling numbers have been a lot smaller than we would have expected, which tells us two things. number one, they're feeling pretty healthy in those, you know, markets where people use jewelry as a savings and secondly that that actually maybe they see continual appreciation as well in the price of gold. So that's actually a good signal for us. Yeah. >> But if we start to see an increase in that that means again in those markets where those consumers use jewelry are saying I need money. >> Yeah. >> Right. That's another big headway. I >> a few more risks that are out there. But but >> you know, you see it a lot in these emerging markets. You know, the Chinese are gigantic buyers of this and then you you read articles, I don't know how many years ago, probably eight years ago now, saying, well, they're moving into property and then they got slammed in property and you know, then >> and now you look at the volatility in the stock market and you were in Alibaba and then the government says something and then the stock is half of where it was, you know, three years ago >> and there's that gold and it has performed. Uh, interestingly I sometimes feel like the risk is the price like strangely because how many Americans are momentum buyers and they're so quick to pull a trigger that if for whatever reason the price went down it would get beat up badly by US retail like see I told you it was a niche accident the Bitcoin people would say it was a stupid idea to own a barbaric relic and this and that >> and then you know you can go into a bit of a winter because people just don't like the price action even if the fundamentals are good long term and I still think these the macro piece is what gives you the conviction to buy when things are low >> and that's not changing anyway you were going to finish here as I've interrupt but you you brought it you brought it to the the the kind of other factor that's at play here >> and and and I kind of keep a very close watch on how predominantly the US economy and the US outlook is going to develop I I personally have a view that that the real game is just a USChina game full stop. And I watched both those markets. You know, I sat in Asia for 18 years of my career and and and was fascinated by the entire region in particular, the prowess of China. The fact that the president's moving the meeting with Xi, he's attempting to move the meeting with Xi, President Trump, um means he's not ready. Means that the game's still a foot. There's an attempt to try and figure out how to get the US economy to land the stick the landing as they say. Come out on top, look good, the numbers are feeling good, growth in the economy, the debts under control. I don't see that being a likely scenario to develop. That's another environment for people having just lots of comfort in risk assets and moving into risk. just don't see us having that comfort of sticking a landing for an economic no inflation, no no recession, no stagflation, jobs are growing, companies are firing on all pistons. You know, I still think there's huge opportunity for risk assets and investment, but I still feel like things are going to be chaotic at least for a year if not longer in terms of policies and behaviors and attempts to kind of try and deal with trade related issues. I just don't see how we're going to nail it. Particularly when the Fed's sitting back saying, "I was looking like I'm going to cut rates." With one move in the month, they basically said, "Don't expect a cut this year." >> See, I I I I see it shortterm the same. I see it medium-term different. I I think whether it was intentional or unintentional, the damage that has been done to existing systems and we talked about monetary systems are no longer on a pendulum. >> They're on a shift. Mhm. >> And and I think the investment world is stuck a little bit in the old operating system and now we have a new operating system and that new operating system is uh an absurd global debt position where if this war lasts two more months, Pakistan will be bankrupt, Egypt will be bankrupt. And I'm not playing I'm not being uh alarmist. I mean they are already in at IMF and thinking about restructuring. You're going to see >> sovereign default accelerate. >> You see the world, you know, you see uh NATO alliance, the thing that kept the world safe for 80 years, mess around with one of those countries, World War II is going to be 13 minutes long and everybody loses. And so you knew that nothing would ever happen. You couldn't go take Greenland. So you've you've upset that apple cart. You've upset global trade and you have and then all of a sudden in the middle of all these distractions the thing that everybody needs to manage but there's no regulation that I'm aware of is artificial intelligence which is coming to eat white collar jobs at a pace that we it'll be head spinning when it it's barely hit escape velocity. >> Sure. But if you are an entry-level coder, if you are an Uber driver, Whimo is coming. These things are going to reorder society uh and investing in a way that I don't think people are really balanced to do. And here's the here's the thing that troubles me. I liking this show to talk about, you know, what keeps you up at night? What do you solve for? One of the things that really bothers me >> is when I have this conversation at a dinner party, I'm viewed as a pessimist. or I was at another place and and I was talking about this and my wife was engaged and we were very animated about what's going on in the world. Not a big fan of it. And one of the other people said, "Well, enough about that. You know, how are your kids?" And I'm saying to myself, "Yeah, because Americans don't really want to hear unhappy things. We, you know, no one here lived through war unless you're older in a Vietnamese in a Vietnam, some of the closer war, that's 1% of society is is our soldier class. the other 99 don't do anything don't do any service and so it's sort of uh it's a challenge it's been a big challenge and actually have been a bit disappointing for me in my career do you face any of this or is am I being too sensitive >> well I don't think you're being too sensitive Steve I've never known you to be a sensitive too sensitive of a guy sensitive the accusation I did too sensitive >> no one calls me sweet eater but that's okay >> I don't think So I I think you're spot on in terms of Americans not liking bad news. That's uh that's just the reality of a pioneering spirit in this country where we can always win. Are you a Jets fan? >> Of course. >> Yeah, they well known. Check my LinkedIn. Long-suffering, very loyal, loyal to a fault. >> So you're guilty of exactly what you just accused these people of Jets. >> Yes. Yeah. But it's only football. >> Always an optimist. >> It's always football. It's only football. You know, I can but but but again bringing it back to a more serious tone, of course people people like to hear about winning stories. They like to hear about things working and at some point you swallow your medicine. >> Yeah. >> Right. And actually we are we are swallowing our medicine. And I think actually the things that we've seen that have changed and I'll make it simple for everybody to understand. Most institutional money employs consultants, investment consultants to help them out. And guess what? they're finally coming around and saying, "Yeah, we need to look at real assets, including gold, maybe some other precious metals." And you're like, "Well, that's a win. We're not going to get a big high five for that win, but at least they're now moving into this discussion much more sensibly." You I've been at conference after conference where they said, "Well, we don't understand the asset." That's a lazy excuse. Or, "We don't think it works." That's also a lazy excuse. We can help you figure it out. And by the way, so can Black Rockck, so can State Street. So can every other asset manager out there. just put the time in. >> And so >> we do find ourselves telling people the Y gold section came out of our brochure. >> Sure. We we we don't feel at least to the institutional counterpart do >> you know in retail you do but you're not really fighting an educated mind I think those people don't know much about anything and yet there's people who want to do the work and there's people who you know want to look at the ads on Yahoo Finance and invest because something is they're tracing things that want that are going to go up. Let me tell you how I how I deal with some of those similar situations when I'm in that social setting, that dinner party, and somebody tells me, you know, they invest in equities. And you know, I was at an event one time and somebody was talking at nauseium about picking out of the 60% of their portfolio in equities and allocation of Indian equities, which was about 2% of the 60% and how they have to spend six months on the ground doing due diligence and all this work that they go into it. And I just looked at him and I said, "You simply will spend that much time for that little amount of exposure in your equity portfolio, that little sleep. And you won't give me a week on gold? Shame on you. That's what they need to hear. >> Why wouldn't you look at it? Why Why would you Hey, I've got something that might work for you." Oh, no. No thanks. I don't want to hear about that. That's crazy. Just take take a day. Take a week. >> I I think it's the brand. I think first of all it's it's a brand that's viewed get Americans are about happiness and winning stories and American exceptionalism. >> Hey, but isn't that a gold medal? I mean, come on. We we have gold stories that are winners. But I think the actual >> Egypt Ela video did it for me. >> I think the worst thing the worst thing is is everybody in America not only has a winning story kind of a mantra to their attitude, they also everybody has an opinion like ourselves included, right? And we all have an opinion and that opinion has a right. Yes, but that all joking aside that that is actually that's actually that's part of the challenge. People have a fixed idea of what they think gold should be doing and how it should be doing it, right? Hanging on to this idea that it's just a safe haven asset. Okay. Well, when people get rich, they spend money and they spend money on things that are nice. That includes gold. Economic prosperity is actually a good environment for gold to grow. >> I I I agree. All right. We've probably exhausted the gold uh Yes. >> the gold thinking for the audience today. So, uh, what's what's what's keeping you at up at night, whether you read it in the paper or you hear it at an executive team meeting at the World Gold Council, what do you take home and like >> Yeah. You know what keeps me up at night? Um, two simple things. I think we're a structural shift in the gold market. And I think that I'm worrying that people aren't necessarily understanding that. We had years of gold being interesting but not as interesting and as well accepted as it is today worldwide. >> Y >> so everyone's like well these volatility numbers are concerning. When I see gold's volatility it's much higher than it than it than it should be. I'm like okay well what should it be? And and I I think that we need to accept the fact that when you become more mainstream, when investment dollars globally become more active in the market, there's not a problem with having a higher level of volatility like other assets do as well. You just need to get people to get that through their head and understand it. >> Yeah. >> Just because it was a 10% annualized wall or 15% annualized vault 15 years ago doesn't mean that's where it needs to be today. You have a lot more action. You have a lot more attention. You have a lot more interest. a lot more consumers. So, it's definitely something that keeps me awake because I'm trying to think about how do you change that mindset because even the industry talks that way and that's a bad way to think. Like we're we're mainstream. You know, I've been on stage and I've said to people, why are you upset over volatility in our prices? This is a good thing. We're on the front page of the paper. People are talking about us and they're using the asset. Enjoy the moment. So, that's one thing that keeps me awake. And the second structurally something juicier. Well, it is. It is. But you're going to probably not be excited about this. I get excited about this work because China's a huge gold market. India's a huge gold market. Asia's a huge gold market. The Middle East is a huge gold market. London's a huge gold market. And it's still too fragmented for us. >> Gold is gold no matter where you have it. The gold you sell your clients, the gold we use and the hold in the ETF, it's the same thing. That's the beauty of it. I think that we need to be faster as an industry fixing these pockets and these clumsy things that go on in terms of moving gold around really bring it together and and and create a much more funible gold market. And I think that that worries me because it the longer we take to do that, the slower we go to get that done, the more relaxed the industry is to adopt technology and change and transparency, the more risk we run that the BIS and others say, "Hey, you're not a high quality liquid asset. Therefore, banks can't trade in it without heavy capital charges." >> Then you have people closing desks. You have people stepping back and liquidity starts to languish. things start to happen that you don't want when you're actually growing as an industry. And that's the thing that bothers me the most and keeps me up the most is the speed with which this industry wants change. >> You know, it's it's very interesting how two long-term market participants uh see the issue differently. Uh if we were in two separate rooms, you said, "Well, what's standing in the way of global adoption?" uh you would you just said what it would be like there's it's got to have you know a lot of transparency across markets easily of moving metals around etc etc it has to have like an institutional you know the same sort of institutional infrastructure that other assets have and frankly that's what we think GBI and GBI direct does but um which is great by >> and and and and we do we have cleansed it for large broker dealers and wealth managers who can now you access, right? Trusted access. >> I I think I think it's trust and access. I think the that no service was done by this question. Is there gold in Fort Knox? And so people doubt from the very fundamental thing is it there? We had a guy come to us today to propose a loan system for the gold that we store on behalf of clients on the platform. Like just offer it as another product. I said, 'There'll be no take up. He said, ' What do you mean there'll be no take up? It's a very liquid asset. I said, people aren't buying it to borrow against it. They're just happy they know it's there, that it's trusted, liquid, and we can deliver it to them as long as they can prove their address anywhere around the world. So, for us, we said if we want the adoption, it would be like there would be every broker dealer would have it. It would be simple as poss. Um, you would be out in every pension fund talking about how every TAM should have it. And if it was owned and trusted more, then there'd be nothing anybody could do. It'd be more embedded. >> Sure. >> And so, you know, but it it takes a lifetime to get there, especially in the United States. And I thank I thank the crypto bros for raising the profile of sound money. And they said it was Bitcoin, but little did they know it would maybe it was certainly gold, maybe both. And they were putting a lot of marketing dollars into that messaging. Uh I thanked our political parties for never being able to balance a budget, never always wanted to cut taxes. So there's no notion that any fiscal or monetary discipline in this country. And that's and that hits the news all the time. >> Sure. And so those things those two things have one is out of our control but one is in our control as an industry. So you solve the platform I'll solve getting it in a very effective way all around the world. You could help me do that. We do pay commissions. Uh but I know you can't get one. All right. Personal question. So you and I we mentioned there were we're you know peers in our career long long history on Wall Street turned into uh a medals and real asset entrepreneur and you work for an organization where you did something entrepreneurial in it. Um okay what are you solving for now? You have a lot of you got you said homes. So it sounds like you got a couple you got real estate you got gold physical gold. Yay. uh and you have a lot of respect uh in this industry. Probably the most consistent and uh fact-based voice that exists here. You know, a lot of people want to yell, but you're sitting on top of an organization that measures. >> Yeah. >> So, what takes you home? What do you uh what do you want to do from now? So, I've actually been asked by the organization to direct my energy to see if we could have more impact um on a policy side. And actually, it's some it's a it's a line of work regulatory from a policy perspective that's actually uh been something I've had to do in times, but I'm giving it a lot more concerted effort. >> Yeah. So that component which is bringing that education to people who really do need it which legislators and administration in Washington simply say hey look let's let's get into the brass tax here >> and and listen to what has to be heard so that we can tackle down opportunities and challenges. I'll give you one opportunity if we can open up mutual funds 40 act registered investment companies. There's an open piece of legislation in the Senate now. We're getting a companion bill in the house to open up 40 act to recognize gold, silver, platinum, and platium as good income for registered investment companies, mutual funds. That means that you can now call Vanguard and simply say, why does my retirement account hold gold? >> Right? And and Vanguard can say, "Why don't we hold gold?" And actually, that's a big opportunity. You talk to the people on the hill on that and guess what they say? That makes a lot of sense. Why isn't that the case? Don't know, but let's fix it now. >> Yeah. Now on the flip side, we know that gold can be used by a lot of bad actors for a lot of bad things. So we are supporting legislation that is addressing directly addressing gold at the artisal and smallcale gold mining level funded by nefarious actors to support the you know illicit finance drug dealers who are using bad practices like mercury in other types of processing for for the ore using child labor just really bad stuff that's a potential risk that if we don't tackle that down and get some clear answers to that could be a big black eye for the industry. We don't want to end up like blood diamonds. >> Yeah. >> So, we need to fix that. >> So, those are two bodies. I was I I'll close this by saying >> on the second one, um I would say I would I'll ask you to consider a a piece of that mission that's good for gold, but that's just good. >> It is. >> Right. And I think I think what's ending up happening a little bit and I talked about a lot about this with Anthony which is we don't you know we're not it's good in a strange bittersweet way it's our asset class is performs price performs better when there's bad things going on. The budget was balanced and our government was awesome and the world was at peace. No one would really want it except for jewelry because it's pretty, you know, not so much of a store of value. But I think when you get to our position, part of what you want to have in your corporate interest is something that's good for the world because you're not going to run for you might be a policy pro, but you're not going to run for Congress. Me neither. And so you want to at least when you're not necessarily solving for maximizing the amount of money you have because you know your kids college is paid for, then you start to say is your work important and meaningful? And of the two things, yeah, I'd love to see gold in mutual funds. By the way, if you want to make it convertible to physical wear your backend, please do. >> Absolutely. And >> I think people would want, you know, to be able to take the delivery out of it, but it's complex, right? It's 401ks. It's Vanguard. >> But let's just start with one simple move. Get it in there. >> Um, but the idea is to solve for something a little different. I'm I'm no longer figuring out I want to maximize return. I already said that. I want to make sure that I that me I'm safe, my family is safe, and if I have a little extra time, I would like to have a job that allows me to do something good in the world and still get paid. And it was the second piece of what you said. You know, the reason you want that to happen is, of course, because you don't want gold to be a blood diamond, but that's the second piece. The first piece is you'd like to not see naroterrorism, you know, finance. You want to see people mercury poisoned. I I don't want >> that is an awesome goal. >> Our organization, nobody wants bad people to profit off a $5,000 gold price. Oh, and by the way, the humanitarian side is equally as important. And that's actually key. >> But but remember, at the heart of all of this, this is the thing that actually drives me is having the ability to do my absolute best to make sure it's simple to understand and clear for people. And actually, sometimes people want to over complicate things. sometimes they can't help but over complicate things. That's the real drive. I've got kids. You've got kids. We've all, you know, got a lives of family. The key thing is to say, "Hey, look, let me just make this easy for you to understand there." And that's what's key about this for the gold market. Just make sure people don't go off with old ideas, feel uncomfortable to have the conversation at a dinner party, just get it, look at it, make a decision on it, move on, and then revisit it. Yeah. >> When you need to. Just don't don't let it drop by the wayside. because it's something different or hard. It's It's not. It's actually pretty simple to understand. >> I agree. >> And it's fun. >> Okay, that was a lot. That was a lot. >> I think uh I I make a bet that most of your podcast talking gold, you don't get to this place. Um but it's been a joy. Thank you. I really appreciate it. >> Thank you very much. >> All right. Great. Thanks. >> That was great. And I hope everyone enjoyed it as much as I did. Uh, I want to thank Joe now for his time, his intellect, his insight, and letting me peel the onion just a little bit. Something I'm not sure he was wholly used to. Uh, I hope it was useful to all of us. I'm Steven Feldman. This is Open Position.