Patrick Tuohy: Gold's Status Has Changed, Higher Price is Inevitable
Summary
Gold's Reestablished Role: Gold has regained its status as a necessary store of value, with increasing recognition from central banks and investors as a separate asset class from other precious metals.
Central Bank Activity: Emerging market central banks are increasing their gold reserves, driven by a desire to catch up with Western nations and a trend towards de-dollarization.
Market Sentiment: Despite high prices, gold is not seen as peaking; long-term expectations suggest it will not fall below $3,000, with anticipated returns of 10-12% annually.
Investor Behavior: Traditional gold investors view gold as an insurance policy, while new investors are attracted by recent price performance, leading to increased ETF inflows.
Portfolio Strategy: Investors are advised to start with gold before diversifying into silver, which is expected to outperform gold in the near term due to the gold-silver ratio.
Goldstrom's Offerings: Goldstrom provides unique services like earning interest on physical gold and offering credit lines against gold, appealing to both traditional and new investors.
Global Economic Trends: The global financial landscape is shifting, with potential implications for gold's role as a core asset, influenced by geopolitical and trade dynamics.
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Patrick Tui, global head of sales and marketing at Goldstrom. Thank you so much for being here. Great to have you. >> Pleasure. Pleasure. Absolute mine. >> Really good to be speaking with you. We've got a lot to go into when it comes to gold and silver, especially with the prices doing what they are right now. But before we start jumping into that, I wondered if you could give a brief overview to yourself and your background in the sector. >> Um, yeah, delighted to. I think uh I had a an unusual introduction into the gold space. Most of my career, 45 years has been in uh financial services, principally capital markets, asset management. And um I sort of retired, I guess, semi-retired probably a decade ago. And uh it seemed like a good idea. someone presented me with an opportunity to to finance a gold transaction and uh in the process um I managed to successfully lose all my money uh in the trade and um but I firm believer that everything happens for a reason and in that process I was uh fortunate enough to meet a young Australian trader called Nick Draak and Nick is the the founder and the principal of Goldstrom. Uh we became friends a decade ago as he tried to uh recover. So I had a very expensive MBA I guess into the business and that was uh you know some of the the challenges of trading in the unrefined markets and the upstream markets. Nick and I became friends and probably six seven years ago we sat down and started to to pencil out Goldstrom and five and a half years ago we came into being. We we had a again another um fantastic piece of timing. We set up in in Singapore on the weekend of lockdown. Uh my birthday, March the 19th, 2020. And uh that was again an interesting place to start. But I I I do believe that all of these things do um do actually happen for some for some sense and reason that are usually apparent many years down the line. >> I always love to hear about how people come into the sector. And you're right, I think everything does happen for a reason. So we'll get into what's happening with gold and silver and goldrum. Let's take a look at gold and silver prices first. Of course, we know that they are on the move right now, trading at or near all-time highs depending where we are at the moment. I'm wondering if you can break down the factors that you see driving the metals right now. >> Yeah, I think there's there's probably two key elements to this. I think one is the the long term. If we take the very long term and and it was interesting before we we we came on that we were talking about you know 2011 2012 and I think you know since the turn of the this this millennium there there's been a change of narrative in terms of gold and I think there's been a reestablishment of gold from being a very out of favor asset unloved uh to being an asset that um at a at a the highest level at the central bank level was perceived as as a necess neessary store of value to then being seen as a store of value. And I think that really we're just sort of progressing through that that now the the let's say the investing community have have woken up to this narrative and I think that's been that's been happening in the last 2 3 4 years and uh and that's sort of where we are. So I think the long-term narrative gold has reestablished itself as a store of value and perceived store of value to to to everybody. I think actually gold has possibly separated itself from other precious metals as being almost an allocation in its own right with other precious metals sitting around it. So that may or may not be the case. But in the short term uh I think um you know the the the the obvious reasons are out there. There's been central bank buying which is somewhat supportive of that narrative but that's been driven in my opinion by um ddollarization I think the emerging market central banks just trying to play catch-up. If you look at the Europeans in terms of the the the volume of of foreign reserves they hold in gold it's north of 50% 50 to 60%. uh whereas the the Asian and the the the central Asian and South American central banks hold significantly less and they are they are the key buyers. So that's that's supporting and I think every time we see any selloff in the market typically at London fixing there's there's a a pickup and that's usually a central bank stepping in I believe to uh to take that value. Um, then I think there's just a a growing I don't want to sound too pessimistic, but I think there's a there's a global lack of trust and uh I think that that is cascading now into into gold. I think a number of people are clearly on on the gold wagon just because of the price and I think that's the inevitability of it. When you get in a taxi and your taxi driver tells you about the the the current all-time high for gold, um, you know that you sort of reach that point in the cycle. But I think we've we've certainly changed the the narrative and the dynamic for for gold and then as a consequence the other precious metals follow along behind. >> That's exactly the direction I was hoping to go in with you is where are we in the cycle right now? Are we at that point where the taxi driver is talking to us about gold? Because I see people getting quite excited to see what the prices are doing but there there is a sense of wondering all right well does that mean that we are close to a top here? So, I'm wondering how you see it. >> Yeah. Um, that's the the the question I think no one truly has an answer to. But, um, is is is this um, a short-term phenomena that's going to have um, some some dynamics that are going to turn it on its head and it reverses 50 60%. I don't believe that is the case. Um, I I don't believe that is the case. I think within our our group, and I know you've met one of my colleagues, Jeff Rhodess, uh the the consensus is that it's unlikely that we'll see gold below $3,000 again in our lifetimes. So, you know, that that's let's say that that's the floor. Um that's a fairly significant move from where we were two years ago. So, that that that's comfortable. Um, I think gold has has if you look at the long-term performance of gold, certainly in this century, you're you're looking at at 10 to 12% type returns. And I think that that is a not an unreasonable expectation uh for clients. Maybe in a a very very low inflation environment, you'd be nearer 8 to 10, but in the the the environment that we're in at the moment, 10 to 12 doesn't seem like an unrealistic number. And maybe we've got a little bit ahead of ourselves at the moment. there's a bit too much froth in the market. Um, and that's just the inevitability of investing. So, I don't believe that gold has sort of has has peaked and this is an all-time high and and sell. I think this is just part of what we need to accept is is the the inevitability going forward. >> Of course, impossible to know for sure, but all of that sounds quite reasonable. And I want to talk a little bit more about trends you're seeing in terms of who is buying gold. I know you talked about what's going on at the central bank level, which countries are are doing the purchasing at this moment. What are you seeing among customers? What kinds of conversations are you having right now? >> Great question. I think there there's two types of investors that uh that we see in that. There's the traditional gold bugs who've always been in gold. They love gold. uh they will always be in gold come a hell of high water because they see gold as as fulfilling that insurance policy aspect of their investments. It's it's it's the ultra rainy day money. It's there. It's outside of the system and it's the foundation of their their portfolio and their investment. I think the um I I don't want to be disparaging. say the come latelys for um for gold are people that are looking at the price and it's sort of demonstrated you know phenomenal phenomenal performance returns this year and and and pretty damn good last year. So I think there's people jumping on it from a price perspective who who maybe don't have the same emotional attachment to gold and don't necessarily understand the true benefits of say a physical holding versus a paper holding. So I think the you know the inflows into ETFs this year have been significant. I think that's a a key lead indicator. Clearly when the price is this high the traditional jewelry community that that that suck up 50% of of annual production they've been slightly sidelined or maybe diverting their attention into silver and platinum. So that's been a driver of those metals I think to to a degree India and China. So the the new investors I think u that there will be an inevitable fallout because there will be some people who have bought gold in the last 18 months and actually believe that gold goes up 30% a year and as soon as it stops going up 30% a year they'll be sellers of gold because all of a sudden it it won't be the sort of the you know gold is the next crypto for a number of people and uh that that's sort of frightening but that's that's an educational factor. So the conversations that we're having are typically around paper versus physical. Should I be buying an ETF? Should I be buying physical? Um we sit in very much the the traditional camp that physical is gold. And unless you can take delivery of your ETF, then you you have a promise. And if the reason that you've bought gold is is trust, well, you seem to be sort of circling back and and eating your own tail really in that respect. Um so the conversations are should I have physical and the answer we we believe is is a obviously a resounding yes that that brings some complexities with it. So there's some educational conversations that we're having with with uh both private clients and the distribution world that we work with. So we're having to educate them on the benefits and the the the protocols that go with owning physical. So that that in itself is is a process and maybe a lag into people taking exposure. So that's not a bad thing. We've established or are in the throws of finalizing the establishment of an academy actually which is there designed to to train the intermediary market um and and the private client market if they're if they're so inclined into the the the whole supply chain of precious metals to sort of walk them through that journey because even though it's it's the oldest asset class it's probably the least understood and um again I'm probably showing my age here Charlotte but we saw want to live in a world where everything's got to be done in in in clicks or 125 characters. So, when you actually have to open an account and fix a price and then take physical delivery of something, you know, it just appears a lot more clunky to people today than just pressing a button. Um, so there is that sort of education process that we need to come we need to come over. I think what one of the the we'll probably get on to it in a second, but one of the key areas that that we're trying to educate the uh the gold bug market uh the established buyers of of gold and precious metals is really around utilization of of of gold, but I'm sure we can come on to that in a while. >> Very interesting. And I want to ask a little bit more about strategy as well because I was mentioning to you our audience is pretty exposed to precious metals, some experience in that sector. But questions that I'm seeing in our YouTube comments for example are well should I be rebalancing my portfolio and look more at silver and platinum for example at this time. So anything that you can say on on that note that might be helpful. Of course every person is different. 100%. I think that that that is really the narrative. I think people need to um it's like any anything that's new, any activity that you have, you've got to get some basic element of mastery. And I think owning gold, it's 85% of the market in terms of daily volume. It's the safe place to start and it's the place that that people should start. Once they get comfortable with that, then we can start to have the conversations about the nuances and the differences between gold and silver and why uh we've been buyers of silver for our our let's let's call them our bug clients for probably 24 36 months now. Uh we we we bought into gold very early on. uh uh sorry bought into silver very early on and and felt that this was just you know um a catch up that that needed to happen. Um and again we see in in the in the near term an outperformance of of silver versus gold because we're still only at 80 in terms of the the gold silver ratio. So we believe that we've got quite a bit to go on a a normal re mean reversion. So we start the conversation by getting people comfortable with precious metals, the process for owning them um and the the the the costs, the considerations, but then the conversation absolutely must extend to uh to silver. And that would be where it probably stops for most of our clients. So we offer um a service to clients where we will provide a a a monthly rebalancing and it's more of a monthly conversation with a quarterly rebalancing. And if you're in physical, the cost and the logistics of just trying to move a portfolio around on a on a weekly or monthly basis just it just does doesn't work. So it's it's a far slower moving. It's more like a um probably like rebalancing a a S&P ETF, something of that description. and um we will basically um move those allocations around again taking into consideration the risk return profile of the individuals that are there. We we we don't have a a crystal ball or a a magic view into the future. So we don't know with with any absolute certainty what the the price movement is going to be of these assets. But we do feel comfortable that in the near term silver will outperform gold. And if you're prepared to live with that volatility and there will be volatility as a consequence then that that's an appropriate thing to do. So typically for a more aggressive invest investor we may be as much as 25% in silver 75% gold. The the more balanced clients are today hugging well I would say they they were at 15 and and the price price movement has probably taken them nearer 20 of their portfolio is now in silver 20% versus gold. Platinum is is really sort of out there. Um, again, I it it's a thin market. It's what whatever it is, 1% of daily volume. So, it it's a thin market that brings with it volatility that in my 40 odd years of of working with investors. The the volatility is is probably your your biggest enemy because it's the thing that spooks people. And you can start with a sensible investment strategy and you you just need a a bad three or four five days of draw downs of of of some proportion and people believe the world's come to an end and all of the principles that they had in terms of investing get thrown out the window. So platinum is there for I think it's sort of the mastery. I think when you've got to sort of black belt of um precious metals then uh platinum would be a conversation that we would have. Um, but we we are absolutely encouraging investors once they're comfortable to have some silver in their portfolio uh and and in varying in amounts. >> I think that that makes a lot of sense the way you're laying it out there. And I want to talk a little bit more about some of Goldstrom's offerings that might be interesting or or unusual to people, which are interest on physical gold and credit lines against gold. So, what can you what can you say about that and how that works? Sure. So our our business is I don't want to say unique or or it's unusual in as much that we operate probably in the in the wholesale market. So we're not really a a gold broker in the in the traditional sense that you know we don't sell gold online. Um we're not in the business of of selling kilo bars or or or coins in in the uh the BTOC space. So we very much work with other traders and uh we work with more institutional high net worth. I'd say our average client is is probably probably sat on 25 kilos of gold. So that that's the sort of the the quantum of of sort of entry point into Goldstrom. Um so for those clients and and and the gold bugs, this has been an interesting journey. So we we look at the the bullion banking world uh as a number of our colleagues have come from that space and and see that gold is is an asset that's utilized. It is a it's an interestbearing asset at the uh at the the institutional level at the banktobank level central bank to central bank level and there is a demand for gold in um in the jewelry segment. So the jewelry sector has has has been probably the the most affected by the rise in price of of gold and not in a positive way over the last 18 months. So as as as gold shot through 3,000 there is a psychological wow this is expensive and and gold jewelry sales tend to taper off. But the thing in the background that's hurt the jewelers the most has then been the financing that they have of their stock because those those credit lines that they have from banks, those facilities that they have from traditional lenders are almost always in dollar terms. So they are limited to a certain amount of dollars that they can actually borrow. Now if the price of gold has gone up by 20 or 30% then the amount that they can borrow is is reduced by 20 or 30%. It's just a it's a zero sum game. So leasing gold to a jeweler removes that friction, that challenge that they may have with either putting up more margin or reducing the the the volume of of facility that they have, the size of the facility that they have. And we've sort of crossed the rubric with a number of investors. Um, if I could just take a step back, I think traditionally people that have gold and they have it in a vault have it for that emotional reason of being outside of the system and actually wanting to know that they own it. They can touch it. They can go in at lunchtime and see that it's there and and feel comfortable with it. And we believe that that that is, you know, 100% 100% solid as a as a rationale. However, um if they want to actually earn interest on this gold, there is a market that will lease this gold from them. They won't borrow it. They will they will lease it. And there's a very subtle difference in as much that you're not giving up title ship. You're not giving up ownership of your gold. You are transferring the use of that gold to a third party, a jeweler, uh who's then able to use that gold for a period, typically 12 months, and at the end of that period will return the physical gold to you. in that interim period they will pay you interest and that interest will also be paid in gold. So your gold will be credited to you in ounces or or grams. So what we've done is we've created an ecosystem where and this is something that's been ongoing in the Middle East for nearly two decades. This is the way that financing is is is largely done in in and around sort of Dubai, UAE, Qatar, places of that that sort. So this isn't something that's new and something that golds from a sort of hatched as a as a plan. This is uh this is just bringing something from another jurisdiction to the to the modern world. So we're able to offer those people that have gold in a vault if they can get to the comfort level of having that gold deployed and the collateral managed by us the ability to earn you know anywhere between 3 and 4% on their gold uh as as a return. So that for many does change the dynamic. Now, where I would say you're talking about the or we were talking about the two types of investors, the sort of the gold bug and the and the come lately. The come lately are actually finding this much easier to come to terms with than the gold bugs. The gold bugs are there saying, "Well, no, if I lease my gold, it's no longer mine. Yeah, I I appreciate I've got a title, but it's in someone else's hands." And then we we further compound matters for them because that gold gets converted into jewelry. But I I'll come on to that a little bit later. People new to the space look at gold and think, "Yeah, this is interesting." But actually, if I could get a yield on it and you can offer me what we call gold plus, an ETF plus a return, then I'm really interested. So, all of a sudden, we're not talking about buying an ETF, we're talking about buying something that's going to give you an ETF plus the yield and, you know, minus some fees. So, net net, you're going to get more than you would from an ETF. So, that's sort of number one. Second part of your your question was around was around credit lines and I think the repo market is is well established in in the the bullion space. I think seasoned investors will will understand the repo market. Um and you've just got to get comfortable with counterparty risk, but we're able to offer people liquidity against their gold with guaranteed buybacks. So we know that effectively, yes, technically you lose title to your gold, but um you're actually in the market. You're still long gold. So you're taking some liquidity. I wouldn't call it taking profit off the table because you stay fully exposed. So you're taking some liquidity against the the the returns that you've had, deploy it somewhere else. Um I spent 20some years in the hedge fund space and uh leverage was always the you know to to the uninitiated was the uh the devil incarnate. Um, however, if you use leverage in a sensible way, you can actually help yourself diversify. And that's really where we we put credit on or credit lines on gold as a as not to leverage up gold, but to diversify maybe into silver. >> Well, I think that gives a pretty good look at what Gold Trim is doing, how you see the market. I will let you go unless you had any final thoughts that you would leave investors with right now. It's pretty interesting times. Yeah, I think um it is interesting times. We're living in history and I think um for me the the the transition the the the destruction of trust that I think we've seen in the financial markets. I' I've been in the markets long enough to know that this isn't a new trend. this has been going on and the whole global um debt position has been something that people have been been talking about and it's going to trip us up at every moment and as we always say you know a stock clocks right twice a day so sooner or later that will come and we had 2008 but I do think this time it's different and I know that's always a dangerous thing to say but I just think with global trade uh and I just think the sort of the the global repositioning that we're going through not necessarily driven by um geopolitics but I think driven by trade is that we are actually seeing you know quite a partisan world forming up and you know is is China ready to to adopt the mantle of been the the global reserve currency for now I think probably not but I think when you look at what's going on in this part of the world in terms of uh Shanghai gold exchange um starting to to vault metals in Hong Kong um how far are we away from a a remnant B futures contract in Hong Kong in terms of that how far are we away from a clearing system in Hong Kong with that bullion being traded unallocated you know styled loc so there's lots of interesting things I think so we are living through history and um if I was if I was an investor at one end would I be concerned that we're an all-time high um no equally if I'm coming to the market brand new today and I had $100 to invest would I rush in with all $100 $. No, I'd probably stage that over a month or so. I think that there's there's an opportunity to just sensibly dollar cost average. But this applies to all assets. It's not just to gold. That's just investing common sense. Um, but I do think that we are we are living through history. And maybe, you know, our our children, grandchildren will look back and and talk about, you know, the the 2020s is the year when uh the world flipped and and gold and and precious metals sort of resume their their um their status as the the the the international core assets. Yeah, >> it feels like that could certainly be true. Well, thank you so much for coming on to go through what's going on in the precious metals. This was really great. >> Pleasure, Charlotte. Lovely to see you. Lovely for me. Take care. >> Of course, you as well. Once again, I'm Charlotte Mloud with investing.com and this is Patrick Tui with Goldstrom. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]
Patrick Tuohy: Gold's Status Has Changed, Higher Price is Inevitable
Summary
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Patrick Tui, global head of sales and marketing at Goldstrom. Thank you so much for being here. Great to have you. >> Pleasure. Pleasure. Absolute mine. >> Really good to be speaking with you. We've got a lot to go into when it comes to gold and silver, especially with the prices doing what they are right now. But before we start jumping into that, I wondered if you could give a brief overview to yourself and your background in the sector. >> Um, yeah, delighted to. I think uh I had a an unusual introduction into the gold space. Most of my career, 45 years has been in uh financial services, principally capital markets, asset management. And um I sort of retired, I guess, semi-retired probably a decade ago. And uh it seemed like a good idea. someone presented me with an opportunity to to finance a gold transaction and uh in the process um I managed to successfully lose all my money uh in the trade and um but I firm believer that everything happens for a reason and in that process I was uh fortunate enough to meet a young Australian trader called Nick Draak and Nick is the the founder and the principal of Goldstrom. Uh we became friends a decade ago as he tried to uh recover. So I had a very expensive MBA I guess into the business and that was uh you know some of the the challenges of trading in the unrefined markets and the upstream markets. Nick and I became friends and probably six seven years ago we sat down and started to to pencil out Goldstrom and five and a half years ago we came into being. We we had a again another um fantastic piece of timing. We set up in in Singapore on the weekend of lockdown. Uh my birthday, March the 19th, 2020. And uh that was again an interesting place to start. But I I I do believe that all of these things do um do actually happen for some for some sense and reason that are usually apparent many years down the line. >> I always love to hear about how people come into the sector. And you're right, I think everything does happen for a reason. So we'll get into what's happening with gold and silver and goldrum. Let's take a look at gold and silver prices first. Of course, we know that they are on the move right now, trading at or near all-time highs depending where we are at the moment. I'm wondering if you can break down the factors that you see driving the metals right now. >> Yeah, I think there's there's probably two key elements to this. I think one is the the long term. If we take the very long term and and it was interesting before we we we came on that we were talking about you know 2011 2012 and I think you know since the turn of the this this millennium there there's been a change of narrative in terms of gold and I think there's been a reestablishment of gold from being a very out of favor asset unloved uh to being an asset that um at a at a the highest level at the central bank level was perceived as as a necess neessary store of value to then being seen as a store of value. And I think that really we're just sort of progressing through that that now the the let's say the investing community have have woken up to this narrative and I think that's been that's been happening in the last 2 3 4 years and uh and that's sort of where we are. So I think the long-term narrative gold has reestablished itself as a store of value and perceived store of value to to to everybody. I think actually gold has possibly separated itself from other precious metals as being almost an allocation in its own right with other precious metals sitting around it. So that may or may not be the case. But in the short term uh I think um you know the the the the obvious reasons are out there. There's been central bank buying which is somewhat supportive of that narrative but that's been driven in my opinion by um ddollarization I think the emerging market central banks just trying to play catch-up. If you look at the Europeans in terms of the the the volume of of foreign reserves they hold in gold it's north of 50% 50 to 60%. uh whereas the the Asian and the the the central Asian and South American central banks hold significantly less and they are they are the key buyers. So that's that's supporting and I think every time we see any selloff in the market typically at London fixing there's there's a a pickup and that's usually a central bank stepping in I believe to uh to take that value. Um, then I think there's just a a growing I don't want to sound too pessimistic, but I think there's a there's a global lack of trust and uh I think that that is cascading now into into gold. I think a number of people are clearly on on the gold wagon just because of the price and I think that's the inevitability of it. When you get in a taxi and your taxi driver tells you about the the the current all-time high for gold, um, you know that you sort of reach that point in the cycle. But I think we've we've certainly changed the the narrative and the dynamic for for gold and then as a consequence the other precious metals follow along behind. >> That's exactly the direction I was hoping to go in with you is where are we in the cycle right now? Are we at that point where the taxi driver is talking to us about gold? Because I see people getting quite excited to see what the prices are doing but there there is a sense of wondering all right well does that mean that we are close to a top here? So, I'm wondering how you see it. >> Yeah. Um, that's the the the question I think no one truly has an answer to. But, um, is is is this um, a short-term phenomena that's going to have um, some some dynamics that are going to turn it on its head and it reverses 50 60%. I don't believe that is the case. Um, I I don't believe that is the case. I think within our our group, and I know you've met one of my colleagues, Jeff Rhodess, uh the the consensus is that it's unlikely that we'll see gold below $3,000 again in our lifetimes. So, you know, that that's let's say that that's the floor. Um that's a fairly significant move from where we were two years ago. So, that that that's comfortable. Um, I think gold has has if you look at the long-term performance of gold, certainly in this century, you're you're looking at at 10 to 12% type returns. And I think that that is a not an unreasonable expectation uh for clients. Maybe in a a very very low inflation environment, you'd be nearer 8 to 10, but in the the the environment that we're in at the moment, 10 to 12 doesn't seem like an unrealistic number. And maybe we've got a little bit ahead of ourselves at the moment. there's a bit too much froth in the market. Um, and that's just the inevitability of investing. So, I don't believe that gold has sort of has has peaked and this is an all-time high and and sell. I think this is just part of what we need to accept is is the the inevitability going forward. >> Of course, impossible to know for sure, but all of that sounds quite reasonable. And I want to talk a little bit more about trends you're seeing in terms of who is buying gold. I know you talked about what's going on at the central bank level, which countries are are doing the purchasing at this moment. What are you seeing among customers? What kinds of conversations are you having right now? >> Great question. I think there there's two types of investors that uh that we see in that. There's the traditional gold bugs who've always been in gold. They love gold. uh they will always be in gold come a hell of high water because they see gold as as fulfilling that insurance policy aspect of their investments. It's it's it's the ultra rainy day money. It's there. It's outside of the system and it's the foundation of their their portfolio and their investment. I think the um I I don't want to be disparaging. say the come latelys for um for gold are people that are looking at the price and it's sort of demonstrated you know phenomenal phenomenal performance returns this year and and and pretty damn good last year. So I think there's people jumping on it from a price perspective who who maybe don't have the same emotional attachment to gold and don't necessarily understand the true benefits of say a physical holding versus a paper holding. So I think the you know the inflows into ETFs this year have been significant. I think that's a a key lead indicator. Clearly when the price is this high the traditional jewelry community that that that suck up 50% of of annual production they've been slightly sidelined or maybe diverting their attention into silver and platinum. So that's been a driver of those metals I think to to a degree India and China. So the the new investors I think u that there will be an inevitable fallout because there will be some people who have bought gold in the last 18 months and actually believe that gold goes up 30% a year and as soon as it stops going up 30% a year they'll be sellers of gold because all of a sudden it it won't be the sort of the you know gold is the next crypto for a number of people and uh that that's sort of frightening but that's that's an educational factor. So the conversations that we're having are typically around paper versus physical. Should I be buying an ETF? Should I be buying physical? Um we sit in very much the the traditional camp that physical is gold. And unless you can take delivery of your ETF, then you you have a promise. And if the reason that you've bought gold is is trust, well, you seem to be sort of circling back and and eating your own tail really in that respect. Um so the conversations are should I have physical and the answer we we believe is is a obviously a resounding yes that that brings some complexities with it. So there's some educational conversations that we're having with with uh both private clients and the distribution world that we work with. So we're having to educate them on the benefits and the the the protocols that go with owning physical. So that that in itself is is a process and maybe a lag into people taking exposure. So that's not a bad thing. We've established or are in the throws of finalizing the establishment of an academy actually which is there designed to to train the intermediary market um and and the private client market if they're if they're so inclined into the the the whole supply chain of precious metals to sort of walk them through that journey because even though it's it's the oldest asset class it's probably the least understood and um again I'm probably showing my age here Charlotte but we saw want to live in a world where everything's got to be done in in in clicks or 125 characters. So, when you actually have to open an account and fix a price and then take physical delivery of something, you know, it just appears a lot more clunky to people today than just pressing a button. Um, so there is that sort of education process that we need to come we need to come over. I think what one of the the we'll probably get on to it in a second, but one of the key areas that that we're trying to educate the uh the gold bug market uh the established buyers of of gold and precious metals is really around utilization of of of gold, but I'm sure we can come on to that in a while. >> Very interesting. And I want to ask a little bit more about strategy as well because I was mentioning to you our audience is pretty exposed to precious metals, some experience in that sector. But questions that I'm seeing in our YouTube comments for example are well should I be rebalancing my portfolio and look more at silver and platinum for example at this time. So anything that you can say on on that note that might be helpful. Of course every person is different. 100%. I think that that that is really the narrative. I think people need to um it's like any anything that's new, any activity that you have, you've got to get some basic element of mastery. And I think owning gold, it's 85% of the market in terms of daily volume. It's the safe place to start and it's the place that that people should start. Once they get comfortable with that, then we can start to have the conversations about the nuances and the differences between gold and silver and why uh we've been buyers of silver for our our let's let's call them our bug clients for probably 24 36 months now. Uh we we we bought into gold very early on. uh uh sorry bought into silver very early on and and felt that this was just you know um a catch up that that needed to happen. Um and again we see in in the in the near term an outperformance of of silver versus gold because we're still only at 80 in terms of the the gold silver ratio. So we believe that we've got quite a bit to go on a a normal re mean reversion. So we start the conversation by getting people comfortable with precious metals, the process for owning them um and the the the the costs, the considerations, but then the conversation absolutely must extend to uh to silver. And that would be where it probably stops for most of our clients. So we offer um a service to clients where we will provide a a a monthly rebalancing and it's more of a monthly conversation with a quarterly rebalancing. And if you're in physical, the cost and the logistics of just trying to move a portfolio around on a on a weekly or monthly basis just it just does doesn't work. So it's it's a far slower moving. It's more like a um probably like rebalancing a a S&P ETF, something of that description. and um we will basically um move those allocations around again taking into consideration the risk return profile of the individuals that are there. We we we don't have a a crystal ball or a a magic view into the future. So we don't know with with any absolute certainty what the the price movement is going to be of these assets. But we do feel comfortable that in the near term silver will outperform gold. And if you're prepared to live with that volatility and there will be volatility as a consequence then that that's an appropriate thing to do. So typically for a more aggressive invest investor we may be as much as 25% in silver 75% gold. The the more balanced clients are today hugging well I would say they they were at 15 and and the price price movement has probably taken them nearer 20 of their portfolio is now in silver 20% versus gold. Platinum is is really sort of out there. Um, again, I it it's a thin market. It's what whatever it is, 1% of daily volume. So, it it's a thin market that brings with it volatility that in my 40 odd years of of working with investors. The the volatility is is probably your your biggest enemy because it's the thing that spooks people. And you can start with a sensible investment strategy and you you just need a a bad three or four five days of draw downs of of of some proportion and people believe the world's come to an end and all of the principles that they had in terms of investing get thrown out the window. So platinum is there for I think it's sort of the mastery. I think when you've got to sort of black belt of um precious metals then uh platinum would be a conversation that we would have. Um, but we we are absolutely encouraging investors once they're comfortable to have some silver in their portfolio uh and and in varying in amounts. >> I think that that makes a lot of sense the way you're laying it out there. And I want to talk a little bit more about some of Goldstrom's offerings that might be interesting or or unusual to people, which are interest on physical gold and credit lines against gold. So, what can you what can you say about that and how that works? Sure. So our our business is I don't want to say unique or or it's unusual in as much that we operate probably in the in the wholesale market. So we're not really a a gold broker in the in the traditional sense that you know we don't sell gold online. Um we're not in the business of of selling kilo bars or or or coins in in the uh the BTOC space. So we very much work with other traders and uh we work with more institutional high net worth. I'd say our average client is is probably probably sat on 25 kilos of gold. So that that's the sort of the the quantum of of sort of entry point into Goldstrom. Um so for those clients and and and the gold bugs, this has been an interesting journey. So we we look at the the bullion banking world uh as a number of our colleagues have come from that space and and see that gold is is an asset that's utilized. It is a it's an interestbearing asset at the uh at the the institutional level at the banktobank level central bank to central bank level and there is a demand for gold in um in the jewelry segment. So the jewelry sector has has has been probably the the most affected by the rise in price of of gold and not in a positive way over the last 18 months. So as as as gold shot through 3,000 there is a psychological wow this is expensive and and gold jewelry sales tend to taper off. But the thing in the background that's hurt the jewelers the most has then been the financing that they have of their stock because those those credit lines that they have from banks, those facilities that they have from traditional lenders are almost always in dollar terms. So they are limited to a certain amount of dollars that they can actually borrow. Now if the price of gold has gone up by 20 or 30% then the amount that they can borrow is is reduced by 20 or 30%. It's just a it's a zero sum game. So leasing gold to a jeweler removes that friction, that challenge that they may have with either putting up more margin or reducing the the the volume of of facility that they have, the size of the facility that they have. And we've sort of crossed the rubric with a number of investors. Um, if I could just take a step back, I think traditionally people that have gold and they have it in a vault have it for that emotional reason of being outside of the system and actually wanting to know that they own it. They can touch it. They can go in at lunchtime and see that it's there and and feel comfortable with it. And we believe that that that is, you know, 100% 100% solid as a as a rationale. However, um if they want to actually earn interest on this gold, there is a market that will lease this gold from them. They won't borrow it. They will they will lease it. And there's a very subtle difference in as much that you're not giving up title ship. You're not giving up ownership of your gold. You are transferring the use of that gold to a third party, a jeweler, uh who's then able to use that gold for a period, typically 12 months, and at the end of that period will return the physical gold to you. in that interim period they will pay you interest and that interest will also be paid in gold. So your gold will be credited to you in ounces or or grams. So what we've done is we've created an ecosystem where and this is something that's been ongoing in the Middle East for nearly two decades. This is the way that financing is is is largely done in in and around sort of Dubai, UAE, Qatar, places of that that sort. So this isn't something that's new and something that golds from a sort of hatched as a as a plan. This is uh this is just bringing something from another jurisdiction to the to the modern world. So we're able to offer those people that have gold in a vault if they can get to the comfort level of having that gold deployed and the collateral managed by us the ability to earn you know anywhere between 3 and 4% on their gold uh as as a return. So that for many does change the dynamic. Now, where I would say you're talking about the or we were talking about the two types of investors, the sort of the gold bug and the and the come lately. The come lately are actually finding this much easier to come to terms with than the gold bugs. The gold bugs are there saying, "Well, no, if I lease my gold, it's no longer mine. Yeah, I I appreciate I've got a title, but it's in someone else's hands." And then we we further compound matters for them because that gold gets converted into jewelry. But I I'll come on to that a little bit later. People new to the space look at gold and think, "Yeah, this is interesting." But actually, if I could get a yield on it and you can offer me what we call gold plus, an ETF plus a return, then I'm really interested. So, all of a sudden, we're not talking about buying an ETF, we're talking about buying something that's going to give you an ETF plus the yield and, you know, minus some fees. So, net net, you're going to get more than you would from an ETF. So, that's sort of number one. Second part of your your question was around was around credit lines and I think the repo market is is well established in in the the bullion space. I think seasoned investors will will understand the repo market. Um and you've just got to get comfortable with counterparty risk, but we're able to offer people liquidity against their gold with guaranteed buybacks. So we know that effectively, yes, technically you lose title to your gold, but um you're actually in the market. You're still long gold. So you're taking some liquidity. I wouldn't call it taking profit off the table because you stay fully exposed. So you're taking some liquidity against the the the returns that you've had, deploy it somewhere else. Um I spent 20some years in the hedge fund space and uh leverage was always the you know to to the uninitiated was the uh the devil incarnate. Um, however, if you use leverage in a sensible way, you can actually help yourself diversify. And that's really where we we put credit on or credit lines on gold as a as not to leverage up gold, but to diversify maybe into silver. >> Well, I think that gives a pretty good look at what Gold Trim is doing, how you see the market. I will let you go unless you had any final thoughts that you would leave investors with right now. It's pretty interesting times. Yeah, I think um it is interesting times. We're living in history and I think um for me the the the transition the the the destruction of trust that I think we've seen in the financial markets. I' I've been in the markets long enough to know that this isn't a new trend. this has been going on and the whole global um debt position has been something that people have been been talking about and it's going to trip us up at every moment and as we always say you know a stock clocks right twice a day so sooner or later that will come and we had 2008 but I do think this time it's different and I know that's always a dangerous thing to say but I just think with global trade uh and I just think the sort of the the global repositioning that we're going through not necessarily driven by um geopolitics but I think driven by trade is that we are actually seeing you know quite a partisan world forming up and you know is is China ready to to adopt the mantle of been the the global reserve currency for now I think probably not but I think when you look at what's going on in this part of the world in terms of uh Shanghai gold exchange um starting to to vault metals in Hong Kong um how far are we away from a a remnant B futures contract in Hong Kong in terms of that how far are we away from a clearing system in Hong Kong with that bullion being traded unallocated you know styled loc so there's lots of interesting things I think so we are living through history and um if I was if I was an investor at one end would I be concerned that we're an all-time high um no equally if I'm coming to the market brand new today and I had $100 to invest would I rush in with all $100 $. No, I'd probably stage that over a month or so. I think that there's there's an opportunity to just sensibly dollar cost average. But this applies to all assets. It's not just to gold. That's just investing common sense. Um, but I do think that we are we are living through history. And maybe, you know, our our children, grandchildren will look back and and talk about, you know, the the 2020s is the year when uh the world flipped and and gold and and precious metals sort of resume their their um their status as the the the the international core assets. Yeah, >> it feels like that could certainly be true. Well, thank you so much for coming on to go through what's going on in the precious metals. This was really great. >> Pleasure, Charlotte. Lovely to see you. Lovely for me. Take care. >> Of course, you as well. Once again, I'm Charlotte Mloud with investing.com and this is Patrick Tui with Goldstrom. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]