Silver Back at $80, Copper Near $6 – Axel Merk Says This Isn’t a Bubble
Summary
New Era Framework: The guest argues rising geopolitical frictions and state activism raise the cost of doing business, creating structural tailwinds for precious metals.
Precious Metals: Gold near record highs and volatile silver strength reflect policy uncertainty, reshoring, tariffs, and speculative flows supporting the complex.
Gold Miners: Despite strong metal prices, miners lag due to historic underinvestment, ETF-driven funding gaps, and investor skepticism, creating rerating potential with select catalysts.
Central Bank Buying: De-dollarization pressures and reserve diversification are boosting official-sector gold demand, with central banks’ low price sensitivity reinforcing long-term support.
Portfolio Positioning: He favors companies transitioning from developers to early producers that can self-fund expansion, targeting specific operational catalysts beyond metal price moves.
Policy Dynamics: Tariffs, subsidies, and potential windfall taxes increase dispersion; front-running favorable policy can help, but governance and jurisdiction risks remain pivotal.
Risk Management: Elevated volatility and changing margin rules argue for prudent position sizing, limited leverage, and rebalancing when conditions are benign.
Transcript
Kitco News Outlook 2026 is brought to you by Discovery, building value through gold and silver. Welcome back. I'm Jeremy Saffron. Over the last 24 hours, the market has stopped pricing inflation and started pricing regime change. Now, silver is back above $80 an ounce, charging right back towards the all-time high of 83.90 set just last month. Meanwhile, copper is trading near $6 a pound as the market reacts to reports that inventory is being pulled into the United States ahead of tariff deadlines. And gold, it's holding firm just below $4,500, essentially at record territory. In fact, gold futures just passed 4,500. Now, all this price action is happening very quickly. And the question is, are we watching a bubble or the repricing of the world order? Now, our guest today is one of the few voices who didn't just predict this shift. He built a portfolio to dominate it. He's the president and CIO of Merk Investments and the architect behind the legendary ASA gold and precious metals fund. While the rest of the street was chasing AI, he was positioning for the return of hard assets. Now, he manages over three billion dollars in the sector alone. His strategy isn't just winning, it's crushing the junior minor benchmark by nearly 200 percentage points. Now, he called the margin expansion. He called the Fed pivot. And this morning, he sent me a note saying, quote, "The postWorld War II era is over. In the new era, power matters. Joining us to map out this new era is Axel Murk. Axel, welcome back. Great to see you. Happy New Year. Also, I bet that's past three billion now under management. >> Yes, in total, we at I think 3.8 billion and we were less than two billion a little over a year ago, I think. So, it's uh it's uh it's been quite a ride. Yeah. >> Yeah. Absolutely. Uh and I bet you're watching the price action today. And before we get into that, I got to start with kind of your framing. I mean in that post World War II era we were talking about you said it's kind of over and the US used to police the world lower cost of global commerce and now we're in a new era where kind of power matters so translate it for investors watching I mean when you say power matters what changes first in markets is it you know supply chains commodity pricing capital flows the cost of financing >> all right oh lots of topics uh let me try to summarize it in three hours um the the the framework I have is that the cost of doing business is going higher with the geopolitical dynamics that are that are happening and uh you mentioned the US being the quote unquote global policemen. Um the side effect of that after World War II was that global commerce was enabled, global shipping routes were safe. Um European countries had the luxury of investing in welfare because they didn't need to worry about defense as much. And anybody who's paid attention in recent years has noticed, well, this world has changed. I consider what happened in Ukraine or Gaza symptoms of this new era. And obviously, most recently, the US is flexing its muscle in Latin America. The rest of the world is outraged uh because of the rule of law. Well, rule of law implies somebody enforcing the rule of law and the global cop is is retreating because it's gotten too expensive, right? when when you're living beyond your means, you got to cut somewhere and uh keeping global shipping routes safe is uh not as high a priority and the Europeans are are complaining. Um but the way they're reacting is just as relevant for precious metals because we've seen not just in the US but globally a far more state activism um supporting certain industries Europeans spending over a trillion in infrastructure and and defense spending. And what that means is we'll get the best economic growth debt can buy. um rather than unleashing entrepreneurial forces in many parts of the world, we're pushing up spending. Um and when that's governmentmandated, it's not efficient. Um which means you spend a lot of money, you get a little bang for the buck and then so a corlary is that um commodity prices are floating higher and and precious metals in particular have been doing quite well. >> Yeah. Yeah, that's that's a good good point. I got to go back. I mean, when you say, you know, the rule of law is retreating because it's become too expensive, where does that show up first for investors? I mean, is it higher insurance costs? Is it these dis disrupted shipping routes that you're talking about? Or are governments quietly tolerating supply and security? >> Well, it's it's on the margin. You see it, right? It's not this huge headline saying, "Oh my god, our our our procurement chains are suddenly more expensive." because obviously >> businesses are in in their job is to to try to to sell goods consumers want and to do so profitably. So they're re-engineering the supply chains. There are several things it means in the short term. I think the uncertainty we've had means that there's a lot of cost cutting because when when where they can anyway um because when when you're faced with uncertainty, you're going to control the cost where you can. It's a key reason why the labor market has been somewhat soft because you're not going to hire when you don't know what the policy is going to be tomorrow. Um, in the medium term, the reshoring is going to increase the cost of business in the sense that it's of course cheaper to buy the cheapest gadget in China. Now, there are reasons why why you may think, well, this is not such a great idea, but there there implications for that, right? Um, and and so it's going to get more expensive to build things. And at the same time, the the other thing we we haven't touched on, and I talked with you about it and another time, is we have obviously tariffs to me that impacts not just the flow of goods, but also the flow of money, which means it's more difficult to attract money to to finance US deficits. um which should mean that we're going to lower our deficits. Instead, what it means, practically speaking, we're going to increase the pressure on the Federal Reserve to keep rates low. And so, it's it's kind of none of this is kind of, oh my god, this is going to go happen, this is going to happen. These are dynamics that are underlying to this and we get distracted by the news of the day, but at the end of the day, um it's it's a positive. if it's a tailwind for for for precious metals in particular that have decoupled from from bond prices and and lots of other things. >> Yeah. No, I mean actually let's let's kind of apply it to the headlines without overstating them. I mean we've got silver retesting $80, copper inventory being secured in the US. Venezuela chatter moving stocks. I mean is is that the market front running power or is it just traders gaming policy and news flow? >> Well, it's a little bit of everything, right? As as everybody in this program presumably watched, silver is historically notoriously volatile. The reason it is so volatile is because there is this industrial component in addition to this monetary component to the metal. And on the one hand, all these forces I've been discussing help precious metals prices in general. But then the policy uncertainty is sometimes the glass is half full, sometimes half empty. A a rational person can make an argument why we're going to have a boom. another rational person will make an argument why we'll have a slowdown. Um, but at the end of the day, we also I haven't touched on that. We have a midterm election coming up, so we'll probably see lots of announcements that that foster growth in terms of deregulation and other things. And so the the unleashing of the animal spirit is is a positive there for precious metals. And then and last but not least, um the speculators have taken note um with crypto not doing quite as well in recent months and spaxs not being as favorable anymore. Well, there's action in precious metals and so they add to volatility. So we get we get a little bit of all of that and and clearly when you have and then silver is also short-term supply issues of course that can create a bit of a squeeze on on top of that. >> Yeah. Yeah. And we're appearing it looks like it's similar too. I got to ask you, I mean, I want to move on to the US policy, but on Venezuela specifically, even if we get a transition, I mean, property rights don't appear overnight. Is the Venezuela trade investable or is it, you know, a legal or governance kind of minefield where shareholders can still get wiped out? >> Well, for us who buy things with a click of a button, I think we should stay away from Venezuela. You got to if you want to invest in a in an area there's turmoil, you got to roll up your sleeves and be on site, right? And I'm not going to make any investment recommendation, but if you're Chevron and you're on site, you can take care of opportunities. But um for us, if we buy an ETF on index, I would I'd be very cautious. Um the there is obviously there there are tremendous natural resources in Venezuela. Um you mentioned the rule of law and property rights. Um property rights are the foundation of prosperity. I I just want to make that as a broader point because when you have property rights, you can borrow against what you own and that means you can have a creditdriven society, you can grow things. If you don't have property rights, you don't know whether you own your house, you can't get a mortgage, or as a business, you can't get a loan to to to grow. And so there and differently said, they're really basic things you can fix in a country to to unleash growth. Um and and many emerging markets never quite figure it out. And I'm not suggesting that Venezuela is going to fix that that overnight. Um the the one thing I might say about Venezuela is that again pointing to the midterm election. um there is very little incentive for bad news coming out of Venezuela and so which to me means that the US might want to take things a step at a time. And also one perspective you might not hear from everybody although I'm sure some have mentioned it. The key in Venezuela is not oil. The key is that the Chinese, the Russians, the Iranians have taken a foothold, a very strong foothold in Venezuela to the point that it became a serious national security risk, which means dismantling that risk is at least a high as high a priority as developing the country. Um, from a national security point of view, the the Venezuelan oil is kind of nice to have, but it's not it's not the reason to for regime change. And so the and that's also why we're seeing kind of the the the current government somehow kind of stay in power even though supposedingly they're going to have to cooperate. But it is having kind of things linger with the Chinese, the Iranians, and the Russians out of the picture is far more important from a national security interest than whether we're going to rebuild Venezuela tomorrow. >> Yeah. Yeah, makes sense. Uh Iran as well. Uh okay. Well, I want to get back to kind of, you know, state activism. We were talking about this policy uncertainty and it came up with jobs. I mean, you made a point that kind of hits home for us viewers. You wrote, "Policy uncertainty has contributed to weak job growth because employers control what they can, including labor costs." So, I mean, what does that mean in practice? Are are companies freezing hiring because they don't trust the rules or because demand is actually weakening? >> Well, it's because they don't know what the rules are tomorrow, right? Because if tariffs change every day, you're going to try to you you talked about copper being kind of trying to preempting tariffs. Now, the good news is that when you're a new administration, any new administration, you want to get the bad news out front. And I I've always thought about the Trump administration is using a carrot and a stick approach. Um the stick being tariffs and the carrot being deregulations, oversimplifying here, of course, a little bit. And so, I think we'll see a lot more carrots and fewer sticks in the coming months. Uh because then the messaging needs to change that. I think there was an editorial in the Wall Street Journal by a former Clinton adviser that Clinton and Trump have very similar problems that the economy is improving but the public doesn't feel it. And so the messaging needs to change. There needs to be good news and and at the same time of course when when there is a scaling back on businesses um that will have that will have an impact and the ripple effects of tariffs can have a a prolonged negative impact also on on these businesses. So when has to cut the corner in time for the midterm elections and at least if you're if you're on the kind of on the on the on the policy side and so I think it's going to be fascinating to to see that unfold. >> Yeah. I mean you know there is a contradiction there. I mean if policy uncertainty is hurting jobs the political response is usually more intervention not less. I mean does that mean that the US doubles down on state activism into the midterms more subsidies you know more industrial policy more messaging? That's the world we live in today. And the Chinese have always done it, but now the Europeans and Americans are are doing it. Um, and it appears to be embraced by many, right? Um, and we see that with the subsidies to farmers. I mean, that's that's part of the challenge when you when you meddle in one place, you're going to have unintended consequences. Um, and for what it's worth, one um I I get this idea that tariffs are important for national security. The reason I don't like tariffs is because it builds the swamp. Um, tariffs means that you're going to ask for an exemption. The folks who lobby the hardest will get an exemption and that is painful for small business because small business doesn't have a lobby. New growth comes from small business. And so there needs to be a way to to figure out how to foster that. And that's why historically I am a believer that government needs to get out of the way and and focus on the basics. Um but that's not the world we live in, right? And and of course if you give if you give subsidy to a company that that mines strategic minerals um yes from a from an investment point of view that that day that that stock will skyrocket. Clearly any permitting on the federal level um can be eased with government regulation. So there's a lot that can be done. Um and I'm not saying all state activism is is necessarily hurtful. um it will certainly get people's attention, but it's a it's a different environment. It will create a greater dispersion and so if you can kind of frontr run this and be on the right side of that that can be profitable. Um you can also be on the losing side of it. Um but but yes, it creates a certain uncertainty in in the market as well. >> Hey, let's get specific on timing. I mean, the White House needs a win before November. Uh, if you could give me one policy move, whether it's strategic reserves or tax credits or trade controls that you expect to see before the midterms that the market is not kind of currently pricing in. >> Well, we've seen a lot of that, right? I mean, the one thing that that people don't talk about much is is is people will get a tax refund, right? The the um the the tax bill um kind of people didn't change the withholdings on on on wages and so in a in a few weeks. So people will get refunds that will boost spending. It's it's really one of messaging that said um if government tells you everything is great and you don't feel great and that messaging doesn't work so well. And so the the art is to do the messaging in a way that that resonates. Um now President Trump is known that he can communicate with his base at least. And so that's I mean he he I'm not going to tell him how to do his messaging. Um it's it's certainly a a challenge. Um ultimately, of course, when when the markets are going to all-time high, at least those who are well off um have a wealth effect. They continue to to do spending. The the key here is that the folks at the lower end of the income spectrum um not only earn more, but actually actually have more um feel that they do more. And maybe if I can bridge to that, we have these three candidates to succeed at the Federal Reserve. Two of them are in the glass half full productivity camp and one of them is in the glass half empty camp. Um both Kevin's Kevin Walsh and Kevin Hasset believe that we could have a tremendous productivity gain if the Federal Reserve only lets the economy and want to cut for that reason. whereas Chris Waller says, "Oh, the economy is is not doing well and we need to cut rates for that reason." And so you can come to the same conclusion from very very different perspectives. Um, if I'm not mistaken, if if you kind of don't want to lose too many seats, the messaging has to shift towards this productivity gain we're getting and why there's an opportunity. Obviously, when we talk about productivity gain, people will will talk about the one thing I haven't mentioned, if you haven't noticed, I haven't talked about AI. I don't think AI is the key driver behind the job losses, but that's going to be the rhetoric that AI is killing all the jobs and and so forth. We'll we'll have to see how that plays out. >> Uh let's I wanted to kind of define state activism because you wrote that governments are now fostering minors. We know as you know government money is rarely free. Axel, I mean give me your kind of red line. I mean, what what's the difference between fostering a minor, you know, permits, tax credits, and socializing the upside, windfall taxes, price caps? I mean, at what point does state support become a sell signal >> on day one? I mean, it's a I I don't like it. I mean obviously the um there's going to be a boost in these companies um when there are miners out there and I I won't name them because I don't want to cause market volatility that that produce strategic minerals in the US and haven't received any any government investment. But don't fool yourself, right? This administration is going to change. I mean look at look at Europe. Look at Volkswagen. Um the the car manufacturer where the government owns a quarter of of the company and is on the board. Um by all means once a government takes a stake in it. Yes, they'll have a seat at the table and will influence policy and you may favor the current administration's policies but there's going to be another government and those shares will still be owned by government. So I my preference is for the government to be out of the way. Um there there are of course light ways of doing it. you can um the the the challenge is right we we've had this thing in the previous administration where there are big loans given to solar manufacturers and then there's a big bankruptcy um because they can't repay the loans and there's egg on the face of the administration. Well, that's that's what happens with state activism, right? There will be failures and uh you can say that for for national security interests you need to do certain things. Um it's just that you've got to be very very careful when when you deploy this money because as you point out right they want to have a seat at the table and it's they're going to meddle with um with the strategy going forward. >> Yeah. Yeah. The stacked board, huh? Uh okay. Well, I want to get back to metals because I'm looking at copper today. I mean, we're we're talking about benchmark copper trading near $6 a pound and the reports say inventory is being pulled into US warehouses ahead of tariff deadlines. Uh, I got to ask you, I mean, you're watching this probably fairly closely. Is this a genuine physical shortage or is it a policydriven stockpiling and tariff arbitrage? >> Well, it's a little bit of everything, right? And uh, and the one thing people forget with commodities is that you have real logistical challenges. Um, and if anybody trades these markets, you got to look at the small print. Um, I expect everybody remembers the negative oil prices we've had because storage costs were high. the same thing we've had when when when we had gold go to the US or silver come to the US because of expected tariffs or this or that. The similar with copper. These are these are real things. And the other thing to remember is the sheer volume. One of the reasons why central banks like gold is because you have in an ounce like over $4,000 worth of of value where where silver as much as people like that it's gone up so much it's you got 80 bucks. Um, if you when I talk to the the big vaults, uh, they don't like silver. It's it's too much work to to ship that stuff around, right? It's darn heavy to to to ship some value around. And of course, copper being an industrial good um, has its own sort of logistical challenges. And the more you go on the industrial side and you have quote unquote speculators hoarding it, the more you have the risk as well of government intervention at some point telling you, hey, you're not allowed to hoard it. We need it in the industry. But clearly with the buildout of AI um which has absolutely astounding investments, we're going to need commodities. Yes. To to build out that stuff. >> When you hear, you know, these we've been hearing about shortages, physical shortages, and it's not just on copper. Obviously, we pointed to to different metals. I mean, name one kind of proof point that you trust here. I mean, what's the cleanest indicator that tells you that that's real? Is it spreads? Is it warehouse withdrawals, treatment charges, scrap flows? Is it something else I'm missing? >> Well, it depends on what you want to watch. Um the the one thing obviously I'm I'm a gold guy ultimately and I watched very closely the the flight of gold out of London to Comx where gold was taken um from London refined in Switzerland to kilobars because they don't accept London bars at Comx and move them to Comx and the the there's this wonderful thing that helps any crunch which is called the price because the price goes up and so there there's always going to be supply at a certain price. But what happened at the time was that a lot of that gold was stuck in the Bank of England because the the big bullion banks that provide the liquidity in the market that's some of the gold there the inventory systems at the Bank of England are so arcane that um to to just illustrate that your typical when you have a pallet of gold that's your gold and when you sell gold to another party they take it from one pallet to another. The Bank of England doesn't do that. they enter in the computer system that this gold bar on this pallet now belongs to somebody else. So if somebody wants to have a large chunk of gold, it takes them forever to find it. And so when you have tons of gold leave the vault every day, they have backlogs of weeks. And and coming back to to to the point you're making is that you can see that or you couldn't see it because it actually worked out at the end of the day. you would have had spreads to widen if there was a kind of supply demand imbalance. So you can look at the small print of what happens in the specific market where the breaking point is. Obviously you can look at global markets when Shanghai has different pricing from the US. You see where different stress points are. Um so the details matter in these in these markets if you if you want to trade them. Um, and for most investors, I'd be cautioned them that unless you really know what you're doing to um to be careful. There's also a lot of nonsense that's out there in the blogersphere with conspiracy theories flaring up um that >> you got you got to shut can you got to shut a couple of those down right now, Axel, with me? What are the ones that you've been watching so closely and you say that's not true? I get I get um well, let me phrase it this way. Yeah, >> gold investors always think they're so special. Um they think that the world is out there to get them. Um well, I have news for you. Any market where there's a derivative has similar effects. And yes, they may be hedging. They're not doing their hedging to suppress a price. um they are doing it because they need to hedge something. Um people are in it for their own profit incentive. They're not governments can't agree on anything internally. You cannot have a global conspiracy on anything and and and to kind of take it a step forward. A lot of people think about some global reset. Well, how on earth are supposed is the world is supposed to agree on anything and you can have a reset. We're going further and further away from a gold standard. Um and and so if you believe in a gold standard, have your personal gold standard, but don't think the government is going to rescue you with repricing the price of gold or something like that. Um that's that is not going to happen. Um so think about what is the governments what governments are, they're good kickers. They'll kick the can down the road. Um the last thing they worry about is the price of gold. They think about how to coersse the Federal Reserve to to finance government spending. and that can be positive for the price of gold. The other thing is when people think about a reset, you always have to think about the day after um the look at Latin America, right? Their economies over decades deteriorated. Some of them are improving and the like. But similarly in the US, we have society adjust, right? We have we used to have one bread winner in the 50s um and uh and that was enough. Nowadays, you have a 65 or 70 year old work in your local supermarket. They're proud members of society that they're still contributing. Um, you have dual income earners and we all proud of how much we're working and contributing society. So, society embraces the the shift that we have and the tools that we're given. Um, even if from today's perspective says, "Oh my god, when I get much older, why do I still have to work?" well, come to that stage and and we're suddenly proud that we're still contributing members to society even if the purchasing power of our currency has eroded and and so it's just be careful when when you make these conclusions as to what will happen because ultimately um we have no idea what will be in the future. >> And actually I mean on those those rumors I mean last week the exchange changed margin requirements on silver. How much of this move was fundamentals versus forced positioning? I mean who got squeezed out when margins went up? Well, speculators of course get those with but that's those are the rules of the system, right? The the problem comes in during the Euro zone debt crisis when the rules get changed or or the financial crisis in 2008 when the rules get but when the rules are clear that when volatility goes up then margins go up. Those rules of the game are clear ahead of time. Um they're meant to to preserve the system. You can argue whether everything should be centrally kind of there should be a central clearing point or decentralized. But once you have the rules in place, it's not a conspiracy. It's the rules of the game. And by the way, a um these margin requirements are of course a disincentive to to use leverage. They're intended to to prevent a systemic fallout if that if the failure of any one party could topple over another party. Um, and as a reminder, government regulations job is not to prevent you from losing money. Their job is to prevent your stupidity to wreck the system as a whole. And that's and I'm not suggesting that all the mechanisms are perfect, but as long as the quite the contrary actually, but as long as the rules of the game are clear, you can prepare for them. >> Yeah. I mean, but if the exchange can change margin rules in the middle of the game, then price discovery isn't purely supply and demand in real time. It's also policy by rule book and then, you know, silver's uniquely exposed both this industrial metal and monetary metal. So, isn't the real takeaway that even if the long-term thesis is bullish, I mean, the paper market can keep slamming the brakes, meaning investors can be directionally right and still get wrecked on the volatility. I mean, what's your risk rule for that? position sizing. Is it owning physical or avoiding paper leverage altogether? >> Well, you only sleep as much risk as you can afford to, right? And uh how many that's not the physical gold bond of your pillow, but you got to look at especially precious metals. Um they tend to have a somewhat contained volatility and then it can surge. And we've of course seen that and and so as far as anyone's risk profile is concerned, you got to look at those periods where with elevated volatility and see whether you can stomach that. If you can't stomach that, you should take precautions before the volatility spikes. One thing to to add here maybe is that um we talk about some investors panicking when volatility goes up. Well, what the media often calls panicking for for small investors is called risk management for for large investors. It's the same thing, right? You reduce your exposure when volatility goes up. It's just that the retailers somehow stupid and and and the fund managers are are super smart and you pay them lots of money. But they ultimately what you should do is um when the times are good when volatility is low then you have the luxury of of deciding it's just like you don't buy fire insurance when your house is on fire and and and the era that the kind of if there's one message I have here is that the the policy uncertainty the the sort of things we see geopolitically um these are symptoms of a new era. Um if uh the current administration is they are they haven't caused this. They uh the they are reflection of where we are. When when you erode the purchasing power with fiscal loes when you have zero interest rate policies you you promote populism um that gets you more populist politicians. It gets you policy decisions that tend to be more shortsighted. Um and and that will persist, right? The question is always what's next rather than and we can criticize as much as we want any one policy we don't like. Um but ultimately we have to position ourselves for a volatile world where we may well get um a lot more intervention going forward. >> Yeah. Let's go to Europe a little bit. I found it interesting. You had this this line that kind of cut through the noise. You wrote that uh Europe will get the best recovery debt can buy. I mean, spending over a trillion dollars can create growth, but it maybe not entrepreneurship. So, are we looking at a zombie recovery in Europe? You know, growth funded by borrowing with weaker productivity underneath. What are your thoughts? >> Yes, I probably won't be it probably a little better than zombie, but it's it's not really sustainable. I mean, the Europeans are masters at kicking the can down the road and they'll live another day. Um, it it's just so sad to to see it all unfold. And the reason why it's so sad is because it's all a little it's too little too late. Um if if you look at the establishment parties in Europe, they've been clinging on to power and they haven't had the answers that people are looking for. They just tell you, "Oh, you you got to be patient and we'll do the right thing." But people don't think that their needs are being addressed. And so when you do too little too late, you're going to get more populism rise on the left and the right and they'll come to power um in in countries where where it matters more and they'll pursue um more populist policies, right? And and and so I don't think Europe is ready for that. They are Europe is not having the debate saying that oh we got to ramp up defense spending and therefore we need to cut social spending. So it's no no we'll have our cut cake and eat it. will spend a little bit more on military. We don't quite know how to do it. We don't really have the procurement channels, but we'll throw some money at that problem and then we'll throw some money at that problem. And they hope that they ek out enough economic growth that they can cling to power. And maybe that works, but I think the risk of that not working is is is rather substantial. >> And and I got to ask you, I mean, if that's true, then then Europe's policy mix becomes almost a tailwind for gold in euro terms. But it can also strengthen the dollar. Does the dollar stay structurally strong in 2026? because the US has the growth narrative and and Europe has the debt narrative. >> Well, the first of all, Europe can have a strong currency with weak growth. They have seen that over and over again. Um we we um we used to do a lot in the currency side. We don't do as much anymore. But one thing that we learned is that when you have a substantial current account deficit, you need economic growth to sustain your currency. When you have that somewhat imbalance or even a surplus, your currency is much more immune to to swings in economic growth. In that sense, the euro can be strong even with the economy weak. In the US, the big issue is, in my view anyway, is that the US has been acting like a giant hedge fund, like a bank where you borrow cheaply in the US, invest for higher returns abroad. And we have thrown a wrench into this machinery. We call it the exorbitant privilege with terrorists that we've made it more difficult for financial flows to get back into the US. And so to me, this is people say, "Oh, the US can't lose its status as a reserve currency because there's no alternative." That's the wrong way to frame it. Um the the right way, in my view, to frame it is that we have a splintering of the world. We have delobalization happening. And so we just have less of that economic engine that drives both on the US and the rest of the world. And it's part of the reason why people are increasing the debt spending to to try to compensate for it. Now the good news is that the US at least is a more dynamic economy than the other ones. Uh and we have this push for deregulation so we can buffer it. It's not like a switch you can turn on and off saying, "Oh, there's some tariffs and therefore the US is going down the drain." I'm not suggesting that at all. I'm what I'm suggesting is that that these tariffs are a serious headwind and and to to the point that you're alluding to, yes, it is a it's very much a key reason why precious metals have done so well. Um both because the the Europeans are spending so much and the US have to spend more money. haven't even talked about the Chinese that are desperate um to get their keep their economies growing and and say as we are moving through different phases of this I can call them phases of desperation maybe if one wants to be more negative um we have tailwinds to the precious metals of course that doesn't mean that that precious metals go up every day >> yeah well said and I mean you know we've been asking who is the buyer when it comes to precious metals and I think we somewhat found the answer I mean I'll pull up a chart from hedgei that is circulating on trading desk this morning it's if you look at the far right of the chart Gold has now surpassed the US dollar as the largest global reserve asset and the gray area just overtook the black line. Now, it doesn't seem like it's a trade. It's the end of the petro dollar system on a chart. I mean, is this strictly because of the price explosion to 4450? Are central banks actively dumping dollars to make room for the middle? Is this Venezuela? What just happened? Well, when you weaponize the dollar, you're providing a quote unquote incentive for countries not aligned with the US to diversify. And not all that money is going to get into gold, but gold is a beneficiary of that process. And I haven't seen that chart. I one thing has to be careful about with these charts is that some central banks value like the US the value at a fixed price, others at market value. Um, but assuming that's that's adjusted in their Yes, gold has played a more important role. Um, the one thing maybe to add to also the previous point about the the conspiracies and the global reset, you cannot have a gold standard unless your budget is in order because I mean of course you can have it in the short term but it's going to break and tell me one major countries that that has as a vision to actually do that. know sometimes we get lip service from some politicians but deficit spending is a wonderful thing when you're a politician and so I I I I don't see any of the major countries moving to to go. Now that said um those central banks apparently see as well that there are some some issues out there that might threaten fiat currencies and they may think that that gold is um will fulfill its traditional role. I happen to agree with that. Um, and the the the the noteworthy thing of course about central banks is that they're not very price sensitive, right? They have this printing press that they can use to to buy gold if that's what they choose to do. Um, and so they they just um have a marching order um internally created or through some outside official telling them. My my my guess is it's more internally created in many of these central banks. But um but yes they are an active buyer in there. Um the the other thing of course is I mean while there has been more retail attention to gold if you look at the holdings in ounces um I don't think we see any euphoria in retail in the US. Indeed when I call talk to gold dealers and you do that at least as much as I do. Um a lot of people retail are selling their coins. Indeed, when we saw talked to wholesalers, their business is not doing well because there's all these coins in circulation that people have brought back to coin dealers that fewer things are being ordered from the mints. And so we it's a it's a very interesting dynamic, but to me, this suggests that we're not at the end of some sort of mania because we very much have a two-way market in this. >> Yeah. Yeah. It's been fascinating to watch. And let's be blunt. I mean if no major government is willing to do fiscal discipline I mean gold standard talk becomes marketing as you said not really policy uh markets should sniff that out quite fast right I mean so isn't the realistic endgame either you know continued financial repression and stealth default via inflation or is it some form of capital controls and force savings to keep debt math working I mean in that world gold isn't a currency system it's a you know kind of a credibility hedge against governments that won't cut spending Well, yes to all of the above. I mean, different countries will have different reactions, but of course, the key attribute of any central bank is to be able to debase the value of the currency, right? I mean, the the idea that price stability is is kind of the one and everything that central banks are in for. Well, 2% inflation is not price stability. And uh as we've learned from Mario Draghi, the former head of the ECB, central banks will do whatever it takes when push comes to shove and and no central bank is an exception to that. Um presidents, prime ministers tend to get what they want in their central bank. Um there is of course things that the central bank can do to to help to be on the better side of things, on the worse side of things. But yes, at the end of the day, the inflation is part of of modern monetary systems. Uh but of course, it doesn't mean the world will come to a crashing end tomorrow. Again, um the policy makers are fabulous kickers. they figure out a way to stay in power another day to to let people kind of be there for another day and uh and it also doesn't mean the price of gold goes up every day. This is this is a long-term um trend that we're seeing. The phase we've entered in is that it's more influenced by populist policies which will make things more volatile on the policy side. >> Yeah. Yeah. Well said. Uh and we're seeing it today of course with the price of silver. I mean, we started the show with the news silver's back above $80. We hit $83.990, I think, on December 28th, and we pulled back and now we're right back at the scene of the crime. I mean, is this a double top where the rally fails or is this a consolidation before we blow past 85? I mean, what's your thoughts here? >> Well, I while I do watch technicals, I rarely ever comment on them. The the one thing I'd like I can add I guess to that to that point is that because especially gold has so little industrial use the technical become a self-fulfilling dynamic because it attracts many technical traders and silver of course is is somewhat related to that as well. Um but but yes, we we've had this this big sell-off in low liquidity at the end of the year and we've bounced right back. >> Um where the price of silver is tomorrow, I I can't tell you. But it is it is certainly noteworthy that it's gone up so much. Now, bridging a little bit here to the producers, one of the challenges is that there are not many good pure play silver companies and silver tends to be a byproduct. And so you see this bidding up of of companies that have silver. Indeed, you even see bidding up of some companies that used to be in silver have no silver production, but the but some investors are jumping on those those companies anyway. I don't want to name them here. >> Mhm. >> But that suggests that that maybe Yep. There is a little bit of speculation in here that might not turn out so well at the end of the day. um for the time being these these producers um they riding this wave and and several of them if they don't have to present the earnings right away um they it it remains to be seen how they can actually execute on that and so there's going to be more volatile in the miners and winners and losers will will separate >> what does uh I mean you know with silver at $80 I mean why are the miners not trading at alltime highs we're going to show that chart on uh that you sent me about gold miners versus the S&P 500 but I mean you What's blocking the reates? I mean, is it just investor distrust of management? Is it that fear of windfall taxes or is the market assuming margins will get taken away here? >> Well, it's it's a bunch of different things. Um, in general, an ounce in the ground is valued less than it it has been. That's been a trend that's been happening. One is I think the rise of ETFs. ET a lot of these mining companies leave constant access to funding and while the funding window is is wide open right now um ETFs can't do that and so you need somewhat specialty investors. One thing that has changed in recent months is when you go to talk to CEOs of mining companies they see that there new faces um in the audience including um journalist investors of of the large funds. And so there is more of that but but still it takes a long time for them to to get to know that sector. It's a sector that has different dynamics and and so and then there's the skepticism of course investors were burnt maybe too many times when these the big miners they overinvested um and then they then they underinvested. Now the big mining companies might have too little leverage to the price of gold. Um to us when we are investing in the sector we tend to look for catalysts that go beyond um just the price of the of the metal um that that there's some rerating in the company or they get added to indices potentially and and to have other catalysts as well. um they if you think about the the economics um aside of course that the price of the commodity um energy prices are hugely relevant they're very benign right and so the this idea that you have a lot of leverage when you invest in the miners is playing out a lot of investors haven't realized that governments often want to have higher taxes when when commodity prices are are higher we've seen that in some West African countries in particular where government wants to have more but generally speaking things are being contained. Also, you often have a broad um commodity boom that makes labor markets very very tight in the commodity space. Of course, labor markets are tight in the space, but by far not as tight as they could be. And so, a lot more of that margin is is is filtering through the bottom line. And uh to me the positive about all of this is that even though we we see more journalist investors nibbling with the space that I don't think we are we at the peak of this because the they don't fully reflect the the high price and of course part of it is are these prices sustainable? And uh while while you and I may think they are um the generalist investor scratching their head, doesn't understand what's happening and so they're discounting it and they they one of the things we're watching is whether the the the operators um was part of the budgeting, right? If they rely you don't want to invest in a mine that relies on $4,500 an ounce of gold in order to break break even. And so you want to watch that of what is how how do they operate? What do they need to break even? But even a high cost the nice thing about a higher cost mine is of course the leverage when they get profitable is much more and so you can see more of a price jump. And so the way to invest in these mining companies really depends on the phase they're in um and a lot of factors that that um that you just don't see when you just look at an ETF for example. >> Yeah. Yeah. You know when you talk about all-in sustaining costs I mean you know we saw some of them just printing at these margins. I mean with you know Igno metals comes to mind you know very low margin or excuse me very low cost and huge margin uh give me the practical takeaway I mean in your portfolio are you leaning senior producers developers or a barbell with cash and optionality >> we have we're currently mostly positioned in companies mostly we we're quite broad but a lot of investments we have in companies that have recently started to produce and so they show up in our holdings as producers, but we are really quite developmentheavy. They they they're very very heavy still on the development side and it's a remarkable shift from pre2022 we were a lot in exploration companies then we shifted to developers. These developers are starting to to move more to producers. Um we think that the the nice thing about those those companies is that they generate enough cash that they can fund their own expansion and in the current environment that is a sweet spot. that could change. But um there is a lot of also when when you have these spin-offs of um of of the bigger miners, there are a lot of opportunities there when when they are managed properly. Um and so there we think there are tremendous opportunities out there even with the rally that we've had that um that it's uh it's an exciting environment to be in in this market. >> And I mean I'm going to get asked by the viewers. So just I guess it's just your uh you can't give us any of those tickers, right? No, we do publish our holdings on a monthly basis on our website. Um, but we'd caution about just copying that. Um, one of the things we are able to do is participate in funding rounds and the like. It's something that that most retail investors just just can't do. Um, and and obviously these are published with a lag. We do sell things as well. um we do have to sell things to buy new things and and so we just caution against just copying what we do because um we're not going to be there when when we sell something. >> All right. So you're not just copying the Nancy Pelosi playbook either, I guess. Uh okay, last question actually. I mean one adjustment. I mean you told me the post World War II era is over and power matters. I mean for the investors watching who's still using the old playbook, what's the single adjustment they should make today? Is it more physical, tighter jurisdiction discipline? maybe more cash or or a different way of sizing risk. >> Oh boy, you still use the old playbook. Um um then I would hope that you have a good income from your job. So it doesn't matter what happens to your portfolio. I mean, it's a if you're following the old playbook, your portfolio is going to be very AI heavy and uh I mean, Greenspan warned about irrational exuberance in late 96 and took years for it to play out and and so yeah, enjoy the ride while it lasts. It's it's the I mean the the old the the thing that's still true about the old playbook is that you got to be comfortable with the risk you're taking. And uh and one one thing to think about is I don't really think it's important to have the best investment process, but have just any investment process, right? Any investment process better than no investment process. What you don't want to do is just invest in the latest thing you hear on social media. Um you and if you do buy something, think about why you bought it and keep that in mind and don't have this bias that now that I bought it is the best thing since sliced bread, but test your theory because at some point if that premise is no longer there, why are you still holding it? And then the other thing is of course that the time to to rebalance your portfolio is when times are good um not not when you're in a panic. Yeah, that's that's uh that's some good advice. All right, Axel MK, thanks for your time today. We really appreciate it. Thanks for coming on the program. >> My pleasure. >> All right, the rules are shifting. Don't trade the headlines. Track the flows. We'd also like to thank our outlook 2026 sponsor, Discovery, combining highquality gold producing assets in Canada with the world's largest undeveloped silver deposits in Mexico. You can find out more by going to discovery silver.com. Don't forget to subscribe right here to Kiko News. I'm Jeremy Sapp and for all of us, we'll see you next time. >> Kitco News Outlook 2026 is brought to you by Discovery. Building value through gold and silver.
Silver Back at $80, Copper Near $6 – Axel Merk Says This Isn’t a Bubble
Summary
Transcript
Kitco News Outlook 2026 is brought to you by Discovery, building value through gold and silver. Welcome back. I'm Jeremy Saffron. Over the last 24 hours, the market has stopped pricing inflation and started pricing regime change. Now, silver is back above $80 an ounce, charging right back towards the all-time high of 83.90 set just last month. Meanwhile, copper is trading near $6 a pound as the market reacts to reports that inventory is being pulled into the United States ahead of tariff deadlines. And gold, it's holding firm just below $4,500, essentially at record territory. In fact, gold futures just passed 4,500. Now, all this price action is happening very quickly. And the question is, are we watching a bubble or the repricing of the world order? Now, our guest today is one of the few voices who didn't just predict this shift. He built a portfolio to dominate it. He's the president and CIO of Merk Investments and the architect behind the legendary ASA gold and precious metals fund. While the rest of the street was chasing AI, he was positioning for the return of hard assets. Now, he manages over three billion dollars in the sector alone. His strategy isn't just winning, it's crushing the junior minor benchmark by nearly 200 percentage points. Now, he called the margin expansion. He called the Fed pivot. And this morning, he sent me a note saying, quote, "The postWorld War II era is over. In the new era, power matters. Joining us to map out this new era is Axel Murk. Axel, welcome back. Great to see you. Happy New Year. Also, I bet that's past three billion now under management. >> Yes, in total, we at I think 3.8 billion and we were less than two billion a little over a year ago, I think. So, it's uh it's uh it's been quite a ride. Yeah. >> Yeah. Absolutely. Uh and I bet you're watching the price action today. And before we get into that, I got to start with kind of your framing. I mean in that post World War II era we were talking about you said it's kind of over and the US used to police the world lower cost of global commerce and now we're in a new era where kind of power matters so translate it for investors watching I mean when you say power matters what changes first in markets is it you know supply chains commodity pricing capital flows the cost of financing >> all right oh lots of topics uh let me try to summarize it in three hours um the the the framework I have is that the cost of doing business is going higher with the geopolitical dynamics that are that are happening and uh you mentioned the US being the quote unquote global policemen. Um the side effect of that after World War II was that global commerce was enabled, global shipping routes were safe. Um European countries had the luxury of investing in welfare because they didn't need to worry about defense as much. And anybody who's paid attention in recent years has noticed, well, this world has changed. I consider what happened in Ukraine or Gaza symptoms of this new era. And obviously, most recently, the US is flexing its muscle in Latin America. The rest of the world is outraged uh because of the rule of law. Well, rule of law implies somebody enforcing the rule of law and the global cop is is retreating because it's gotten too expensive, right? when when you're living beyond your means, you got to cut somewhere and uh keeping global shipping routes safe is uh not as high a priority and the Europeans are are complaining. Um but the way they're reacting is just as relevant for precious metals because we've seen not just in the US but globally a far more state activism um supporting certain industries Europeans spending over a trillion in infrastructure and and defense spending. And what that means is we'll get the best economic growth debt can buy. um rather than unleashing entrepreneurial forces in many parts of the world, we're pushing up spending. Um and when that's governmentmandated, it's not efficient. Um which means you spend a lot of money, you get a little bang for the buck and then so a corlary is that um commodity prices are floating higher and and precious metals in particular have been doing quite well. >> Yeah. Yeah, that's that's a good good point. I got to go back. I mean, when you say, you know, the rule of law is retreating because it's become too expensive, where does that show up first for investors? I mean, is it higher insurance costs? Is it these dis disrupted shipping routes that you're talking about? Or are governments quietly tolerating supply and security? >> Well, it's it's on the margin. You see it, right? It's not this huge headline saying, "Oh my god, our our our procurement chains are suddenly more expensive." because obviously >> businesses are in in their job is to to try to to sell goods consumers want and to do so profitably. So they're re-engineering the supply chains. There are several things it means in the short term. I think the uncertainty we've had means that there's a lot of cost cutting because when when where they can anyway um because when when you're faced with uncertainty, you're going to control the cost where you can. It's a key reason why the labor market has been somewhat soft because you're not going to hire when you don't know what the policy is going to be tomorrow. Um, in the medium term, the reshoring is going to increase the cost of business in the sense that it's of course cheaper to buy the cheapest gadget in China. Now, there are reasons why why you may think, well, this is not such a great idea, but there there implications for that, right? Um, and and so it's going to get more expensive to build things. And at the same time, the the other thing we we haven't touched on, and I talked with you about it and another time, is we have obviously tariffs to me that impacts not just the flow of goods, but also the flow of money, which means it's more difficult to attract money to to finance US deficits. um which should mean that we're going to lower our deficits. Instead, what it means, practically speaking, we're going to increase the pressure on the Federal Reserve to keep rates low. And so, it's it's kind of none of this is kind of, oh my god, this is going to go happen, this is going to happen. These are dynamics that are underlying to this and we get distracted by the news of the day, but at the end of the day, um it's it's a positive. if it's a tailwind for for for precious metals in particular that have decoupled from from bond prices and and lots of other things. >> Yeah. No, I mean actually let's let's kind of apply it to the headlines without overstating them. I mean we've got silver retesting $80, copper inventory being secured in the US. Venezuela chatter moving stocks. I mean is is that the market front running power or is it just traders gaming policy and news flow? >> Well, it's a little bit of everything, right? As as everybody in this program presumably watched, silver is historically notoriously volatile. The reason it is so volatile is because there is this industrial component in addition to this monetary component to the metal. And on the one hand, all these forces I've been discussing help precious metals prices in general. But then the policy uncertainty is sometimes the glass is half full, sometimes half empty. A a rational person can make an argument why we're going to have a boom. another rational person will make an argument why we'll have a slowdown. Um, but at the end of the day, we also I haven't touched on that. We have a midterm election coming up, so we'll probably see lots of announcements that that foster growth in terms of deregulation and other things. And so the the unleashing of the animal spirit is is a positive there for precious metals. And then and last but not least, um the speculators have taken note um with crypto not doing quite as well in recent months and spaxs not being as favorable anymore. Well, there's action in precious metals and so they add to volatility. So we get we get a little bit of all of that and and clearly when you have and then silver is also short-term supply issues of course that can create a bit of a squeeze on on top of that. >> Yeah. Yeah. And we're appearing it looks like it's similar too. I got to ask you, I mean, I want to move on to the US policy, but on Venezuela specifically, even if we get a transition, I mean, property rights don't appear overnight. Is the Venezuela trade investable or is it, you know, a legal or governance kind of minefield where shareholders can still get wiped out? >> Well, for us who buy things with a click of a button, I think we should stay away from Venezuela. You got to if you want to invest in a in an area there's turmoil, you got to roll up your sleeves and be on site, right? And I'm not going to make any investment recommendation, but if you're Chevron and you're on site, you can take care of opportunities. But um for us, if we buy an ETF on index, I would I'd be very cautious. Um the there is obviously there there are tremendous natural resources in Venezuela. Um you mentioned the rule of law and property rights. Um property rights are the foundation of prosperity. I I just want to make that as a broader point because when you have property rights, you can borrow against what you own and that means you can have a creditdriven society, you can grow things. If you don't have property rights, you don't know whether you own your house, you can't get a mortgage, or as a business, you can't get a loan to to to grow. And so there and differently said, they're really basic things you can fix in a country to to unleash growth. Um and and many emerging markets never quite figure it out. And I'm not suggesting that Venezuela is going to fix that that overnight. Um the the one thing I might say about Venezuela is that again pointing to the midterm election. um there is very little incentive for bad news coming out of Venezuela and so which to me means that the US might want to take things a step at a time. And also one perspective you might not hear from everybody although I'm sure some have mentioned it. The key in Venezuela is not oil. The key is that the Chinese, the Russians, the Iranians have taken a foothold, a very strong foothold in Venezuela to the point that it became a serious national security risk, which means dismantling that risk is at least a high as high a priority as developing the country. Um, from a national security point of view, the the Venezuelan oil is kind of nice to have, but it's not it's not the reason to for regime change. And so the and that's also why we're seeing kind of the the the current government somehow kind of stay in power even though supposedingly they're going to have to cooperate. But it is having kind of things linger with the Chinese, the Iranians, and the Russians out of the picture is far more important from a national security interest than whether we're going to rebuild Venezuela tomorrow. >> Yeah. Yeah, makes sense. Uh Iran as well. Uh okay. Well, I want to get back to kind of, you know, state activism. We were talking about this policy uncertainty and it came up with jobs. I mean, you made a point that kind of hits home for us viewers. You wrote, "Policy uncertainty has contributed to weak job growth because employers control what they can, including labor costs." So, I mean, what does that mean in practice? Are are companies freezing hiring because they don't trust the rules or because demand is actually weakening? >> Well, it's because they don't know what the rules are tomorrow, right? Because if tariffs change every day, you're going to try to you you talked about copper being kind of trying to preempting tariffs. Now, the good news is that when you're a new administration, any new administration, you want to get the bad news out front. And I I've always thought about the Trump administration is using a carrot and a stick approach. Um the stick being tariffs and the carrot being deregulations, oversimplifying here, of course, a little bit. And so, I think we'll see a lot more carrots and fewer sticks in the coming months. Uh because then the messaging needs to change that. I think there was an editorial in the Wall Street Journal by a former Clinton adviser that Clinton and Trump have very similar problems that the economy is improving but the public doesn't feel it. And so the messaging needs to change. There needs to be good news and and at the same time of course when when there is a scaling back on businesses um that will have that will have an impact and the ripple effects of tariffs can have a a prolonged negative impact also on on these businesses. So when has to cut the corner in time for the midterm elections and at least if you're if you're on the kind of on the on the on the policy side and so I think it's going to be fascinating to to see that unfold. >> Yeah. I mean you know there is a contradiction there. I mean if policy uncertainty is hurting jobs the political response is usually more intervention not less. I mean does that mean that the US doubles down on state activism into the midterms more subsidies you know more industrial policy more messaging? That's the world we live in today. And the Chinese have always done it, but now the Europeans and Americans are are doing it. Um, and it appears to be embraced by many, right? Um, and we see that with the subsidies to farmers. I mean, that's that's part of the challenge when you when you meddle in one place, you're going to have unintended consequences. Um, and for what it's worth, one um I I get this idea that tariffs are important for national security. The reason I don't like tariffs is because it builds the swamp. Um, tariffs means that you're going to ask for an exemption. The folks who lobby the hardest will get an exemption and that is painful for small business because small business doesn't have a lobby. New growth comes from small business. And so there needs to be a way to to figure out how to foster that. And that's why historically I am a believer that government needs to get out of the way and and focus on the basics. Um but that's not the world we live in, right? And and of course if you give if you give subsidy to a company that that mines strategic minerals um yes from a from an investment point of view that that day that that stock will skyrocket. Clearly any permitting on the federal level um can be eased with government regulation. So there's a lot that can be done. Um and I'm not saying all state activism is is necessarily hurtful. um it will certainly get people's attention, but it's a it's a different environment. It will create a greater dispersion and so if you can kind of frontr run this and be on the right side of that that can be profitable. Um you can also be on the losing side of it. Um but but yes, it creates a certain uncertainty in in the market as well. >> Hey, let's get specific on timing. I mean, the White House needs a win before November. Uh, if you could give me one policy move, whether it's strategic reserves or tax credits or trade controls that you expect to see before the midterms that the market is not kind of currently pricing in. >> Well, we've seen a lot of that, right? I mean, the one thing that that people don't talk about much is is is people will get a tax refund, right? The the um the the tax bill um kind of people didn't change the withholdings on on on wages and so in a in a few weeks. So people will get refunds that will boost spending. It's it's really one of messaging that said um if government tells you everything is great and you don't feel great and that messaging doesn't work so well. And so the the art is to do the messaging in a way that that resonates. Um now President Trump is known that he can communicate with his base at least. And so that's I mean he he I'm not going to tell him how to do his messaging. Um it's it's certainly a a challenge. Um ultimately, of course, when when the markets are going to all-time high, at least those who are well off um have a wealth effect. They continue to to do spending. The the key here is that the folks at the lower end of the income spectrum um not only earn more, but actually actually have more um feel that they do more. And maybe if I can bridge to that, we have these three candidates to succeed at the Federal Reserve. Two of them are in the glass half full productivity camp and one of them is in the glass half empty camp. Um both Kevin's Kevin Walsh and Kevin Hasset believe that we could have a tremendous productivity gain if the Federal Reserve only lets the economy and want to cut for that reason. whereas Chris Waller says, "Oh, the economy is is not doing well and we need to cut rates for that reason." And so you can come to the same conclusion from very very different perspectives. Um, if I'm not mistaken, if if you kind of don't want to lose too many seats, the messaging has to shift towards this productivity gain we're getting and why there's an opportunity. Obviously, when we talk about productivity gain, people will will talk about the one thing I haven't mentioned, if you haven't noticed, I haven't talked about AI. I don't think AI is the key driver behind the job losses, but that's going to be the rhetoric that AI is killing all the jobs and and so forth. We'll we'll have to see how that plays out. >> Uh let's I wanted to kind of define state activism because you wrote that governments are now fostering minors. We know as you know government money is rarely free. Axel, I mean give me your kind of red line. I mean, what what's the difference between fostering a minor, you know, permits, tax credits, and socializing the upside, windfall taxes, price caps? I mean, at what point does state support become a sell signal >> on day one? I mean, it's a I I don't like it. I mean obviously the um there's going to be a boost in these companies um when there are miners out there and I I won't name them because I don't want to cause market volatility that that produce strategic minerals in the US and haven't received any any government investment. But don't fool yourself, right? This administration is going to change. I mean look at look at Europe. Look at Volkswagen. Um the the car manufacturer where the government owns a quarter of of the company and is on the board. Um by all means once a government takes a stake in it. Yes, they'll have a seat at the table and will influence policy and you may favor the current administration's policies but there's going to be another government and those shares will still be owned by government. So I my preference is for the government to be out of the way. Um there there are of course light ways of doing it. you can um the the the challenge is right we we've had this thing in the previous administration where there are big loans given to solar manufacturers and then there's a big bankruptcy um because they can't repay the loans and there's egg on the face of the administration. Well, that's that's what happens with state activism, right? There will be failures and uh you can say that for for national security interests you need to do certain things. Um it's just that you've got to be very very careful when when you deploy this money because as you point out right they want to have a seat at the table and it's they're going to meddle with um with the strategy going forward. >> Yeah. Yeah. The stacked board, huh? Uh okay. Well, I want to get back to metals because I'm looking at copper today. I mean, we're we're talking about benchmark copper trading near $6 a pound and the reports say inventory is being pulled into US warehouses ahead of tariff deadlines. Uh, I got to ask you, I mean, you're watching this probably fairly closely. Is this a genuine physical shortage or is it a policydriven stockpiling and tariff arbitrage? >> Well, it's a little bit of everything, right? And uh, and the one thing people forget with commodities is that you have real logistical challenges. Um, and if anybody trades these markets, you got to look at the small print. Um, I expect everybody remembers the negative oil prices we've had because storage costs were high. the same thing we've had when when when we had gold go to the US or silver come to the US because of expected tariffs or this or that. The similar with copper. These are these are real things. And the other thing to remember is the sheer volume. One of the reasons why central banks like gold is because you have in an ounce like over $4,000 worth of of value where where silver as much as people like that it's gone up so much it's you got 80 bucks. Um, if you when I talk to the the big vaults, uh, they don't like silver. It's it's too much work to to ship that stuff around, right? It's darn heavy to to to ship some value around. And of course, copper being an industrial good um, has its own sort of logistical challenges. And the more you go on the industrial side and you have quote unquote speculators hoarding it, the more you have the risk as well of government intervention at some point telling you, hey, you're not allowed to hoard it. We need it in the industry. But clearly with the buildout of AI um which has absolutely astounding investments, we're going to need commodities. Yes. To to build out that stuff. >> When you hear, you know, these we've been hearing about shortages, physical shortages, and it's not just on copper. Obviously, we pointed to to different metals. I mean, name one kind of proof point that you trust here. I mean, what's the cleanest indicator that tells you that that's real? Is it spreads? Is it warehouse withdrawals, treatment charges, scrap flows? Is it something else I'm missing? >> Well, it depends on what you want to watch. Um the the one thing obviously I'm I'm a gold guy ultimately and I watched very closely the the flight of gold out of London to Comx where gold was taken um from London refined in Switzerland to kilobars because they don't accept London bars at Comx and move them to Comx and the the there's this wonderful thing that helps any crunch which is called the price because the price goes up and so there there's always going to be supply at a certain price. But what happened at the time was that a lot of that gold was stuck in the Bank of England because the the big bullion banks that provide the liquidity in the market that's some of the gold there the inventory systems at the Bank of England are so arcane that um to to just illustrate that your typical when you have a pallet of gold that's your gold and when you sell gold to another party they take it from one pallet to another. The Bank of England doesn't do that. they enter in the computer system that this gold bar on this pallet now belongs to somebody else. So if somebody wants to have a large chunk of gold, it takes them forever to find it. And so when you have tons of gold leave the vault every day, they have backlogs of weeks. And and coming back to to to the point you're making is that you can see that or you couldn't see it because it actually worked out at the end of the day. you would have had spreads to widen if there was a kind of supply demand imbalance. So you can look at the small print of what happens in the specific market where the breaking point is. Obviously you can look at global markets when Shanghai has different pricing from the US. You see where different stress points are. Um so the details matter in these in these markets if you if you want to trade them. Um, and for most investors, I'd be cautioned them that unless you really know what you're doing to um to be careful. There's also a lot of nonsense that's out there in the blogersphere with conspiracy theories flaring up um that >> you got you got to shut can you got to shut a couple of those down right now, Axel, with me? What are the ones that you've been watching so closely and you say that's not true? I get I get um well, let me phrase it this way. Yeah, >> gold investors always think they're so special. Um they think that the world is out there to get them. Um well, I have news for you. Any market where there's a derivative has similar effects. And yes, they may be hedging. They're not doing their hedging to suppress a price. um they are doing it because they need to hedge something. Um people are in it for their own profit incentive. They're not governments can't agree on anything internally. You cannot have a global conspiracy on anything and and and to kind of take it a step forward. A lot of people think about some global reset. Well, how on earth are supposed is the world is supposed to agree on anything and you can have a reset. We're going further and further away from a gold standard. Um and and so if you believe in a gold standard, have your personal gold standard, but don't think the government is going to rescue you with repricing the price of gold or something like that. Um that's that is not going to happen. Um so think about what is the governments what governments are, they're good kickers. They'll kick the can down the road. Um the last thing they worry about is the price of gold. They think about how to coersse the Federal Reserve to to finance government spending. and that can be positive for the price of gold. The other thing is when people think about a reset, you always have to think about the day after um the look at Latin America, right? Their economies over decades deteriorated. Some of them are improving and the like. But similarly in the US, we have society adjust, right? We have we used to have one bread winner in the 50s um and uh and that was enough. Nowadays, you have a 65 or 70 year old work in your local supermarket. They're proud members of society that they're still contributing. Um, you have dual income earners and we all proud of how much we're working and contributing society. So, society embraces the the shift that we have and the tools that we're given. Um, even if from today's perspective says, "Oh my god, when I get much older, why do I still have to work?" well, come to that stage and and we're suddenly proud that we're still contributing members to society even if the purchasing power of our currency has eroded and and so it's just be careful when when you make these conclusions as to what will happen because ultimately um we have no idea what will be in the future. >> And actually I mean on those those rumors I mean last week the exchange changed margin requirements on silver. How much of this move was fundamentals versus forced positioning? I mean who got squeezed out when margins went up? Well, speculators of course get those with but that's those are the rules of the system, right? The the problem comes in during the Euro zone debt crisis when the rules get changed or or the financial crisis in 2008 when the rules get but when the rules are clear that when volatility goes up then margins go up. Those rules of the game are clear ahead of time. Um they're meant to to preserve the system. You can argue whether everything should be centrally kind of there should be a central clearing point or decentralized. But once you have the rules in place, it's not a conspiracy. It's the rules of the game. And by the way, a um these margin requirements are of course a disincentive to to use leverage. They're intended to to prevent a systemic fallout if that if the failure of any one party could topple over another party. Um, and as a reminder, government regulations job is not to prevent you from losing money. Their job is to prevent your stupidity to wreck the system as a whole. And that's and I'm not suggesting that all the mechanisms are perfect, but as long as the quite the contrary actually, but as long as the rules of the game are clear, you can prepare for them. >> Yeah. I mean, but if the exchange can change margin rules in the middle of the game, then price discovery isn't purely supply and demand in real time. It's also policy by rule book and then, you know, silver's uniquely exposed both this industrial metal and monetary metal. So, isn't the real takeaway that even if the long-term thesis is bullish, I mean, the paper market can keep slamming the brakes, meaning investors can be directionally right and still get wrecked on the volatility. I mean, what's your risk rule for that? position sizing. Is it owning physical or avoiding paper leverage altogether? >> Well, you only sleep as much risk as you can afford to, right? And uh how many that's not the physical gold bond of your pillow, but you got to look at especially precious metals. Um they tend to have a somewhat contained volatility and then it can surge. And we've of course seen that and and so as far as anyone's risk profile is concerned, you got to look at those periods where with elevated volatility and see whether you can stomach that. If you can't stomach that, you should take precautions before the volatility spikes. One thing to to add here maybe is that um we talk about some investors panicking when volatility goes up. Well, what the media often calls panicking for for small investors is called risk management for for large investors. It's the same thing, right? You reduce your exposure when volatility goes up. It's just that the retailers somehow stupid and and and the fund managers are are super smart and you pay them lots of money. But they ultimately what you should do is um when the times are good when volatility is low then you have the luxury of of deciding it's just like you don't buy fire insurance when your house is on fire and and and the era that the kind of if there's one message I have here is that the the policy uncertainty the the sort of things we see geopolitically um these are symptoms of a new era. Um if uh the current administration is they are they haven't caused this. They uh the they are reflection of where we are. When when you erode the purchasing power with fiscal loes when you have zero interest rate policies you you promote populism um that gets you more populist politicians. It gets you policy decisions that tend to be more shortsighted. Um and and that will persist, right? The question is always what's next rather than and we can criticize as much as we want any one policy we don't like. Um but ultimately we have to position ourselves for a volatile world where we may well get um a lot more intervention going forward. >> Yeah. Let's go to Europe a little bit. I found it interesting. You had this this line that kind of cut through the noise. You wrote that uh Europe will get the best recovery debt can buy. I mean, spending over a trillion dollars can create growth, but it maybe not entrepreneurship. So, are we looking at a zombie recovery in Europe? You know, growth funded by borrowing with weaker productivity underneath. What are your thoughts? >> Yes, I probably won't be it probably a little better than zombie, but it's it's not really sustainable. I mean, the Europeans are masters at kicking the can down the road and they'll live another day. Um, it it's just so sad to to see it all unfold. And the reason why it's so sad is because it's all a little it's too little too late. Um if if you look at the establishment parties in Europe, they've been clinging on to power and they haven't had the answers that people are looking for. They just tell you, "Oh, you you got to be patient and we'll do the right thing." But people don't think that their needs are being addressed. And so when you do too little too late, you're going to get more populism rise on the left and the right and they'll come to power um in in countries where where it matters more and they'll pursue um more populist policies, right? And and and so I don't think Europe is ready for that. They are Europe is not having the debate saying that oh we got to ramp up defense spending and therefore we need to cut social spending. So it's no no we'll have our cut cake and eat it. will spend a little bit more on military. We don't quite know how to do it. We don't really have the procurement channels, but we'll throw some money at that problem and then we'll throw some money at that problem. And they hope that they ek out enough economic growth that they can cling to power. And maybe that works, but I think the risk of that not working is is is rather substantial. >> And and I got to ask you, I mean, if that's true, then then Europe's policy mix becomes almost a tailwind for gold in euro terms. But it can also strengthen the dollar. Does the dollar stay structurally strong in 2026? because the US has the growth narrative and and Europe has the debt narrative. >> Well, the first of all, Europe can have a strong currency with weak growth. They have seen that over and over again. Um we we um we used to do a lot in the currency side. We don't do as much anymore. But one thing that we learned is that when you have a substantial current account deficit, you need economic growth to sustain your currency. When you have that somewhat imbalance or even a surplus, your currency is much more immune to to swings in economic growth. In that sense, the euro can be strong even with the economy weak. In the US, the big issue is, in my view anyway, is that the US has been acting like a giant hedge fund, like a bank where you borrow cheaply in the US, invest for higher returns abroad. And we have thrown a wrench into this machinery. We call it the exorbitant privilege with terrorists that we've made it more difficult for financial flows to get back into the US. And so to me, this is people say, "Oh, the US can't lose its status as a reserve currency because there's no alternative." That's the wrong way to frame it. Um the the right way, in my view, to frame it is that we have a splintering of the world. We have delobalization happening. And so we just have less of that economic engine that drives both on the US and the rest of the world. And it's part of the reason why people are increasing the debt spending to to try to compensate for it. Now the good news is that the US at least is a more dynamic economy than the other ones. Uh and we have this push for deregulation so we can buffer it. It's not like a switch you can turn on and off saying, "Oh, there's some tariffs and therefore the US is going down the drain." I'm not suggesting that at all. I'm what I'm suggesting is that that these tariffs are a serious headwind and and to to the point that you're alluding to, yes, it is a it's very much a key reason why precious metals have done so well. Um both because the the Europeans are spending so much and the US have to spend more money. haven't even talked about the Chinese that are desperate um to get their keep their economies growing and and say as we are moving through different phases of this I can call them phases of desperation maybe if one wants to be more negative um we have tailwinds to the precious metals of course that doesn't mean that that precious metals go up every day >> yeah well said and I mean you know we've been asking who is the buyer when it comes to precious metals and I think we somewhat found the answer I mean I'll pull up a chart from hedgei that is circulating on trading desk this morning it's if you look at the far right of the chart Gold has now surpassed the US dollar as the largest global reserve asset and the gray area just overtook the black line. Now, it doesn't seem like it's a trade. It's the end of the petro dollar system on a chart. I mean, is this strictly because of the price explosion to 4450? Are central banks actively dumping dollars to make room for the middle? Is this Venezuela? What just happened? Well, when you weaponize the dollar, you're providing a quote unquote incentive for countries not aligned with the US to diversify. And not all that money is going to get into gold, but gold is a beneficiary of that process. And I haven't seen that chart. I one thing has to be careful about with these charts is that some central banks value like the US the value at a fixed price, others at market value. Um, but assuming that's that's adjusted in their Yes, gold has played a more important role. Um, the one thing maybe to add to also the previous point about the the conspiracies and the global reset, you cannot have a gold standard unless your budget is in order because I mean of course you can have it in the short term but it's going to break and tell me one major countries that that has as a vision to actually do that. know sometimes we get lip service from some politicians but deficit spending is a wonderful thing when you're a politician and so I I I I don't see any of the major countries moving to to go. Now that said um those central banks apparently see as well that there are some some issues out there that might threaten fiat currencies and they may think that that gold is um will fulfill its traditional role. I happen to agree with that. Um, and the the the the noteworthy thing of course about central banks is that they're not very price sensitive, right? They have this printing press that they can use to to buy gold if that's what they choose to do. Um, and so they they just um have a marching order um internally created or through some outside official telling them. My my my guess is it's more internally created in many of these central banks. But um but yes they are an active buyer in there. Um the the other thing of course is I mean while there has been more retail attention to gold if you look at the holdings in ounces um I don't think we see any euphoria in retail in the US. Indeed when I call talk to gold dealers and you do that at least as much as I do. Um a lot of people retail are selling their coins. Indeed, when we saw talked to wholesalers, their business is not doing well because there's all these coins in circulation that people have brought back to coin dealers that fewer things are being ordered from the mints. And so we it's a it's a very interesting dynamic, but to me, this suggests that we're not at the end of some sort of mania because we very much have a two-way market in this. >> Yeah. Yeah. It's been fascinating to watch. And let's be blunt. I mean if no major government is willing to do fiscal discipline I mean gold standard talk becomes marketing as you said not really policy uh markets should sniff that out quite fast right I mean so isn't the realistic endgame either you know continued financial repression and stealth default via inflation or is it some form of capital controls and force savings to keep debt math working I mean in that world gold isn't a currency system it's a you know kind of a credibility hedge against governments that won't cut spending Well, yes to all of the above. I mean, different countries will have different reactions, but of course, the key attribute of any central bank is to be able to debase the value of the currency, right? I mean, the the idea that price stability is is kind of the one and everything that central banks are in for. Well, 2% inflation is not price stability. And uh as we've learned from Mario Draghi, the former head of the ECB, central banks will do whatever it takes when push comes to shove and and no central bank is an exception to that. Um presidents, prime ministers tend to get what they want in their central bank. Um there is of course things that the central bank can do to to help to be on the better side of things, on the worse side of things. But yes, at the end of the day, the inflation is part of of modern monetary systems. Uh but of course, it doesn't mean the world will come to a crashing end tomorrow. Again, um the policy makers are fabulous kickers. they figure out a way to stay in power another day to to let people kind of be there for another day and uh and it also doesn't mean the price of gold goes up every day. This is this is a long-term um trend that we're seeing. The phase we've entered in is that it's more influenced by populist policies which will make things more volatile on the policy side. >> Yeah. Yeah. Well said. Uh and we're seeing it today of course with the price of silver. I mean, we started the show with the news silver's back above $80. We hit $83.990, I think, on December 28th, and we pulled back and now we're right back at the scene of the crime. I mean, is this a double top where the rally fails or is this a consolidation before we blow past 85? I mean, what's your thoughts here? >> Well, I while I do watch technicals, I rarely ever comment on them. The the one thing I'd like I can add I guess to that to that point is that because especially gold has so little industrial use the technical become a self-fulfilling dynamic because it attracts many technical traders and silver of course is is somewhat related to that as well. Um but but yes, we we've had this this big sell-off in low liquidity at the end of the year and we've bounced right back. >> Um where the price of silver is tomorrow, I I can't tell you. But it is it is certainly noteworthy that it's gone up so much. Now, bridging a little bit here to the producers, one of the challenges is that there are not many good pure play silver companies and silver tends to be a byproduct. And so you see this bidding up of of companies that have silver. Indeed, you even see bidding up of some companies that used to be in silver have no silver production, but the but some investors are jumping on those those companies anyway. I don't want to name them here. >> Mhm. >> But that suggests that that maybe Yep. There is a little bit of speculation in here that might not turn out so well at the end of the day. um for the time being these these producers um they riding this wave and and several of them if they don't have to present the earnings right away um they it it remains to be seen how they can actually execute on that and so there's going to be more volatile in the miners and winners and losers will will separate >> what does uh I mean you know with silver at $80 I mean why are the miners not trading at alltime highs we're going to show that chart on uh that you sent me about gold miners versus the S&P 500 but I mean you What's blocking the reates? I mean, is it just investor distrust of management? Is it that fear of windfall taxes or is the market assuming margins will get taken away here? >> Well, it's it's a bunch of different things. Um, in general, an ounce in the ground is valued less than it it has been. That's been a trend that's been happening. One is I think the rise of ETFs. ET a lot of these mining companies leave constant access to funding and while the funding window is is wide open right now um ETFs can't do that and so you need somewhat specialty investors. One thing that has changed in recent months is when you go to talk to CEOs of mining companies they see that there new faces um in the audience including um journalist investors of of the large funds. And so there is more of that but but still it takes a long time for them to to get to know that sector. It's a sector that has different dynamics and and so and then there's the skepticism of course investors were burnt maybe too many times when these the big miners they overinvested um and then they then they underinvested. Now the big mining companies might have too little leverage to the price of gold. Um to us when we are investing in the sector we tend to look for catalysts that go beyond um just the price of the of the metal um that that there's some rerating in the company or they get added to indices potentially and and to have other catalysts as well. um they if you think about the the economics um aside of course that the price of the commodity um energy prices are hugely relevant they're very benign right and so the this idea that you have a lot of leverage when you invest in the miners is playing out a lot of investors haven't realized that governments often want to have higher taxes when when commodity prices are are higher we've seen that in some West African countries in particular where government wants to have more but generally speaking things are being contained. Also, you often have a broad um commodity boom that makes labor markets very very tight in the commodity space. Of course, labor markets are tight in the space, but by far not as tight as they could be. And so, a lot more of that margin is is is filtering through the bottom line. And uh to me the positive about all of this is that even though we we see more journalist investors nibbling with the space that I don't think we are we at the peak of this because the they don't fully reflect the the high price and of course part of it is are these prices sustainable? And uh while while you and I may think they are um the generalist investor scratching their head, doesn't understand what's happening and so they're discounting it and they they one of the things we're watching is whether the the the operators um was part of the budgeting, right? If they rely you don't want to invest in a mine that relies on $4,500 an ounce of gold in order to break break even. And so you want to watch that of what is how how do they operate? What do they need to break even? But even a high cost the nice thing about a higher cost mine is of course the leverage when they get profitable is much more and so you can see more of a price jump. And so the way to invest in these mining companies really depends on the phase they're in um and a lot of factors that that um that you just don't see when you just look at an ETF for example. >> Yeah. Yeah. You know when you talk about all-in sustaining costs I mean you know we saw some of them just printing at these margins. I mean with you know Igno metals comes to mind you know very low margin or excuse me very low cost and huge margin uh give me the practical takeaway I mean in your portfolio are you leaning senior producers developers or a barbell with cash and optionality >> we have we're currently mostly positioned in companies mostly we we're quite broad but a lot of investments we have in companies that have recently started to produce and so they show up in our holdings as producers, but we are really quite developmentheavy. They they they're very very heavy still on the development side and it's a remarkable shift from pre2022 we were a lot in exploration companies then we shifted to developers. These developers are starting to to move more to producers. Um we think that the the nice thing about those those companies is that they generate enough cash that they can fund their own expansion and in the current environment that is a sweet spot. that could change. But um there is a lot of also when when you have these spin-offs of um of of the bigger miners, there are a lot of opportunities there when when they are managed properly. Um and so there we think there are tremendous opportunities out there even with the rally that we've had that um that it's uh it's an exciting environment to be in in this market. >> And I mean I'm going to get asked by the viewers. So just I guess it's just your uh you can't give us any of those tickers, right? No, we do publish our holdings on a monthly basis on our website. Um, but we'd caution about just copying that. Um, one of the things we are able to do is participate in funding rounds and the like. It's something that that most retail investors just just can't do. Um, and and obviously these are published with a lag. We do sell things as well. um we do have to sell things to buy new things and and so we just caution against just copying what we do because um we're not going to be there when when we sell something. >> All right. So you're not just copying the Nancy Pelosi playbook either, I guess. Uh okay, last question actually. I mean one adjustment. I mean you told me the post World War II era is over and power matters. I mean for the investors watching who's still using the old playbook, what's the single adjustment they should make today? Is it more physical, tighter jurisdiction discipline? maybe more cash or or a different way of sizing risk. >> Oh boy, you still use the old playbook. Um um then I would hope that you have a good income from your job. So it doesn't matter what happens to your portfolio. I mean, it's a if you're following the old playbook, your portfolio is going to be very AI heavy and uh I mean, Greenspan warned about irrational exuberance in late 96 and took years for it to play out and and so yeah, enjoy the ride while it lasts. It's it's the I mean the the old the the thing that's still true about the old playbook is that you got to be comfortable with the risk you're taking. And uh and one one thing to think about is I don't really think it's important to have the best investment process, but have just any investment process, right? Any investment process better than no investment process. What you don't want to do is just invest in the latest thing you hear on social media. Um you and if you do buy something, think about why you bought it and keep that in mind and don't have this bias that now that I bought it is the best thing since sliced bread, but test your theory because at some point if that premise is no longer there, why are you still holding it? And then the other thing is of course that the time to to rebalance your portfolio is when times are good um not not when you're in a panic. Yeah, that's that's uh that's some good advice. All right, Axel MK, thanks for your time today. We really appreciate it. Thanks for coming on the program. >> My pleasure. >> All right, the rules are shifting. Don't trade the headlines. Track the flows. We'd also like to thank our outlook 2026 sponsor, Discovery, combining highquality gold producing assets in Canada with the world's largest undeveloped silver deposits in Mexico. You can find out more by going to discovery silver.com. Don't forget to subscribe right here to Kiko News. I'm Jeremy Sapp and for all of us, we'll see you next time. >> Kitco News Outlook 2026 is brought to you by Discovery. Building value through gold and silver.