00:00 then we could see $8,900 at the end of this bull market and we're actually right on track for that price target. So $8,900 is now our new base case. Our monetary system is rotten and all those measures that we have seen quite recently by Scott Bessent for example. Those are all confirmation signs that we're getting closer to the endgame.
00:26 the dynamic that we're seeing will lead to much more financial repression, capital controls. >> It seems like you could say that 8,900 by the end of 2030 is more on the conservative side. >> Yeah, I could see significantly higher numbers. But if we revalue 10,000, 15,000, 20,000, yes, it solves a lot of problem. It also creates other problems.
00:49 So would I rule out 15,000 20,000? No, definitely not. So again, we're in a bull market, not in a bubble yet. I think it could become a great bubble. Western investors are slowly realizing that actually our monetary system as we know it is at risk. Family offices now have between 2 and 3% gold allocation. That's not a hedge.
01:16 That's actually pocket change. Pension funds hold less than 2% gold. We know that most insurance companies couldn't care less about gold. >> You're saying that the higher beta part of the precious metals complex is where the greater opportunity lies from here and that's the miners. >> This is The Real Story with Michelle Makori.
01:44 Hello, I'm Michelle Makori and you are watching The Real Story where we go beyond the headlines, beneath the surface and behind the curtain to show you what is really happening with money, markets and power. And joining me today is Ronald-Peter Stöferle. He is the managing partner and fund manager at Incrementum, a Liechtenstein based asset and wealth manager with over a billion dollars in assets under management.
02:10 He's also the co-author of the annual In Gold We Trust report which he first launched in 2007 and that has become one of the most widely followed pieces of research on gold and the monetary system and this year's 20th edition, Back to the Monetary Future, makes two particularly interesting arguments. One that gold is undergoing a process of remonetization, gradually reclaiming a role in the global monetary system and that after gold's extraordinary run, the next opportunity may lie in what he calls performance gold. All right, joining me
02:44 now to discuss the report and so much more is Ronald. Welcome to the show. >> Good evening from Europe. Thanks for having me. >> Good evening. And if I butchered your name, I do apologize. >> You did really well. Okay, I'll get it right next time. As I said, I read the whole report and it is an excellent thesis for many of the topics that we discuss on this show on a regular basis and it just consolidates everything and substantiates everything and it's an excellent piece of work explaining
03:16 much of what we talk about here. So, congratulations on all of that. Of course, it's too much for us to get into during this one-hour show, but we'll try to give the viewers as much perspective as everything as we can. And I like that you called it Back to the Monetary Future. And the central thesis is that gold is being remonetized.
03:40 So, let's start off with the big picture. What has changed that makes you believe we are witnessing the remonetization of gold rather than just a very powerful gold bull market? What's happened over the past few years that convinced you this is more than just another gold bull market? >> Well, I think it's what you're at the moment seeing is what we call a creeping remonetization.
04:08 So gold is actually gradually regaining monetary significance. And this is happening not by decree but by function and we have identified six different powerful drivers for that remonetization and what we are seeing now is if you talk to investors, to institutional players, to central banks in emerging markets for example, countries that are used to stubbornly high inflation rates, to weak currencies, it's just natural to hold physical gold, to have gold not as a satellite investment but really as
04:51 the foundation of their portfolios. But when you talk to institutional players, to central bankers and so on in the western world then most people will say well it's just one investment. It has gone up in price. It is a satellite investment. It is a bubble.
05:12 It doesn't pay any interest and all those things. So I think that this remonetization is definitely driven by the global south and now very late in the game also western investors are slowly realizing that actually our monetary system as we know it is at risk and probably we'll see, let's put it in a diplomatic way, a reorganization over the next couple of years. >> And I like the name Back to the Monetary Future because you make the point that this is just history rhyming, if not repeating itself and rhyming, and
05:54 that gold eventually does always work its way back into the global monetary system. Give us a little bit of background on that. >> Well, we always try to come up with names that actually summarize those 400 or 500 pages that we put out every year. And this year we said, well, actually it should really be about this remonetization that we're seeing at the moment.
06:26 And if you want to understand the present and especially the future you have to understand history. And therefore we came up with the analogy of Marty McFly going back in his time machine, the DeLorean, and actually trying to fix the present and the future.
06:51 And I think that it is a pretty good analogy and sometimes we feel like the crazy professor, Doc Brown, in the movie if we talk about our financial system, our monetary system, about the virtues of owning gold, but it seems that more and more people are waking up now to this idea. So I think that three, four, five years ago when we said well actually gold is a monetary asset and our next monetary system will have some sort of hard asset probably gold backing again.
07:28 People said, "Well, what are those guys smoking?" Now, I think more and more we call them the closet gold bugs. They kind of realize that our monetary system is rotten and all those measures that we have seen quite recently by Scott Bessent for example.
07:50 I think those are all confirmation signs that we're getting closer to the endgame. >> Right? And again, I love that analogy. People are coming around to understanding what Doc Brown is talking about. One of the greatest cinematic trilogies, I think. I always watch it when it comes back on TV.
08:13 It's one of those when you're channel hopping, Back to the Future, one, two, or three are on, I always pause and relive that. But let's talk about these six vectors because as you say in the report you identify six vectors through which this remonetization is happening. Reserves, private institutional demand, balance sheet recapitalization, anchoring, accumulation and digitalization.
08:37 I'd like to try and go through all of them briefly, but let's focus on the top one because arguably reserves and central bank accumulation is perhaps the most important driver here. So talk us through that and talk us through how sanctions on Russia and arguably the excessive weaponization of the dollar by the Biden administration may have been a tipping point here.
09:04 >> Yeah. Well, obviously 2022 was the point in time when the playbook changed. We can see that the correlation between the price of gold and real yields, especially the direction of real yields was extremely high and that broke in 2022. That was the point in time when central banks all over the globe started aggressively buying gold.
09:28 We had three years in a row with central banks buying more than a thousand tons of gold. Last year it was only 860 tons but due to the rise in gold prices actually on an absolute basis it was a new all-time high. And it seems that this year is also pretty strong. Just in June China bought more than 40 tons of gold.
09:53 So I think we'll be round about 800 to 1,000 tons once again. Now why is this happening? Because in 2022 the world actually realized well if the western world, so basically the US and the European Union, can sanction Russia and basically can close them out from our financial system, if they can basically with a stroke of a pen make 350 billion US basically worthless.
10:28 Well, actually perhaps they could do something similar with other countries. So it is like I use the analogy: if you go on vacation and you only have one credit card and this credit card is stolen or doesn't work anymore. Well, actually you desperately need a plan B. Now, what kind of monetary plan B can you have? Well, actually you need something that is liquid, that is accepted all over the globe, that is neutral.
11:03 That cannot be inflated at will and something that has low bid-ask spreads and that can be transferred easily. And there's a reason why central banks all over the globe didn't start buying euros or Japanese yen or Swiss francs and they started aggressively buying physical gold.
11:25 And I think Michelle, this was really a wake-up call for many central banks. I think this will continue as one of the central pillars of this gold bull market. And it's not just the fact that central banks all over the globe are buying gold now. They're also repatriating it. And I think this is another confirmation that the importance and the acceptance of gold when it comes to politicians and central bankers has completely changed over the last couple of years. >> Right. And just as a recap for our viewers, in 2022, after
12:02 Russia invaded Ukraine, the Biden administration and the G7 took that extraordinary step to isolate Russia from the Western financial system. They immobilized Russia's access to a substantial portion of its own foreign exchange reserves held abroad. They restricted transactions with the Russian central bank.
12:23 They sanctioned major Russian financial institutions and they removed Russian banks from SWIFT, the dominant global financial messaging system. >> And this was, like you say, an extraordinary use of the western financial architecture as a geopolitical weapon. So suddenly countries around the world had to confront a very big question.
12:44 If your foreign exchange reserves can be frozen, if your banks can be cut off from the infrastructure of the global financial system, how safe are those reserves in a geopolitical crisis? And I think that's when we start to see central bank gold accumulation, but also that parallel financial architecture and infrastructure being built by China and the BRICS plus, which is another big part of the story.
13:12 So, are we going to look back at history and say that this move by the Biden administration to kick Russia out of the financial system in 2022, was that the tipping point? Are we going to look back on that and say that's what really made the difference? >> Yeah, perhaps it was like — nobody really thought about the second and third order effects.
13:40 And I think in history we will see perhaps it was like the Sarajevo moment before the First World War, I don't know, but I think what it really triggered is — we tried to make our research also fun. So we also have all sorts of analogies and I think when it comes to central bank behavior, increasing their gold reserves, we compare it to the principle of the German tourist in Mallorca who's getting up at 6:00 a.m. in
14:17 the morning reserving his sunbed with towels. And I think this is the central bank buying that we're seeing now. Central banks really try to reserve their spot basically at the poker table where the big guys are playing poker with golden chips.
14:40 And the US still holds 8,000 tons. In the Euro system we've got more than 12,000 tons of gold. The IMF holds more than 3,000 tons of gold. And then those countries, those growing countries that gain in importance not just when it comes to their economies but also militarily and when it comes to technology — China, India, Turkey for example, the Arab region — they're just now really trying to come to gold levels that make them look
15:24 a little bit more serious, to get their entrance ticket to the negotiation table and that's what we're seeing. And it seems that this central bank buying will continue. There was this survey by the World Gold Council and basically every central banker questioned said that they will not sell any gold and that they will basically continue their buying programs.
15:52 So again, this is really the foundation of this bull market and then there are additional drivers adding to that bull market. >> And as we said, it was the realization that you don't really have a safe reserve asset if you don't own it yourself that started this central bank accumulation and the de-treasurization or de-dollarization.
16:22 We like to use the term de-treasurization as we're seeing central banks around the world buy less and less US treasuries and now gold has overtaken them as the top reserve at least in terms of dollar amount. But it was this weaponization. And I think it's interesting because we're seeing perhaps a similar thing play out again now because the US is again demonstrating just how powerful control of the dollar-based financial system it has.
16:49 And Treasury Secretary Scott Bessent has launched what he calls an economic D-Day against Iran. And this goes beyond simply sanctioning Iranian entities. The US is now putting pressure on third countries, banks and companies that continue doing business with Iran. So effectively saying if you help facilitate those transactions, you could face secondary sanctions and possibly lose access to the US dollar system.
17:16 And it's interesting because he says no nation should expect to enjoy the rewards of our system while helping those who seek to destroy it. It is an extraordinary source of American power, but there is the risk of course and arguably we've already seen it with these gold purchases that people then just look for an alternative system.
17:40 I mean, what influence do you think the repeated use of that power ultimately has on the monetary system itself? Does it reinforce dollar dominance because it reminds everybody how indispensable the dollar still is? Or does it just accelerate the search for alternatives because countries are increasingly understanding that access to the dollar and the dollar financial architecture can be used as geopolitical leverage.
18:07 I mean, is this all part of the longer term case for gold? >> Well, this was just — calling it a D-Day was an interesting wording. I wouldn't agree to that. But if you understand the history of Iran, then you will know that actually they're used to those sanctions for more than 40 years now.
18:36 And I think they're perfectly able to circumvent all those sanctions and we're seeing the same with Russia. I don't know how many sanctions the European Union has introduced over the last couple of years. I think it was 12 or 13 rounds whatever. And the more sanctions there are the closer the relationship between Russia, China and India becomes and I think that Iran is also in that game. So we'll see how it goes.
19:12 I think we all know that the more TACOs Donald Trump makes, the less markets and politicians actually take him serious. And I think there's — on September 24th, Trump will meet Chinese President Xi Jinping, but he will meet him from a position of weakness, not from a position of strength actually.
19:38 And China has a couple of potential levers. We all know that one of the reasons that oil prices didn't explode over the last couple of months, that was that the Chinese actually didn't import too much oil and they used up their oil reserves.
20:07 So I would say that there is some sort of deal in the background between the Chinese and the Americans. And I think that if we combine the whole setup with politics, with markets, I think there's four very very strong assumptions in the market at the moment. First of all, I think the market believes now that there's no economic slowdown happening.
20:36 Second one is that we won't see any Fed hikes. Then I think the market believes that we won't see any spending cuts in the AI space. And then I think the market is also pretty sure that we won't see any real political upset before the US midterm. So I think the consensus when it comes to the economy, when it comes to politics, when it comes to capital markets is extremely vulnerable and I think that Donald Trump obviously knows that and the Iranians and the Chinese obviously know
21:16 that. So he's playing everything from a very very weak position. So long story short, I don't think that those sanctions against Iran will really work. I think it will bring them closer to China and Russia. >> Well, my point was more do you see that accelerating the whole de-dollarization, de-treasurization and accelerating this move towards that neutral reserve asset gold.
21:45 >> Yeah. Well, kind of. We always said before the de-dollarization, there's the de-treasurization happening and it's pretty obvious that the world is splitting in basically two different parts. It's team USA and team China, Russia, Iran and some other countries. And I think that the Americans are playing it really well when it comes to — how did they call it? Sticks and carrots.
22:15 Basically giving access to US capital markets, giving access to US credit markets. And if you don't play that game well actually then you'll be hit by some sticks with customs and sanctions and you will lose access to US capital markets and so on. So that's the development.
22:42 So I don't necessarily believe in the big de-dollarization theory, especially also if you look at the numbers: well, the importance of the US dollar has decreased but it hasn't really collapsed yet. But I think that gold is actually the biggest profiteer here from those developments, that the world is actually splitting up. And again, you need a neutral monetary reserve asset for kind of monetary communication between those blocks. >> And hence the appeal of gold as that asset. But it was
23:22 interesting because there was some interesting language that Treasury Secretary Scott Bessent was using and he said the term blow up the global financial system. And I thought that was very interesting. Let's play that sound bite and get your thoughts. >> You described this as an economic D-Day, but D-Day wasn't a threat of an invasion and the US didn't give a timeline to Germany.
23:50 So, why not impose the sanctions today? >> Well, we are giving everyone the opportunity to remedy bad behavior. Why would I want to blow up the global financial system? We believe that it is important to level set and give people a cure period, but they should know that that will move very quickly and that we are serious.
24:15 Secondary sanctions are a very powerful tool. And we here at Treasury — this is Gene Lang, the acting under secretary for terrorism finance. And in the terrorism finance department and at OFAC, the reason we are able to use secondary sanctions is because we do not take their use lightly. So we believe that a warning shot and a level set of expectations is appropriate.
24:41 And if people do not want to meet our expectations, then we expect and they should expect that they will leave the dollar system. >> So, we'll leave the dollar system and I don't want to focus on the motive behind sanctioning Iran, whether that is indeed the correct move or not the correct move. I want to focus on what it means if this potentially backfires because he says that why would I want to blow up the global financial system? So if these other countries do not comply with the sanctions and they effectively kick them out of the dollar system,
25:15 could this backfire and indeed blow up the global financial system? >> Well, I'm not sure regarding Scott Bessent. Let's put it that way. I mean, he's a very very smart man. I think he knows monetary systems. He knows monetary history.
25:42 I think he's totally aware of all those global trends that are happening. He's following capital markets very very closely. I mean he was trading alongside George Soros. He knows Druckenmiller pretty well. So he knows that stuff. But then on the other hand, from my point of view, the US is like — they're playing poker.
26:06 They are playing poker with a pretty weak hand. They're bluffing. And compared to that, the Chinese are playing Go, very strategically, very very long-term oriented. I mean, just one example regarding Scott Bessent: who believes that this little note to buy Japanese yen, sell euros, that this was a coincidence that it just happened.
26:36 So, I think he knows how to play the media. I think he knows how to play capital markets. And therefore I don't think it was a slip of tongue, but I wouldn't overreact to that kind of wording. What I think is really interesting, Michelle, is coming back to our topic. Bessent said that he actually thinks that in this term, in the second term of Donald Trump, there will be a Bretton Woods moment and he wants to be part of that.
27:12 And Scott Bessent, his biggest private position is actually gold and he said his colleagues they used to call him a gold bug. So he clearly understands what's going on. And I think that's much much more interesting than those threats against Iran because Iran, they're out of the system for so many years now.
27:35 I think it's not really a threat to them. >> Well, less about Iran and more about the sanctions on the other parties that don't comply with the sanctions and blowing up the financial system that way. And there are some that say that perhaps that's what they want. They want to blow up the financial system and have a reset.
27:58 And they do point to the fact that Scott Bessent is a well-known gold bug. And he has said that he does see some kind of Bretton Woods realignment and that he wants a seat at that table. We do have that sound bite if we could play that. >> I also felt very strongly that we're in the midst of a great realignment and of a Bretton Woods realignment coming in terms of global policy, global trade.
28:24 A lot of what I taught at Yale I've been studying my whole life. I'd like to be part of it either on the inside or the out. >> He made those comments very early on and it has led many to say look, Scott Bessent is a very smart man. He knows exactly what he's doing and that links back to one of the vectors in your report and that is anchoring and that was the idea of the Trump–Bessent–Shelton trio and Judy Shelton's treasury trust bonds having the 50-year gold convertible backed or linked to gold. As a way of maybe
29:03 saving the treasury but blowing up the dollar, but saving the treasury or keeping the dollar as the unit of account and the medium of exchange but giving more backing to the Treasury market. And we're seeing this in the context of recent intervention in the Treasury market where we had buybacks from a maximum of 2 billion into at least 4 billion per operation in order to secure what's happening with the 30-year yield there.
29:36 You mentioned Stanley Druckenmiller. He's been warning that that move risks damaging the credibility of the Treasury market. So let's focus on this re-anchoring because you highlighted that in your report and there was some expectation that that would happen July 4th of this year to coincide with the 250th anniversary of the United States. That didn't happen.
30:01 Do you still think that it can happen? Talk us through that. >> Well, it didn't happen. I think for the 250th anniversary, there was like an M&A cage fight or whatever on the lawn of the White House. So that was probably — you have to set priorities. No, I think Michelle, we had an interview with Dr.
30:29 Judy Shelton again in this year's report. We had her in 2017 already. Because she's one of those very few well-connected economists that actually get gold and that get our monetary system. And Donald Trump once said she's his favorite economist. So we talked about this idea of gold backed bonds and basically the US could issue 50-year gold convertible bonds and she said well just get it out with like a notional of one or two billion and then let's see if the market likes
31:14 it. Now, if we have a look at yields not only in the United States but globally, it seems that we really need the fire brigade. Yeah. And it seems that now finally what one of my mentors told me a couple of years ago when we set up our company — he told me and I've got it on a post-it note: scare your investors out of bonds.
31:43 And I think this — now finally we're seeing that fixed income investors are realizing well actually we've got sticky inflation, we've got — the debt is not sustainable, actually the dynamic that we're seeing will lead to much much more financial repression, capital controls and I think the governments all over the globe...
32:15 Actually, basically the only solution is a little bit like in the 40s when we had more than 3% negative real yields for a couple of years, that's kind of the playbook, but it doesn't really work. So I think issuing those gold-backed bonds — and we had them previously in history by a couple of countries.
32:41 So it's not a new idea obviously. It could actually work and if it is a success and if it works for the US, well perhaps other countries will follow and this could be some sort of a trend to reestablish trust in the bond market. But again, having a look at yields, just have a look at the spread of French bonds versus German bonds, for example.
33:12 It shows you that there's an enormous amount of distrust and volatility in the market. And Scott Bessent, he tried with this special operation to calm markets down, but I think he actually achieved quite the opposite. So, those gold-backed bonds, is it going to happen? I don't know. But I think the more turmoil we're seeing in fixed income markets globally, I think the more realistic it's going to become.
33:46 >> I'd just like to take a quick moment and thank you all so much for watching and listening. If you enjoy these conversations, please subscribe to the channel and please share our content. Remember that full episodes are also posted on Apple and Spotify podcasts. Every subscription, every like, every share, every comment helps us reach more people.
34:10 And I'm really very grateful for your support. And I would also like to thank my partners at Miles Franklin. For nearly four decades, Miles Franklin has been one of the most respected and trusted names in precious metals. And if you're looking to diversify your portfolio and protect your purchasing power, there is an experienced team that can help you understand your options, go through your strategies, and make informed decisions based on your personal financial goals.
34:37 And you can reach them at info@milesfranklin.com. All right, now back to the conversation with Ronald. Well, you say that gold backed bonds are a way of restoring credibility, but isn't there an uncomfortable implication then if the United States needs to attach gold to a Treasury security to enhance its credibility, isn't that itself an admission that the government's promise alone is not enough? That it's becoming less valuable? I mean, is it really politically viable? >> Well, you had — I think in the end of the 70s, beginning of the 1980s
35:16 when we had a pretty similar situation, I would say, Michelle, when the world actually lost trust in the United States, and then Paul Volcker came in and he killed inflation and you know the story. The US had to issue bonds in Swiss francs and I think in Deutsche Mark.
35:43 So because nobody wanted dollar-based US treasuries anymore. So it has happened. Could it happen again? Yes. Would it stabilize the market? Not 100% sure. It could as you rightly say lead to exactly the opposite. But what's the alternative? I think some sort of yield curve control will be implemented.
36:14 But I think the market will try to test the Treasury and obviously also the Federal Reserve and I think that's one of the most interesting developments recently. We used to say don't fight the Fed, but perhaps we should talk about not fighting the Treasury. I think that's really one of the big fights going on.
36:42 Who's more important? Who's more powerful? Is it Scott Bessent or is it Kevin Warsh? And we'll see. But I think it doesn't really calm markets at the moment. And if you have a look at the renminbi, but also if you have a look at the Japanese yen, for example, it seems that they're showing more and more strength versus the US dollar.
37:11 So I think developments that we're seeing in fixed income markets, in currency markets clearly lead to the conclusion that gold is picking up in importance in these markets as again a neutral monetary reserve asset. >> And it's interesting because the World Gold Council noted that gold rallied about 3% around that August 19th announcement of the Treasury market intervention and it characterized the move as an intervention at the margin rather than yield curve control.
37:47 But as you say, if policymakers increasingly have to intervene to prevent long-term borrowing costs from becoming economically or politically intolerable, I mean, that tells you a lot about the role that gold could play from here, especially as we saw it respond. And so, I'll use that to go into one of your other vectors and we'll call it the institutional demand, right? Because we still have a very big gap in institutional demand.
38:21 You say that it's the largest institutional demand gap in monetary history, that pension funds hold less than 2% gold. But when these institutions see these moves and they see the Treasury stepping in and saying things like potentially tapping the TGA in order to buy more yields and gold goes up in response to that.
38:43 I mean, they're sniffing out that sovereign debt crisis that all of the gold bugs, for lack of a better word, have been talking about. Where are we with the institutional gap? Talk us through that. And to go back to your earlier metaphor, as people start to understand what Doc Brown is saying, what does that mean for institutional demand? >> Well, we all know how large institutional players, how bureaucratic they are and how long it takes them to actually make decisions and to change
39:22 their behavior. And we are quoting a couple of studies in the report. For example, the UBS study that focuses on family offices and they now have between 2 and 3% gold allocation. So that's not a hedge, that's actually pocket change.
39:46 Pension funds hold less than 2% gold. We know that most insurance companies couldn't care less about gold. We know that most of the generalist investors couldn't care less about gold. So all those topics that we are discussing for ages, they haven't really arrived on Wall Street yet.
40:11 So starting last year everybody was talking about the debasement trade. I think we're talking about that for 20 years now, that it's not actually the price of gold rising but just the purchasing power of money that is falling measured in gold. So I think this private and institutional demand is really one of the most important drivers going forward.
40:41 Now we know that we've been advocating the new 60/40 portfolio for a couple of years now. Then there was quite recently the CIO of Morgan Stanley talking about the 60/20/20 portfolio: 60% equities, 20% bonds, 20% gold. I mean 20% gold and that's not little Incrementum, that's Morgan Stanley.
41:04 Then we had a couple of really high-profile guys actually talking about gold and about the importance of gold as a monetary hedge for your portfolio. So I think this is now slowly but surely starting and I think one of the best indicators for that is actually ETF flows and we have seen, Michelle, over the course of this bull market that there was significant inflows from western financial investors into the gold ETFs but they are acting still very very procyclical.
41:42 So with the markets correcting they sold ridiculous amounts of gold ETFs. So basically now we're back to square one. But what is interesting is again this countercyclical behavior by Asian investors. So for example it seems that at $4,000 US there was a very very large, very powerful buyer in the market probably from China.
42:10 But it wasn't only the Chinese central bank probably, Chinese state funds — it was also Chinese ETF demand picking up significantly. It was Indian ETF demand picking up significantly. So it seems that we in the western world, the behavior is still rising gold prices, inflows into gold ETFs and vice versa.
42:41 And I hope that at some point this will be changing. But what I can tell you, and this is one sign for me that we're still — I wouldn't say at the beginning of this trend, but somewhere like halftime, beginning of the second half, let's put it that way, or in baseball terms, like I don't know, fifth or sixth innings, something like that.
43:06 The pension funds that we talked to recently, there's a couple of Swiss pension funds for example, smaller ones, not the very large ones, and they hold two, three, 4% of their total portfolios in gold. They approached us because actually they want to sell gold and this is not the behavior that you usually see at the end of a big secular bull market. So I think that's a pretty good confirmation that we're still kind of early on.
43:38 But I think that this institutional demand will be one of the most powerful drivers of this gold bull market. >> But what finally closes that gap if it is still such a gap and you have pension funds holding around 2% in gold? We did have that debasement trade. It was topical and then it kind of went away. What closes that gap and what happens when that gap closes? What is a reasonable allocation that you expect and what does that then mean for the price of gold? >> Well, people keep asking me where should the future demand for gold come
44:11 from and I say well it's pretty easy: fixed income. That's still by far the largest liquid asset class, more than 150 trillion. And if fixed income investors realize well actually, first of all inflation is pretty sticky and for how many months is the inflation rate in the US now above the 2% target? I think it's 65 months something like that. So why do we still have that 2% inflation target if nobody really takes it — especially the Federal Reserve doesn't
44:52 take it serious anymore and tries to find explanations why they still want not not want to hike rates but actually want to lower rates. So I think that investors, large investors tend to be lazy. It's like large tankers: if they want to change direction it just takes time. But I think, a little bit like in the 1970s, I talked to fixed income managers that were active in the 1970s and they said, well actually some of those bond funds held more than 20% of physical gold in their
45:32 portfolios. And I think gold as a hedge in a time when actually the 60/40 portfolio doesn't work anymore, meaning that bonds don't hedge your equity risks anymore, that there's a positive correlation between equities and bonds. Now you need a diversifier. And I think gold played that role as a portfolio diversifier extremely well.
45:59 And I think that it is a process but more and more institutional players are waking up to that. >> Well, you say that some of it would come from fixed income and the traditional argument is usually gold doesn't give you yield. So what would you say to that? >> Yeah. Well actually who needs a yield if you have like this CAGR of gold? I mean, I think since 1971 gold has a CAGR of 9%.
46:29 Last year gold was up 64%. And Michelle I can tell you I started writing about gold in 2007. Back then people said well gold is too expensive. It doesn't pay any interest. This bull market is over. It is a pet rock. It is not productive. Well actually gold did pretty well over those 20 years and I don't say that — we're asset allocators, we're fund managers and I think that differentiates us from people on YouTube or Twitter making bold forecasts for gold because actually we get a daily
47:08 NAV for our investment funds. So we have to manage our risks and therefore it's not 100% gold obviously, but we wrote a paper and said that the optimal gold allocation is between 14 to 18% for a traditional portfolio. Because if you own like two or 3% like some of the private bankers advise you to hold, that's not a hedge.
47:42 It doesn't really move the needle from a portfolio context. But owning more than that, if you own like 30, 40% in gold, well then obviously you've got different risks in your portfolio. That worked out pretty well over the last couple of years. But I mean gold can have a down year.
48:05 Obviously I think gold is not the solution to all of our problems. Yeah, let's face it. Although it's probably not a very popular opinion, but I think it's just — gold perfectly does its job as a monetary diversifier, as a portfolio diversifier, and I think it will continue to do that.
48:29 But that doesn't necessarily mean that this is being pro gold, doesn't mean that you're anti-equities for example. So I would say in this environment have a significantly lower allocation to fixed income. If you want to own government bonds why not local currencies in some emerging markets, more corporate bonds.
48:50 But I'm definitely not a buyer of European debt at these levels and also not US debt. >> Well, a couple of points there when you say gold allocation of 14 to 18%. How do you allocate that to gold? Is that owning physical gold either directly or via ETFs or is that also exposure to the miners and what you've called performance gold? >> Yeah, well a great question Michelle.
49:18 We differentiate between what we call safety gold or safe haven gold which is physical gold stored in a safe jurisdiction perhaps outside of the banking system and this is like a buy and hold asset. Yeah. Ideally you inherit it to your kids or to your grandchildren. This is not something that has to be actively timed.
49:40 When it comes to mining stocks, managing mining stocks I lost lots of hair over the last couple of years. It's a very complex, very demanding sector. And it's not a buy and hold sector from my point of view because there's so many risks. There's so many top down risks coming from the gold and the silver market, but there's also so many bottom up risks like geological risk, management risks.
50:06 You've got ESG, energy prices. You've got pretty bad management teams in some of the mining companies. So I think it's a very very complex asset class. So, this is part of the performance gold that has to be actively timed. >> Now, but is that still under that 14 to 18% gold? >> No. No. No. No. >> How do you divide? So, 14 to 18% safety gold in your portfolio and then you have another allocation to performance.
50:35 >> Yes. 10% performance gold which is mining equities and also silver. 10% commodities. And 5% Bitcoin. So we've got two funds actually that combine gold and Bitcoin which gives you excellent risk numbers, excellent Sharpe ratios. It works really well combining the both.
50:58 I know that many people hate Bitcoin in the gold scene and I know that many people hate gold in the Bitcoin scene. >> Not me. I bring the two together. I'm always very very clear that I own both gold and bitcoin and for much of the same reasons. So, but go ahead. >> So that's kind of our allocation where we say well if you compare that to the 60/40 portfolio, to the traditional 60/40, you want to have more, let's say, inflation hedges and commodities are pretty good
51:36 inflation diversifiers, Bitcoin, obviously also mining equities, silver as well, but again they have to be actively timed and then physical gold. When it comes to fixed income, we say that roughly 15% should be allocated as some sort of a stabilizer but again less so in government debt and more in the fixed income space from emerging markets for example, corporate debt and so on.
52:07 And this gives you, in real time, the outperformance of our new 60/40 portfolio to the traditional 60/40 is tremendous. So the difference is more than 25 percentage points in the last two years. So it is significant. So it really works in real time.
52:32 >> And I will get more into the miners in the second part of this conversation, but I want to talk more about where we are in the bull market right now because you write that according to Dow theory, we're in the middle of the public participation phase of the bull market. What does that mean? >> Yeah. Well, when I was still working in the bank, my boss asked me to do the CFA, and I said, well, probably not smart enough to do a CFA, and I'm not really interested in that stuff.
53:05 So, I wanted to do the CMT, which is the Chartered Market Technician. And I read all those classics of technical analysis. Dow theory obviously, chart patterns, all sorts of technical indicators, sentiment analysis, relative strength, intermarket analysis and this just added very powerful tools to my toolbox and I think the Dow theory based on the works of Charles Dow obviously, who founded the Wall Street Journal and who calculated the Dow Jones
53:46 Industrials Index. He said that every secular trend has three different phases. So there's the accumulation phase right at the beginning when only diehard contrarian investors start buying. This is when you go to a cocktail party and you say well I am buying gold now.
54:10 Everybody will say how can you buy gold now? I mean it's the most stupid idea. So this is the first part, very very contrarian and I think we've left this stage of the cycle over the last couple of quarters. The second part and this is by far the largest part of this trend is the so-called public participation phase.
54:33 So this is when the media picks up, is getting more interested, when there's more products being launched. Analysts from Wall Street are becoming more positive because let's face it, Wall Street analysts, they're facing career risk. So they don't want to make any bold contrarian forecasts. Yeah.
54:54 So they only basically write the trend. So this is the phase in the bull market when you go back to the cocktail party and you say well I'm buying gold, people will say well yeah, gold, I always said gold is interesting, you should have like one to two% gold and I keep buying gold. So it is generally accepted and I think we're like in the second part of this stage now and then the third stage is actually the so-called distribution phase when those contrarian investors start actually selling to retail money, to dumb money,
55:31 whatever you want to call it, but to the Johnny-come-latelies. So this is kind of the parabolic phase. This is the phase when everybody goes crazy, when you've got ridiculous M&A activities, when Wall Street analysts just raise their forecasts to crazy numbers. And this is when you go to the cocktail party and say well I'm buying gold.
55:53 People say why are you buying gold? You should buy silver, juniors and you should take out the mortgage and bet the farm on gold and silver juniors in Latin America and West Africa. So this is the phase where everybody is getting really crazy and I think we're not there yet.
56:17 I think that January gave us kind of a sense what it could feel like with this kind of parabolic move. But why do I think that we haven't seen the top in this market yet? First of all, we haven't seen any crazy M&A yet. When I look at the balance sheets and the cash flow statements of the mining companies, I'm seeing pristine balance sheets.
56:37 I'm seeing a ridiculous amount of free cash flow. I'm seeing shareholder value being created. I'm seeing very conservative management teams. So, we haven't really seen that yet. I think we will see it at the very end of the trend. Ridiculous M&A, management teams becoming, taking on enormous risks, paying high premium, but we're not there yet.
57:06 And the second thing that makes me pretty confident is that usually at the end of a secular gold bull market the gold silver ratio would have to be significantly lower. So in the last previous two big secular bull markets the gold silver ratio was trading between 15 to 20. So we have seen some outperformance by silver but not the outperformance that you usually see at the end of a major gold bull market.
57:36 So again we're in a bull market, not in a bubble yet. I think it could become a great bubble. I mean, fartcoin had a market cap of 2.5 billion. Why shouldn't some ridiculous — >> You cannot compare meme coins, you cannot compare fartcoin and stuff because central banks are not buying meme coins, central banks — >> No, no, I mean fartcoin to some junior mining stocks for example. Yeah, I think this will be the real — where the real mania is
58:12 going to happen, in the junior mining space. We've seen some good developments recently, but let's face it, we've seen a brutal bear market in commodities. First of all, we've seen no capex in the space. Now, more and more countries are waking up saying, well, we actually need that stuff.
58:34 We need reliable access, long-term access to commodities, to strategic metals. And then on the other hand the second very very powerful trend in asset management I think especially in Europe was ESG. So everything that had to do with commodities, with resources was bad, was dirty. So no institutional players wanted to hold that in their portfolios.
58:59 And I think this is now really changing but again we haven't seen the end of this development yet. >> Well, obviously you're talking about the miners and they move in response to how the base asset, be it gold or silver, is doing. And I will circle back to get more on the miners, but I want to focus on where you actually see the price of gold.
59:21 Your original base case target — because you've been writing about this for a very long time. Your original base case target was 4,800 by the end of 2030. As we know, gold reached that well ahead of schedule. What in your original model did you underestimate? Let's begin there. >> Well, actually we said that this is really the base case.
59:46 We put out that price target in 2020 when we were talking about a golden decade and back then I think this was really the contrarian stage. Yeah. Everybody said 4,800. Those guys are crazy. But we also said that if inflation should be a major topic or let's say stagflation should be a major topic in this decade, in this golden decade, then we could see $8,900 US at the end of this bull market and we're actually right on track for that price target.
1:00:23 So $8,900 is now kind of our new base case. Now, I worked in the bank for quite a while and I know I had like very very smart colleagues with PhDs from the best schools and they produced very very complex models. The only problem was that those models didn't really work in real time.
1:00:48 So we said okay, if we have a model let's keep it simple and let's just analyze what are the most important drivers for gold. And this is how we came up with our valuation model for gold where obviously — and you can read that up in the 2020 report — where monetary growth is one of the most important drivers and based on that view again $8,900 is the price target.
1:01:19 And I just realized Michelle that I enjoy hiking and climbing mountains being from Austria. And I said that because so many people were concerned regarding the gold price development over the last couple of weeks. And I said, let's be serious. I mean, gold was up 64%. We have to digest this move.
1:01:44 It is a little bit like a base camp if you want to climb Mount Everest. So I think at around 4,000 we've built this base camp and now the next stage of this expedition is starting and the interesting thing is, and that's really a coincidence again, $8,900 is our price target by 2030.
1:02:09 And I just realized that the Mount Everest is 8,849 meters high. So I think that this analogy works pretty well. We have set a new base camp where supply demand was basically settling down and now we're setting the stage for the next part of this expedition.
1:02:34 And I think we'll climb monetary Mount Everest over the course of the next couple of years. >> Well, you say 8,900 by 2030. Is that not conservative if you look at all of these other vectors that we're discussing? If we're looking at the fact that — let's just start with the basics that institutions are barely allocated.
1:03:01 If we look at the fact that we have these central bank buyers, consistent buyers and are largely price insensitive. If we look at the first vector, the reserve issue and lack of faith in US treasuries and all of those other issues that we've been discussing, it seems like you could say that 8,900 by the end of 2030 is more on the conservative side.
1:03:29 >> Yeah. Well, I could see like significantly higher numbers. I mean, I think a revaluation of US gold, for example, that's definitely a topic that has become a little bit more mainstream. And there was a study by the Federal Reserve talking about gold revaluations a couple of months ago.
1:03:58 So if the US revalues to current prices that would be like an accounting windfall profit of more than a trillion. Does it really solve the fiscal problems of the US? No. But if we revalue 10,000, 15,000, 20,000, yes, it solves a lot of problems. It also creates other problems. But I would never rule that out.
1:04:20 And I think that a couple of years ago, people would have said, "Well, $10,000 US dollar gold, don't wish for that because that's going to be riots on the streets." Well, we're now trading at almost 5,000 and I think that people still couldn't care less about gold.
1:04:43 If you ask like 100 people on the street, where's the price of gold trading now? In the western world, I think that 95 couldn't say where it's actually trading. If you do that in India or in China, it's different. Definitely. So would I rule out 15,000, 20,000? No, definitely not. It's a little bit like in the 1970s if somebody would have said at the beginning of the 70s that gold would be trading at 850 in 1980, people would have said, "Well, it's not going to happen.
1:05:15 That's going to mean like Third World War and riots on the street." Can it happen? Yes, definitely. And I think that we haven't talked about the other vectors. For example, this silent recapitalization that is happening. Those — for example the Deutsche Bundesbank, they see that the gold revaluation, they're treating it as quasi equity and that's almost 400 billion in revaluation profits we're seeing in the euro system. We're seeing this surplus account of 1.3 trillion. So actually I
1:05:54 think that politicians and central bankers, at least the smart ones, they actually know what a rising gold price does to the system, that it's silently recapitalizing the system. And then you've got other vectors. I think at some point western central banks, those what I call the gold light countries like Australia, especially Canada but also to some degree perhaps Japan, they will start buying physical gold.
1:06:24 We're seeing the digitalization. Tether has become a really significant buyer in the market over the last couple of quarters. So the interesting thing is that it is actually kind of a loop and those vectors, they are reinforcing each other. So therefore, I think it's important to really have that view from different angles.
1:06:50 And those angles kind of confirm my thesis that now we're at the beginning or perhaps right in the middle of a remonetization phase of gold, not in the Western world, but probably even globally. >> Right. And again we do often make the point that we don't necessarily want $10,000 gold to $20,000 gold because it means as you say that there are riots in the street and that other things have gone terribly wrong there.
1:07:22 But let's focus on vector 6, digitalization, because it's very interesting in terms of tokenized gold because one of the issues with access to gold has been people don't want to store it. There are issues with the hassle of buying gold and yes that is overcome potentially via a gold ETF. We're seeing this trend of real world assets and putting everything on chain, something that Larry Fink of BlackRock has been championing.
1:07:48 Love him or hate him, this is where it's going. He's saying it's the next generation of markets. How do you see tokenized gold, potentially gold tokenized on the blockchain with the ability to redeem that gold? How do you see that driving the next phase of accumulation on a retail level and on an institutional level? >> Well, I think it's probably something that goes hand in hand with the dislike of CBDCs.
1:08:24 So tokenized gold actually beats CBDCs. You've got a neutral and a censorship resistant currency instead of a programmed and surveillable currency. But still, the gold token market cap is still fairly small. I think it's six or seven billion now. It's significantly higher. I think it's up 5x in the last 24 months.
1:08:49 But from my point of view, it doesn't really replace gold. It rather repackages it. Let's put it that way. Or it mobilizes it. That's probably the better term. It mobilizes gold. This tokenize everything — that's from my point of view a solution for a problem that doesn't really exist. Yeah.
1:09:24 So I know from the crypto scene that there was this trend previously, tokenize everything, tokenize real estate, tokenize fine art. Would I buy tokenized real estate? Would I buy tokenized Van Gogh paintings? No, not really. And it hasn't really been a big trend over the last couple of years.
1:09:49 So for me it's not really a big trend. I think that tokenized gold — there is an audience for that but it's not going to be the major driver going forward. What is interesting is the physical demand coming from Tether. We've got an exclusive interview with Juan Sartori from Tether, head of special projects.
1:10:12 We're really taking a deep dive on the purchase programs of Tether. They're storing all their physical gold outside of the banking system in vaults in the Swiss mountains. So, it's definitely an important driver, but I think all those current players like Paxos, like Tether Gold, I think it's not going to be a major driver of this gold bull market.
1:10:41 >> Well, perhaps there will be new participants in that space that drive it. And just to remind our viewers, Tether is also the number one issuer of stablecoins, USDT, which is positioned as a way to continue to have demand for US treasuries. But it's very interesting that the number one issuer of stablecoins is taking that money and buying gold.
1:11:08 Let's bring it back to the miners because you have said that that is the way to have performance gold, right? So gold has already had a very good move. You're saying that the higher beta part of the precious metals complex is where the greater opportunity lies from here and that's the miners. But miners have traditionally disappointed, right? Why haven't miners already fully reflected what is supposed to happen or what has already happened to gold? >> Well, I think that not even in the gold mining space, management
1:11:49 teams actually believe in this bull market. If you have a look at the long-term assumptions in their decks, well, they're all calculating with gold prices around 2,000, 2,400. So there is kind of a hidden option on the balance sheets of the mining companies.
1:12:10 Traditionally they've got somewhat disappointing management teams. They haven't really delivered any shareholder value. We've crunched the numbers and since 1971 you made a significantly better performance holding physical gold than owning mining stocks.
1:12:35 However, if you time it right then obviously you have this gold on steroids, that beta to the price of gold. And I think Michelle, it's interesting that Newmont being one of the best performing stocks in the S&P 500. It just made new all-time highs this week, which is a sign that obviously the big money, the generalists, they chase the most liquid names.
1:13:03 And it seems that finally generalists are realizing that there's an enormous amount of value on the balance sheets. I mean the free cash flow of Newmont last year was 7.3 billion. Agnico was 4.5 billion. Barrick was roughly 4 billion. Up more than 200%. First quarter was excellent. Second quarter was excellent.
1:13:28 I think the companies really got the price surge in energy costs, they've got it under control again. Their net cash — now the sector is net cash and they're really smartly allocating their capital. Again I think they will make the same mistakes like in previous cycles but if you compare it now, the debt ratios for example, current ratio, net debt to EBIT, they are — total debt to enterprise value — to the S&P 500, they're significantly more attractive.
1:14:09 If you have a look at some valuation numbers, the PE for the GDM index is 13 now, while the S&P 500 is trading at 28. Price cash flow is significantly better. Price sales — if you have a look at the gross margin of the GDM index, it's 54%. EBITDA margin 56%.
1:14:34 So those companies are really really healthy. So I think the next couple of years will have lots of fun, lots of performance in the mining space, but again they will probably make the same mistakes like in the previous cycle, ridiculous M&A activities. And then it will be time to say goodbye, but it's not yet. And we're seeing — I'm managing an active gold mining fund.
1:14:56 We're seeing some decent inflows. We're seeing from potential clients that they're kind of warming up to the idea of allocating capital, but they haven't really made the move yet. But I think it's now finally happening. >> Well, from an allocator, if you're bullish on gold, why not simply own gold? With a miner, you're taking management risks, geopolitical risk, geological risk, permitting risk, cost inflation, labor risk, dilution.
1:15:27 Why isn't the cleanest thesis: let me just buy gold. I'll buy a leveraged gold fund if you want some extra juice. >> Sure. I think Michelle, that's perfectly fine. And again, so many things can go wrong in mining. I'm on the board of directors of two Canadian companies, Tudor Gold and Goldstar Minerals.
1:15:51 And it's super interesting, but it's not easy being in that business. It can be very very rewarding, but again, you have to be aware of the risks. Michael Weeks, who is the son-in-law of Tony Deden, one of the smartest gentlemen in the industry.
1:16:14 Michael Weeks, he summed up the case for gold brilliantly and I'm kind of jealous because I wrote thousands of pages about gold and I didn't have the idea. So he said the value of gold is actually not what it promises, but actually what it spares its owners. So you've got this — Nassim Taleb would say this via negativa approach.
1:16:42 So, gold doesn't carry any duration risk. There's no credit risk. There's no liquidity risk. There is no balance sheet that can implode or explode. You've got no cash flows drying up. You've got no stupid management teams misallocating capital. You don't need the trust or the goodwill of any counterparty.
1:17:07 You just need a secure storage location. That's basically it. It's so simple. And I think it's this idea that there's so many risks that you're not taking by only owning gold. I think that's super super fascinating. >> And just full disclosure I'm on the board of McEwen.
1:17:29 So I'm definitely for gold, copper and silver miners. And you make an unusual proposal in the report, something that I've actually brought up and that is the corporate gold standard, that miners should retain some of the gold that they produce on their own balance sheets. Talk us through that. I mean, it seems pretty obvious: you're a miner.
1:17:50 You're saying to people buy gold because gold is your hedge against fiat and then they go and they take that gold and they sell that gold for fiat. That is the business model but wouldn't it make sense for miners to retain some percentage of production? >> Well actually I think that Rob McEwen does that.
1:18:13 There's very few companies actually following that idea and I developed that chapter together with Chris Ritchie who was at Silvercrest and it's just a thought, it's a discussion that I wanted to start. So it's called The Product Is the Solution and Michelle I have to say that being in this industry for so many years I think there's very very few industries that have a worse reputation and I think that comes from, first of all, not really delivering the story good enough. You
1:18:58 know if you have a look at the slide decks of the average mining companies, the slogan is if you can't convince them confuse them. You've got all those geological terms and so many drill results but actually generalist investors, they don't get it, they don't understand it because they're no geos. So I think you really have to simplify the story and the question is, if you're producing and it's really hard work to getting the gold out of the
1:19:30 ground, if you're producing such a perfect product why do you actually sell it for fiat money and I think that that was the main idea behind that chapter and there's all sorts of reasons why especially the CFOs don't want to do that. Yeah, it's different.
1:19:55 It's contrarian. It's something that most companies are not doing. But I think if you just retain 5 to 10% of the output as bullion on the balance sheet I think it will make a difference. It will make a difference when it comes to investors.
1:20:17 It will make a difference for your balance sheet and therefore I think, or I hope, that there will be some change in the attitude when it comes to marketing their own product and actually believing in their product. And our mutual friend Rob McEwen, he again — I think he's one of the biggest fans and supporters of the In Gold We Trust report and he gets that and there's a few other people in this industry getting that and I think if you're kind of a first mover I think you will have a competitive
1:20:53 advantage compared to the rest of the industry. >> It's interesting, you could make the comparison, as much as it will irk many of the gold fans out there. You could make the comparison to bitcoin treasury companies, how some bitcoin companies retain bitcoin on their balance sheets.
1:21:14 But let's talk about the mining sector because what does actually bring the generalist investor back? I mean when you're looking at AI and you're looking at these phenomenal runups, what actually — and you say the narrative is weak — what actually brings the generalist investor back? >> Well, I think it's hard numbers.
1:21:33 It's really those companies appearing on value screenings by generalist investors. I think it will be about communicating and then delivering what the management teams actually propose. I think it will be about building trust from generalist investors.
1:22:00 And I can tell you, Michelle, I'm heading to the two big conferences in Colorado in September. So Precious Metals Summit and Denver Gold, and at Denver Gold, which is more of the large cap companies. Every year people say, well, now the generalists are finally coming. So far, we haven't really seen them.
1:22:21 Perhaps we'll see them this year. I hope it's not like in that play Waiting for Godot. But I think at some point it should happen. It might be anecdotal evidence, Michelle, but I was at a birthday party and I wanted to leave around midnight. There was actually a guy approaching me and he said, well actually you are this gold guy, right? And I said, "Yeah, kind of."
1:22:51 And he said, "Yeah, my portfolio is full with Agnico, with some royalty names, Franco, Wheaton. I've got a couple of smaller producers and developers." And so I said, "Well, you're actually also running a mining fund." And he said, "No, I'm running a deep value fund." And I thought that that was really interesting.
1:23:12 And he said well in his screenings actually it was mostly about gold mining companies not only having very attractive absolute valuation but especially relative to those kind of hot sectors that everybody is talking about on Wall Street. So I think it will be a process.
1:23:36 Again, I think the industry has to do a much much better job communicating. But I think it should happen because again, we're seeing pristine balance sheets now and I think the sector is at its healthiest as I've ever seen it probably. >> And yet, you could say that the fundamentals have never been more divorced from markets in general.
1:24:02 When you look at price to earnings ratios and you look at what stocks are moving and the Warren Buffett indicators, it's hard to make the case that generalist investors are actually looking for value and are actually concerned with fundamentals when you look at the PE ratios of some of the other companies that promise ginormous returns.
1:24:28 But I hear your point. I have two questions as we start to wrap up here, Ronnie. Firstly, you've made the case for gold. What is the case against gold? What derails your thesis here? What needs to happen for this to not work out? >> Well, I think fiscal policy completely changing. I think Kevin Warsh, everybody said that he's a hawk. But so far, no, he isn't.
1:25:02 And I think that there was a reason why Donald Trump chose Kevin Warsh. But I don't see that yet, really aggressive rate hikes because we just cannot afford it anymore. And we're seeing the turmoil in bond markets at current rates already and Michelle, we haven't really talked about the kind of yield curve control that we're seeing now.
1:25:32 We haven't really talked about what the next steps could be. We haven't really talked about why Kevin Warsh is actually trapped. So I think that we would have to see the fiscal situation dramatically improving. We would have to see very conservative policies again.
1:25:53 We would have to see these political developments completely reversing. I'm not a pessimist. Yeah. And I think that people always think if you like gold you're a pessimist. I've got a family. I've got kids. I'm running a couple of companies. I'm allocating capital.
1:26:15 So I think there is a way out, but I think what we're seeing now is it's pretty clear that at some point there will be much more financial repression. There will be capital controls. I think that politicians with that financial repression will try to change the entire structure of finance.
1:26:44 So there will be much much more capital being funneled into directions where it would normally not go to, which is fixed income obviously. So I don't really see that yet but of course, being a prudent investor I always have to have in mind what's the downside. >> Right and that's just one side of the argument there.
1:27:10 I mean some people like to highlight — the bitcoiners like to highlight that just as gold people say that quantum computing potentially is an existential threat to bitcoin rather — is there an equivalent existential threat to gold? Space mining, something that dramatically increases the supply. Is that something that you even factor in here? >> Well space mining, we had a chapter about that I think two years ago.
1:27:40 Yeah, I wouldn't rule it out. Obviously. But I think one of the takeaways was that it's going to be so expensive actually to mine it somewhere in outer space that we're far far away from that. I think what's interesting is deep sea mining, not only for gold but for some other commodities and the beauty of gold is that there's so much gold around, it's just a question of how much does it cost to get it out of ground. So I think
1:28:17 we're seeing a 5,000 years track record of gold and I think that we can talk about the Lindy effect, you can talk about centuries of trial and error and I think the market for good reason chose gold as the perfect monetary asset and I think are there threats? Yes, definitely.
1:28:41 But I would say that the threats to fiat currencies are significantly higher than the threats to gold. >> So that brings us back full circle because you've spent 20 years making the case for gold. Now, your latest report is really emphasizing that we're moving into this period of remonetization. What does the gold report say in 20 years time? Big picture.
1:29:07 What do you think that would look like? >> It's a great question, Michelle. >> What does far into the future look like? You've been doing this for 20 years. >> I can only tell you, Michelle, that people think that this must be like the most boring job on earth. And I keep saying, well, it's the most fascinating thing because it's not about gold.
1:29:34 It's actually about where is the world going to? Yeah. Where are interest rates going? What is inflation doing? Geopolitical drivers, de-dollarization. So actually if you want to have some sort of understanding of gold you have to try to understand really everything and that makes it so fascinating and so complex.
1:29:57 So I kind of hope that in 20 years from now I'll still be writing about gold. Probably in those 20 years there will be, as I've said, a reorganization of our monetary system. I'm pretty sure about that. I think that gold will play a major role in that. But that doesn't have to be like the big bang, the big catastrophe.
1:30:25 Perhaps it's just a gradual process and again those six different vectors, they're kind of confirming each other and stimulating each other. And I don't know if there's going to be some sort of a Bretton Woods conference where politicians and central bankers sit together and say well let's agree on a new global currency.
1:30:47 I'm not sure if that's going to happen but I think that the monetary value of gold will be more and more understood globally. And I think that there's a big divergence between the perception in the western world compared to the perception in emerging markets. So I did keynotes about gold in 35 or 40 countries all over the globe.
1:31:17 And the best questions are always asked in countries like Turkey for example, in high inflation countries, in countries where they're used to having very weak currencies and high inflation rates. So for them, gold isn't some sort of satellite investment.
1:31:38 It's actually the foundation of their portfolios. And I think that in the western world we're seeing some sort of emerging marketization or — I don't know how exactly to call that — but developed markets are more and more moving into the direction of typical emerging market behavior while many emerging markets' capital markets are actually acting more like developed markets.
1:32:08 So I think that this view on gold over the next 20 years will completely change in the western world and I think that's going to be a really really exciting development for us. >> And as you say it doesn't necessarily have to be something horrible and chaotic. Let's hope that it's not that.
1:32:34 But I will guarantee that I will have you back on way before 20 years time to see how the report is shaping up. Ronnie, really appreciate your time. We're going to leave it there, but I will give you the final word. >> Thank you very much, Michelle. It's been a pleasure. It's getting late here. Almost 10, bedtime.
1:32:54 I'm coming to the age where I'm actually going to bed earlier than my kids. >> Where can people learn more about you and your work? >> Well, have a look at our web page, incrementum.li. We're a boutique asset manager based in Liechtenstein, probably one of the best jurisdictions in Europe. One of I think only five countries globally without any debt.
1:33:18 If you want to have a look at our In Gold We Trust report, have a look at ingoldwetrust.report. You can download this year's edition, 480 pages, but there's also a compact version. So I know that not everybody is keen on reading such a brick of a report. You can download all previous In Gold We Trust reports.
1:33:43 We've got monthly chart books. We've got special publications. So have a look at ingoldwetrust.report. And then follow me on Twitter, my handle — or on X my handle is @RonStoeferle where I'm writing about macro, posting some charts and then also writing about international sports and music sometimes.
1:34:07 >> Oh all right, well I've got to check that out. I did say I did enjoy the report. And even the abridged version, it has some very colorful quotes and that's what I liked about it, is that you sprinkled in a little bit of sense of humor, a little bit of history, some very interesting quotes from people along the sides of it.
1:34:26 So, I do recommend everybody reads it. It's a labor of love indeed. Ronnie, thank you so much. Appreciate you. Thank you for joining us today. >> Thank you very much, Michelle. All the best and take care. Bye-bye. >> Thank you. And as always, a big thank you to you for watching and listening. If you found this conversation interesting, insightful, educational, entertaining, hopefully all of the above, please like, share, and subscribe.
1:34:52 It really helps us grow this community and we really appreciate it. And if you would like to learn more about building a precious metals strategy, you can reach out to info@milesfranklin.com. There is a team of specialized advisers and brokers that can guide you according to your personal circumstances. That's info@milesfranklin.com. Also check out the website milesfranklin.com.
1:35:15 As always, leave us your comments. Feel free to praise, whine, or dis. We'll see you soon. Until then, stay sovereign. >> This is The Real Story with Michelle Makori.