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Speaker 1: From The Australian. Here's what's on the front. I'm Claire Harvey.

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Speaker 1: It's Thursday October twenty three, twenty twenty five. The Australian

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Speaker 1: Defense Force is tightening its purse strings as the huge

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Speaker 1: cost of the Orcus Submarine Pact and other ship building

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Speaker 1: work becomes clear. Projects are being delayed and personnel costs

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Speaker 1: slashed to keep spending in check. The Australian is exclusively

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Speaker 1: revealing today. That story by Foreign Affairs and Defense correspondent

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Speaker 1: Ben Packham is live right now at the Australian dot

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Speaker 1: com dot yu. Fresh from a stint teaching constitutional law

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Speaker 1: at the prestigious Harvard Law School in the United States,

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Speaker 1: Professor Meaghan Davis has called out what she says is

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Speaker 1: a lack of integrity in the Australian legal system. Davis

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Speaker 1: is one of the architects of the Voice to Parliament,

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Speaker 1: and she says Indigenous people are most affected by the

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Speaker 1: system's failings. The gold price has been going up and up,

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Speaker 1: and now it's going down in a big way. Today,

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Speaker 1: Market's editor David Rodgers joins us to explore why gold

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Speaker 1: usually falls hard and what's behind the sudden collapse In

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Speaker 1: a commodity. Everyone was going crazy.

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Speaker 2: For a modern day gold rush, and in the past

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Speaker 2: two years it's gone parabolic, hitting a record high of

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Speaker 2: three thousand US dollars.

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Speaker 1: Announced David Rogers is The Australian's Markets editor and he

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Speaker 1: sits next to me at work and Dave, there's been

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Speaker 1: something I've been meaning to ask you about. It's the

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Speaker 1: gold price. I went to buy a necklace for my

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Speaker 1: daughter the other day and I was absolutely shocked at

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Speaker 1: the increase in price since the last time I bought

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Speaker 1: her a little piece of jewelry. Hundreds of dollars had

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Speaker 1: been added to the price of a necklace at Angers

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Speaker 1: and Kot in my local shopping mall. What's been going

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Speaker 1: on over the past few years with the goal price.

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Speaker 3: Well, goal is well and truly more than doubled since

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Speaker 3: late twenty twenty two. In fact, it's gone up about

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Speaker 3: one hundred and seventy percent, and it's accelerated even in

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Speaker 3: recent last couple of months as the US Federal Reserve

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Speaker 3: has signaled that it's going to cut interest rates further.

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Speaker 3: Because gold doesn't pay an interest rate, it makes it

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Speaker 3: easy for gold to rise because as held as a

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Speaker 3: store of value and so yeah, no surprise that a

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Speaker 3: necklace would cost at least double what you paid a

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Speaker 3: couple of years ago. Now, the big driver in recent

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Speaker 3: years has been the central banks, particularly the emerging market

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Speaker 3: central banks. They started to be net buyers of gold

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Speaker 3: after the global financial crisis, and that buying really accelerated

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Speaker 3: after Russia's invasion of Ukraine and subsequent freezing of Russian

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Speaker 3: foreign reserves by the Western world.

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Speaker 1: Dave says that was a wake up call for other countries,

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Speaker 1: think Turkey and China, that they might like to invest

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Speaker 1: in something that's solid and tangible, just in case they

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Speaker 1: fell foul of the United States too. Foreign reserves are

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Speaker 1: what central banks like Australia's Reserve Bank by just in case.

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Speaker 1: It's often foreign currency like the US dollar or US

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Speaker 1: Treasury bonds, but if those assets are held offshore, they

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Speaker 1: can be frozen as a way of putting pressure on

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Speaker 1: a country. That's what happened to Russia after it invaded Ukraine.

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Speaker 1: That made gold look super safe. Other countries brought up too,

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Speaker 1: including members of NATO who are on Russia's doorstep. Gold

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Speaker 1: was going.

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Speaker 3: Off this year. You've had wider investors pouring your money

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Speaker 3: into gold, ETFs exchange traded funds, and those funds gold

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Speaker 3: ETFs are backed by gold, so that the more investors buy,

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Speaker 3: the more they need to top up on gold. Just

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Speaker 3: in September alone, twenty six billion Australian dollars worth of

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Speaker 3: goal was bought by gold ETFs globally. That brings us

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Speaker 3: to Tuesday night, when, after hitting a record high of

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Speaker 3: around four three hundred and eighty one dollars per ounce,

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Speaker 3: gold unexpectedly had a massive fall of five point three

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Speaker 3: percent in a single night. Now, that was the biggest

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Speaker 3: one day fall since twenty thirteen, and haven't been many

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Speaker 3: instances when gold has fallen that much. Unfortunately, historical precedent

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Speaker 3: for gold having such big one day falls is not good.

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Speaker 3: In twenty thirteen, it took gold two and a half

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Speaker 3: years to stop falling after it had that more than

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Speaker 3: five percent fall, I think it was around nine percent,

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Speaker 3: and then in nineteen eighty three it had a fall

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Speaker 3: of twelve percent and it didn't bottom until nineteen ninety nine.

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Speaker 1: So what is going on? This is a bit different

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Speaker 1: from other times when the gold price has been in turmoil.

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Speaker 1: Back in the early nineteen eighties when inflation was sky high,

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Speaker 1: investors rush to gold because it holds its value really well,

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Speaker 1: especially compared with currency and stocks. When central banks like

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Speaker 1: the US FED jacked up interest rates to try and

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Speaker 1: get that inflation under control, well, suddenly investors rushed away

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Speaker 1: from gold and towards investments where they could take advantage

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Speaker 1: of those high interest rates, like bank deposits. That's not

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Speaker 1: the case this time. Inflation isn't super high like it

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Speaker 1: was in the eighties, and interest rates aren't zooming up

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Speaker 1: towards twenty percent like they did back then. And anyway,

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Speaker 1: it hasn't been investors driving the gold price up. It

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Speaker 1: was central banks worrying about uncertainty and conflict. Dave says,

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Speaker 1: it's all a bit of a mystery because although the

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Speaker 1: Middle East has calmed down a bit, war in Russia

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Speaker 1: is still raging, and everyone's worried about Taiwan too. I

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Speaker 1: was interested to read on the World Gold Council's website that,

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Speaker 1: of course, and this makes sense. There's a finite amount

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Speaker 1: of gold in the world, two hundred and something thousand

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Speaker 1: metric tons that have ever been discovered. They've got a

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Speaker 1: fantastic graphic where they imagine it being melted down and

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Speaker 1: compressed into a cube that would be twenty three meters

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Speaker 1: or so on each side. A few stories of a

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Speaker 1: city skyscraper in the amount of gold that exists in

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Speaker 1: the world, which made me wonder. When central banks buy gold,

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Speaker 1: what do they do with it? Are they just using

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Speaker 1: it to underpin their currency or are they then trading

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Speaker 1: it trying to make a profit that way.

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Speaker 3: Yeah, I believe it's a fundamental underpinning of their currency

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Speaker 3: and asset that can't be wiped out with a keystroke.

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Speaker 3: We know the US has large quantities of gold, and

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Speaker 3: Fort Knox and the Bank of England as physical holdings

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Speaker 3: of gold and so on around the world. It's one

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Speaker 3: of these remaining physical, finite stores of value. It takes

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Speaker 3: up very little space. It's still extremely scarce, and the

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Speaker 3: cost of mind and gold goes higher and higher the

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Speaker 3: more that it's been distracted from the surface.

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Speaker 2: Australians are lining up to buy gold, even though the

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Speaker 2: price of the precious metal has never been higher.

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Speaker 1: Ordinary people gone by gold as well. In Sydney, they

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Speaker 1: q op outside a bullion store and they tend to

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Speaker 1: be there at moments a big change like this. There's

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Speaker 1: also the Indian Festival of Diwali, which brings people to

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Speaker 1: buy gold as a bit of a tradition. What's investing

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Speaker 1: in gold about for just normal civilian.

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Speaker 3: I think gold still has this allure of being a

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Speaker 3: precious metal. Some people are just goldbugs, they just love gold.

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Speaker 3: But there are other potentially smarter ways to have exposure

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Speaker 3: to gold which are almost equally as safe. That's via

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Speaker 3: gold exchange traded funds. So if you have units of

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Speaker 3: one of the biggest gold funds in the world, are

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Speaker 3: you just about as safe at having gold yourself? But

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Speaker 3: some people will prefer to have it in their own safe.

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Speaker 1: So the price is crashing. What do you think is

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Speaker 1: going to happen over the next few days. Would you

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Speaker 1: think that ordinary investors will panic and start selling their

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Speaker 1: gold and potentially create some sort of run.

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Speaker 3: I think that a further pullback of ten percent from

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Speaker 3: the top could fairly easily happen, so double what we

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Speaker 3: saw on Tuesday and overnight trading. I think that the

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Speaker 3: rebound we saw today and the age Pacific shows that

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Speaker 3: the market is trying to hold on to an uptrend

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Speaker 3: line which has held since late August when the Federal

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Speaker 3: Reserve Governor Powell shifted to a more dubbish stance. But

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Speaker 3: the magnitude of the fall we saw will definitely unsettle

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Speaker 3: a lot of investors, and you're probably going to see

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Speaker 3: some selling around four thousand, two hundred or if it

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Speaker 3: breaks that four hundred near the recent highs, simply because

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Speaker 3: of that speculator element you talk about. When you talk

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Speaker 3: about the number of people queuing up outside places like

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Speaker 3: ABC bullying in Martin Place, it does show you a

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Speaker 3: sign of the speculative element, and even the fact that

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Speaker 3: we're talking about it and it's on the front page

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Speaker 3: to show that there's a substantial speculative element as well

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Speaker 3: as the more fundamental buying from central banks.

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Speaker 1: Coming up. Back to the jewelry, what does it mean

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Speaker 1: for consumers in terms of retail? Back to the necklace?

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Speaker 1: How long will it take if let's say this fall

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Speaker 1: is sustained, how long would that take to flow through to.

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Speaker 3: The jewelry market.

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Speaker 1: Is that something that would take years or would never

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Speaker 1: go down?

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Speaker 3: It's hard to say. I think it would take a

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Speaker 3: lot more supply of gold to come on stream to

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Speaker 3: cause a major downshift in the gold price at this point,

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Speaker 3: and there are a lot of marginal gold mines we've

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Speaker 3: heard about coming out of mothballs because of the rise

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Speaker 3: in gold, and so you know, economics will tell you

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Speaker 3: that ultimately that will stimulate production and the market will

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Speaker 3: find its own level. And I mean gold has the

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Speaker 3: rise we've had is far out stripped what's happened in

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Speaker 3: inflation in recent years. But many would argue that it

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Speaker 3: has been driven by this portfolio shift by central banks

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Speaker 3: because of the uncertainty in the world.

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Speaker 1: Dave Rogers is the Australian's Markets Ever. He spends all

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Speaker 1: day blogging what's happening in the markets second by second.

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Speaker 1: It's grouping, I can say from sitting next to him.

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Speaker 1: Check it out at the Australian dot com dot au