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Speaker 1: Welcome to the Fear and Greed Business Interview. I'm sure

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Speaker 1: an Alma gold has had a spectacular run lately. Last week,

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Speaker 1: fears of a trade war saw the price for the

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Speaker 1: precious metal jump by more than US one hundred dollars

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Speaker 1: an ounce for a new record. I've just under twenty

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Speaker 1: nine hundred US dollars an ounce. That's a spot price.

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Speaker 1: Futures were even higher. With uncertainly still a dominant theme

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Speaker 1: in global markets, it's continued to rise. How far can

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Speaker 1: it go though? Good gold pass the three thousand US

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Speaker 1: dollars an ounce mark? And what does it mean for investors?

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Speaker 1: Remember this is general information only, and you should seek

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Speaker 1: professional advice before making investment decisions. Chris Braikey is the

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Speaker 1: founder and CEO of online investment advisor stock Spot. Chris,

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Speaker 1: Welcome back to Fear and Greed.

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Speaker 2: Thanks Shan. It always good to be on.

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Speaker 1: Are you surprised that we're talking about three thousand usd

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Speaker 1: ann ounce for gold? Look?

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Speaker 2: I think yes and no. I think this year it's

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Speaker 2: really thrown a few people. The big move in gold

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Speaker 2: or over the last twelve months, mainly because the conditions

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Speaker 2: that we've had, which is rising long term interest rates

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Speaker 2: and a strong US dollar, you know, usually aren't conducive

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Speaker 2: to a strong goal price. They usually actually be headwinds.

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Speaker 2: And so gold has really defied a lot of these

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Speaker 2: you know, market conditions that would usually hold it back

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Speaker 2: and searched forward. It's not so much of a surprise

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Speaker 2: to me because I think there's really other factors that

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Speaker 2: are driving it, and some of those traditional factors are

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Speaker 2: really just playing less of a role.

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Speaker 1: Okay, So what are some of those factors. I'm guessing

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Speaker 1: the one big one.

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Speaker 2: Well, I mean, people talk about global uncertainty, and I

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Speaker 2: think you can talk about, you know, the wars that

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Speaker 2: have happened, and what's happening in Russia and Ukraine and Israel,

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Speaker 2: but I think these are all sort of side stories.

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Speaker 2: And the biggest challenges we face from an economic standpoint

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Speaker 2: globally is China's deflationary problem. But bigger than that is

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Speaker 2: the US's persistent inflation issues. And I think the fact

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Speaker 2: that the US government debt has increased so significantly from

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Speaker 2: about twenty three trillion around the COVID crisis time to

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Speaker 2: thirty six trillion today, I think that's kind of laying

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Speaker 2: the foundations for a bigger debt crisis, and that's really

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Speaker 2: what's driving gold.

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Speaker 1: And so the old about golds at the store of

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Speaker 1: value argument is that why investors in times of uncertainty

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Speaker 1: go for gold.

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Speaker 2: It's really a replacement for money. So the challenge with

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Speaker 2: money is that governments really can dictate the supply, and

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Speaker 2: if there is a debt problem, then governments can print

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Speaker 2: money to service their debt. They can allow inflation to

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Speaker 2: stay higher for a longer period of time and basically

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Speaker 2: inflate their way out of debt. Gold is a way

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Speaker 2: of protecting the real value of your money in that

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Speaker 2: sort of condition.

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Speaker 1: I mean the point there, I suppose that will someone

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Speaker 1: tell me all the gold ever mined wouldn't fit under

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Speaker 1: the Eiffel Tower. There's actually not that much of the

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Speaker 1: stuff around.

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Speaker 2: That's right. I think someone's shown me the visual and

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Speaker 2: it would all fit into essentially a tennis court. If

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Speaker 2: you can imagine a tennis court cube, all the gold

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Speaker 2: basically fits in there. Look, there's not a lot around.

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Speaker 2: And although it does seem to many people like a

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Speaker 2: bit of an archaic thing to as Buffett, I think

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Speaker 2: discussed like dig it out of the ground just so

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Speaker 2: you can bury it again in a vault. It really

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Speaker 2: is a store of value that people have relied on

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Speaker 2: for a long period. But it does go through decades

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Speaker 2: of not really performing and then decades of doing very well.

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Speaker 2: And I think we've entered, you know, one of those

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Speaker 2: strong performing decades most likely.

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Speaker 1: And when central banks around the world are buying up gold,

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Speaker 1: that can't hurt its reputation either.

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Speaker 2: That's right. I mean, that is the other factor that

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Speaker 2: it's been cited over the last year that central banks,

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Speaker 2: you know, particularly you know in the East, the Chinese

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Speaker 2: Central Bank have really been big buyers of gold. And this,

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Speaker 2: you know, has been an accelerating trend that we hadn't

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Speaker 2: really seen ten and twenty years ago. But I think

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Speaker 2: a lot of these crises that are happening from a

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Speaker 2: war perspective globally a leading central banks to really repatriate

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Speaker 2: money and also to bring gold back home as well.

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Speaker 1: So what's the big downside to gold? So this is

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Speaker 1: all why gold is rising? Could it turn on a dime?

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Speaker 2: Look that the big downside to gold and the reason

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Speaker 2: why some people have a zero allocation. You know, Vanguard

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Speaker 2: famously doesn't have any allocation in their diversified funds is

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Speaker 2: because they don't see it generating a yield or any

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Speaker 2: sort of return. You only get your return through capital gains,

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Speaker 2: and so in theory, in a period of high interest rates,

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Speaker 2: you're missing out on an interest rate in gold, and

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Speaker 2: it needs to go up every year by as much

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Speaker 2: as interest rates to compensate you for not getting that interest.

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Speaker 2: That's certainly the reason I hear banded around a lot

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Speaker 2: that it just doesn't produce a yield. While would you

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Speaker 2: not earn, well, why would you own that asset?

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Speaker 1: You know?

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Speaker 2: My counter argument is there was a period, you know,

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Speaker 2: a few years ago, when a lot of government bonds

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Speaker 2: weren't generating any yield, and many of them generating a

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Speaker 2: negative yield, and yet still people invested in those as

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Speaker 2: a defensive asset. So I don't think you can look

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Speaker 2: at yield alone. You need to think of a total return.

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Speaker 1: I still want to talk about investing in gold, including

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Speaker 1: some of the ways people are doing it. Will be

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Speaker 1: back in a moment. My guest today is Chris Breichy

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Speaker 1: from Stockspot. Okay, so we've gone through the fundamentals of gold.

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Speaker 1: Let's say, how do you invest in it? If I

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Speaker 1: want to invest in gold, How do I do it? Well?

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Speaker 2: Of course, historically the way that people would invest in

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Speaker 2: gold is literally to buy physical gold, So whether it

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Speaker 2: was through jewelry or buy gold bullion of bars. You

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Speaker 2: can buy it at a gold bullion dealer and then

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Speaker 2: you can store it either at home, you know, in

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Speaker 2: your own vault under your mattress, or you can go

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Speaker 2: and pay a vault to store your gold for you.

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Speaker 2: That can make sense for some people. You certainly, you know,

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Speaker 2: feel pretty secure when you've got your gold in the vault,

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Speaker 2: but it can be expensive to kind of hold it

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Speaker 2: in that way. And so about twenty years ago in

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Speaker 2: Australian actually invented the first gold ETF, and a gold

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Speaker 2: ETF is similar in some respects. It still stores that

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Speaker 2: gold physically in a vault. For instance, that the gold

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Speaker 2: ETF we recommend at Stockspot stores the gold in London

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Speaker 2: in a vault, and that vault is ensured by the

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Speaker 2: Lloyd's of London. So your money is safe and in

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Speaker 2: a vault, but you don't have to store it yourself,

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Speaker 2: and so the costs are much lower.

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Speaker 1: So an ETF is kind of the most common way nowadays.

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Speaker 2: It's certainly the most efficient I think the gold ETF

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Speaker 2: in Australia that's been the most popular one just crossed

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Speaker 2: over four billion dollars assets under management last week, and

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Speaker 2: so there is a lot of money sitting in that.

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Speaker 2: I think some people still like to whold jewelry and

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Speaker 2: physical bullion and bars as well, but these days, if

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Speaker 2: you're going to own gold as part of an investment portfolio,

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Speaker 2: you know, I don't see a lot of downsides of

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Speaker 2: holding it in that ETF structure.

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Speaker 1: So, I mean you mentioned Vanguard before the break, and

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Speaker 1: in a sense, what we're talking about with ETF can

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Speaker 1: be institutional or retail. If we just think institutional, do

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Speaker 1: they mostly invest via ETF or do they are they

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Speaker 1: big enough to do it themselves or it's kind of

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Speaker 1: not something I've thought much about.

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Speaker 2: Usually via some sort of either by a future sort

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Speaker 2: of product, so you can buy financial contracts that give

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Speaker 2: you exposure to gold or via an ETF. Although you know,

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Speaker 2: from my research of super funds in Australia, most super

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Speaker 2: funds have a zero or negligible allocation, which I think

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Speaker 2: is interesting. You know, I found one or two funds

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Speaker 2: with like a one or two percent allocation. You know,

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Speaker 2: we've put out our super product recently with a fifteen

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Speaker 2: percent allocation. It's a much bigger allocation, and I think

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Speaker 2: a lot of super funds will really get squeezed into

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Speaker 2: buying gold over the next ten years if government bonds

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Speaker 2: continue to perform poorly compared to gold.

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Speaker 1: OK, so where is You've just taken me down a

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Speaker 1: little rabbit warrant he where most of the gold held?

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Speaker 1: I remember as a graduate and going and working at

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Speaker 1: the Reserve Bank and looking at the vault at the

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Speaker 1: Reserve Bank. There's literally gold bullion bars in Martin Place

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Speaker 1: in Sydney down the bottom there. Now they don't have

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Speaker 1: them anymore. Where is the gold?

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Speaker 2: I mean personal gold? I think you're right, as often

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Speaker 2: stored in vaults in banks, and you know, when people

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Speaker 2: have concerns about the viability of banks, you'll often see

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Speaker 2: a run on those storage vaults because they're worried. And

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Speaker 2: that happened in Europe in the Greek debt crisis a

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Speaker 2: little while ago, you know. So that's one place central

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Speaker 2: banks have their own storage facilities for gold. And actually

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Speaker 2: one of the interesting things that's happened over the last

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Speaker 2: couple of weeks with Trump proposing tariffs on Mexico and Canada.

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Speaker 2: You know, historically when there's been tariffs, gold and similar

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Speaker 2: products have been exempt. But you know, there wasn't an

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Speaker 2: exemption for gold in these recent tariffs, only energy. And

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Speaker 2: so there's been a lot of moving of gold around

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Speaker 2: the world from one vault to another to try and

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Speaker 2: avoid tariffs because in theory tariffs are now going to

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Speaker 2: be imposed on gold. Billion being moved from Canada to

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Speaker 2: the US.

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Speaker 1: Oh wow, So where is most of the gold? Mind?

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Speaker 1: I mean in Australia is big into gold, and South

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Speaker 1: Africa is big into gold. Are they the main places?

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Speaker 2: Yeah, there's I mean, there's a few countries that are

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Speaker 2: big minus of gold, Australia, Canada, South Africa. As you mentioned,

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Speaker 2: China does produce a lot of gold. So gold is

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Speaker 2: produced in many countries. You know, some have imposed limitations

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Speaker 2: on exportation. So for instance, China from my understanding, doesn't

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Speaker 2: allow any gold to be exported. They keep it all,

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Speaker 2: whereas Australia is an exporter of gold.

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Speaker 1: Okay, So the moral of this tale, we know what

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Speaker 1: why gold has done what it's done. It still can

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Speaker 1: be part of an investment portfolio. And you mentioned your

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Speaker 1: own super fine at fifteen percent, So you're obviously a

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Speaker 1: fan of holding it as a defensive asset. Is that right? Yeah,

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Speaker 1: that's right.

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Speaker 2: I think people are sometimes confused about where gold fits,

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Speaker 2: but really it's it's the most pure form of money,

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Speaker 2: So in my mind it's it's definitely a defensive asset.

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Speaker 2: The other thing that makes it defensive is it has

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Speaker 2: a wonderful negative correlation to Australian shares, which means that historically,

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Speaker 2: when Australian shares have fallen, gold has done very well.

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Speaker 2: And what's I guess another layer interesting on this is

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Speaker 2: when Australian shares and bonds both fall together, which is

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Speaker 2: very rare, it's usually due to an inflation scare, and

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Speaker 2: that's when gold really shines. And so I think, you know,

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Speaker 2: that's the potential outcome over the next ten years that

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Speaker 2: I think a lot of people aren't thinking about that.

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Speaker 2: If there's inflation that's persistent, you may see shares and

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Speaker 2: bonds both having a pretty poor period and that's where

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Speaker 2: gold is likely to do a lot better.

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Speaker 1: Chris, thanks for talking to Fear and Greed.

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Speaker 2: My pleasure, Sean.

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Speaker 1: As Chris Braikey, founder and CEO of Online Investment Advisors

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Speaker 1: Stock Spot. This is the Fear and Greed Business Interview.

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Speaker 1: Remember this is general information only and you should always

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Speaker 1: seek professional advice before making investment decisions. Join us every

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Speaker 1: morning for the full episode of Fear and Greed at

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Speaker 1: Daily Business News. For people who make their own decisions,

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Speaker 1: I'm Sean Elner. Joy Day,