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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: How high can Gold Go? Gold has been on a

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Speaker 2: record setting run lately.

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Speaker 3: Look at that gold up mine, tens of percent.

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Speaker 1: The games keep coming for gold. If I check right now,

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Speaker 1: gold is at a record four two hundred and two

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Speaker 1: dollars an ounce.

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Speaker 2: The commodity broke forty two hundred dollars an ounce on Wednesday,

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Speaker 2: the latest high in a gold rush of historic proportions.

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Speaker 1: This has been an incredible year for gold.

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Speaker 2: That's Jack Ryan, Bloomberg's Commodities and Precious Metals Reporter.

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Speaker 1: If we were to end the year now, it would

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Speaker 1: be the best year since nineteen seventy nine. It's about

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Speaker 1: fifty five percent this year.

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Speaker 2: This incredible year for gold has also been an incredible

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Speaker 2: year for some other shiny commodities.

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Speaker 1: Gold is actually, in one sense, the weakest performer of

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Speaker 1: the platinums, up by about eighty percent, silver by about

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Speaker 1: seventy five. All of the precious medals are moving higher

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Speaker 1: this year, and there's a lot of reasons behind that.

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Speaker 2: Jack says, all this interest in precious metals is a

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Speaker 2: sign of our uncertain times.

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Speaker 1: Gold thing often operates as a barometer for geopolitical tension

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Speaker 1: or what's happening in the global financial system, so that

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Speaker 1: watching the gold price can actually be quite a useful too,

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Speaker 1: to kind of take the pulse of what's happening in

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Speaker 1: the world at that particular moment.

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Speaker 2: People have long rushed to buy gold when the economy

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Speaker 2: seems weak or unstable, but the scale and the speed

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Speaker 2: of this gold rally is different. Just when the pace

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Speaker 2: of growth looked to be slowing down last week, it

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Speaker 2: started up again amid escalating US China tensions over tariffs

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Speaker 2: and a signal from US Federal Reserve Chair Jerome Powell

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Speaker 2: that at least one more rate cut could be coming

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Speaker 2: this year. And while some high profile voices in the

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Speaker 2: financial world are sympathetic to the turn towards gold, like

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Speaker 2: JP Morgan Chase CEO Jamie Diamond Future times.

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Speaker 3: In my life I said, semi rational to have some

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Speaker 3: of your portfolio.

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Speaker 2: It's also raising alarm bells for some investors, like Ken Griffin,

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Speaker 2: CEO of the global investment firm Citadel.

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Speaker 3: The world you see central banks around the world, as

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Speaker 3: you see individual investors around the world go, you know what.

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Speaker 3: I now view gold as a safe harbor asset in

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Speaker 3: a way that the dollar used to be viewed. That's

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Speaker 3: what's really concerning to me.

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Speaker 2: Jack says that the gold rush and the debate around

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Speaker 2: it reflects something deeper about the way investors are thinking

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Speaker 2: about the economy and the world right now.

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Speaker 1: Holding the currencies, even not even just the debt of

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Speaker 1: a foreign country, is an implicit expression of trust in

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Speaker 1: those countries. And when you maybe trust them less, an

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Speaker 1: asset that doesn't have any counterparty might become more appealing.

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Speaker 1: And that really, I think, if you boil it down,

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Speaker 1: has been the thing that's really supported gold.

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Speaker 2: I'm Sarah Holder, and this is the Big from Bloomberg

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Speaker 2: News Today on the show, what's behind gold and Silver's

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Speaker 2: record smashing runs and what can history teach us about

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Speaker 2: how this gold rush could end. If there's one thing

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Speaker 2: you should know about gold, it's that it thrives in

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Speaker 2: a crisis.

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Speaker 1: Gold broke one thousand dollars as Bear Stearns was kind

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Speaker 1: of collapsing in two thousand and eight and two thousand,

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Speaker 1: a few months after the start of the pandemic.

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Speaker 2: That's Jack Ryan, who covers precious medals for.

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Speaker 1: Bloomberg three thousand earlier this year. You could say it

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Speaker 1: was the kind of trade war that was expanding. Liberation

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Speaker 1: Day was just coming up. And so now you look

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Speaker 1: at when it crossed the threshold of four thousand, what's

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Speaker 1: been happening in the world.

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Speaker 2: Geopolitical tensions, trade wars, high inflation. It's been crisis after crisis,

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Speaker 2: and all the bad news has been good news for gold.

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Speaker 1: Talked to investors and people in the market, a key

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Speaker 1: turning point for the gold market seems to have been

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Speaker 1: when Russia's assets foreign exchange assets were frozen.

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Speaker 2: That was in twenty twenty two, at the beginning of

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Speaker 2: Russia's invasion of Ukraine, and.

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Speaker 1: Those were treasuries, those were assets denominated in dollars, in

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Speaker 1: pounds and yen G seven currencies, and that I think

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Speaker 1: was a key moment for central banks around the world

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Speaker 1: because they looked at that and they realized that if

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Speaker 1: they came into conflict with the West at some point

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Speaker 1: in the future, they could potentially lose access to the reserves,

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Speaker 1: presumably at the time when they would actually need it

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Speaker 1: the most. Gold. On the other hand, as long as

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Speaker 1: you start within your own borders, it can't be frozen,

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Speaker 1: it can't be taken from you. And so from that

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Speaker 1: point on, buying of gold by central banks roughly doubled

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Speaker 1: from about five hundred tons a year before that to

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Speaker 1: about one thousand tons a year now.

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Speaker 2: Jack says, the central banks that have been building up

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Speaker 2: their gold reserves most aggressively have a few things in common.

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Speaker 1: China have been a really important buyer, probably the most

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Speaker 1: important buyer. India has also been adding to its reserves,

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Speaker 1: and Eastern Europe as well, so Poland, Serbia, the Czech Republic.

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Speaker 1: They've all been buying quite a lot of gold. It's

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Speaker 1: countries who are not part of the post Second World

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Speaker 1: War Breton Woods system, a global monetary order under pin

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Speaker 1: by gold. These are countries that didn't take part in that,

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Speaker 1: but are now large economies, and they're building gold reserves

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Speaker 1: that are beginning to be commensurate with the massive holes

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Speaker 1: that were built up by the United States, France, Switzerland, Italy,

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Speaker 1: other countries like that.

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Speaker 2: But it's not just central banks that are seeing the

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Speaker 2: appeal of gold right now. Other investors are flocking to

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Speaker 2: gold as the Trump administration ratchets up pressure on the

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Speaker 2: US Federal Reserve.

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Speaker 1: One important one has been some of the attacks on

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Speaker 1: the independence independence of the Federal Reserve. The efforts to

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Speaker 1: fire one of the governors, Lisa Cook, that I think

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Speaker 1: has been a really key kind of source of support

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Speaker 1: for gold, because if you had applied to Federal Reserve,

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Speaker 1: it sets up this kind of possible goldilock situation.

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Speaker 2: Lisa Cook is fighting Trump's attempt to remove her, and

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Speaker 2: the Supreme Court will hear the case early next year.

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Speaker 2: In the meantime, FED Chair Jerome Powell has been firmed

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Speaker 2: that the Federal Reserve retains its independence, but a weakening

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Speaker 2: labor market has pushed the Fed to start cutting interest rates.

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Speaker 2: In September, it lowered them by a quarter percentage point,

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Speaker 2: and this week Powell suggested another rate cut could be

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Speaker 2: coming at the end of October, and that means gold

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Speaker 2: could start looking a lot better for investors who might

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Speaker 2: otherwise want to earn interest on their cash or on bonds.

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Speaker 1: Your cash in the bank becomes less appealing, and treasuries

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Speaker 1: become ress appealing, and non yielding gold becomes more attractive.

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Speaker 2: So it's a goldilock situation for gold. No pun intended,

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Speaker 2: as you said, possibly, yeah. Meanwhile, these factors and some

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Speaker 2: others have also been driving up the price of gold's

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Speaker 2: notoriously volatile cousin silver.

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Speaker 1: Often if gold moves one way, silver will move twice

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Speaker 1: as far the same direction, and I mean it's done

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Speaker 1: something similar to that this year. And for silver, there's

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Speaker 1: kind of diverse use cases. I mean, gold is used

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Speaker 1: either in jewelry or it's used essentially just as an

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Speaker 1: investment asset, where silver has quite a sizeable chunk of

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Speaker 1: annual silver supply goes into industrial applications photovoltaic solar cells.

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Speaker 1: That's a growing source of demand. And so for the

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Speaker 1: last couple of years the market has been in deficit.

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Speaker 1: There is a lot of silver in vaults around the world.

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Speaker 1: The world isn't going to imminently run out of silver,

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Speaker 1: but you have that deficit situation. And then on top

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Speaker 1: of that, investors are looking at the volume of debt

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Speaker 1: that's held by some Western European countries the United States,

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Speaker 1: wondering about how that can be resolved, and so they're

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Speaker 1: looking at the risk of currency debasement and how they

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Speaker 1: can hedge against that, and they think maybe cryptocurrencies, maybe

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Speaker 1: precious metals, maybe real estate, maybe these are kind of

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Speaker 1: assets that we can hedge against this risk.

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Speaker 2: With all of this rush to buy gold, it's worth

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Speaker 2: noting buying a commodity like gold or silver looks pretty

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Speaker 2: different from buying a US Treasury bond or a share

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Speaker 2: of a stock on the SMP.

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Speaker 1: There's many ways to do it, and you can kind

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Speaker 1: of scale it based on maybe how paranoid you are

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Speaker 1: about whether or not you'll be able to get access

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Speaker 1: to your investment. And you can buy a small bar

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Speaker 1: or a coin from a bullion dealer. There's probably a

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Speaker 1: visceral appeal of just to having gold coins under your

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Speaker 1: bed or something like.

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Speaker 2: That for investors who don't need to stash their doablloons

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Speaker 2: under their mattress. Jack says. Another route is trading gold

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Speaker 2: futures or buying gold back stable coins. Other investors are

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Speaker 2: buying precious metals through exchange traded funds. The gold or

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Speaker 2: silver back to ETFs give an investor a share of

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Speaker 2: the commodities they hold.

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Speaker 1: That's an easy, straightforward, relatively low cost way to get

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Speaker 1: exposure to gold and silver, and it's very popular.

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Speaker 2: Okay, so there's both tangible and intangible ways to invest.

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Speaker 2: I'm wondering are there examples of how this run on

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Speaker 2: the metals market is creating logistical craziness in the physical world.

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Speaker 1: It's funny. At the start of the year, investors were

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Speaker 1: concerned about the possibility that gold, silver, these various other

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Speaker 1: precious metals would be tariffed, and because of that, prices

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Speaker 1: in the US started creeping higher as people exited their shorts,

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Speaker 1: and that led to this great arbitrage situation where you

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Speaker 1: could buy gold in London for cheaper and sell out

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Speaker 1: in New York for more, And in order to do

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Speaker 1: that you had to fly the stuff over. So typically

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Speaker 1: with gold, you'll store it in the hold of a

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Speaker 1: passenger flight. So probably if you fly in New York London,

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Speaker 1: it's quite possible that underneath your seat you won't be

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Speaker 1: aware of it for security reasons. But there is gold.

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Speaker 2: As of September, President Trump has said that gold at

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Speaker 2: least was not going to be subject to tariffs. But

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Speaker 2: because of the massive outflow of precious metals during that

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Speaker 2: uneasy period, London is still short on silver.

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Speaker 1: Now we're seeing a big premium actually for silver in London,

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Speaker 1: and some of that metal that traders went a massive

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Speaker 1: effort to get to New York, they're now flying it

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Speaker 1: back to London because the arbitrage now works the other way.

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Speaker 1: You can buy it for less in New York and

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Speaker 1: sell it for more in London. Wow.

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Speaker 2: So they're basically saying, turn this flight around. We got

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Speaker 2: to get the silver back to London.

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Speaker 1: Absolutely after the break.

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Speaker 2: What we can learn from the last time the value

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Speaker 2: of gold spiked by historic proportions, and what bears and

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Speaker 2: bulls are saying about where precious metal prices go from here.

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Speaker 2: Gold is officially more valuable than ever. But Bloomberg Precious

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Speaker 2: Metals reporter Jack Ryan says, it's not the first time

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Speaker 2: a gold rush made history.

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Speaker 1: So these are good times for gold. But the best

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Speaker 1: times for gold was the nineteen seventies.

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Speaker 2: Up until then, anyone who held US dollars could in

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Speaker 2: theory trade them in for gold. But at the start

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Speaker 2: of the seventies, President Richard Nixon ended the gold standard.

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Speaker 2: Dollar prices floated freely and the price of gold started

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Speaker 2: to rise.

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Speaker 1: Throughout the nineteen seventies, and a lot of Western economies,

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Speaker 1: particularly in the US, you had stagflation. You had weak

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Speaker 1: growth and high inflation, and gold ripped through that period,

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Speaker 1: particularly as you got to the latter stage of that decade,

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Speaker 1: and you at the oil crisis, really sky high inflation Vietnam.

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Speaker 1: That's a government borrowing in order to pay for that.

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Speaker 1: And throughout that period, historians and scholars will tell you

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Speaker 1: that Nixon was putting pressure on the Fed. He was

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Speaker 1: putting pressure on the chair Arthur Burns to keep interest

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Speaker 1: rates lower than perhaps they should have been. And I mean,

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Speaker 1: you could argue that, you know, there are some echoes

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Speaker 1: of that today. And then you had a peak in

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Speaker 1: January nineteen eighty and just prior to that, President Jimmy

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Speaker 1: Carter had frozen some Iranian assets at a similar moment

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Speaker 1: to G seven countries freezing Russian assets. And that there

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Speaker 1: was many oil producing countries that had built up vast

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Speaker 1: fortunes of dollars from selling oil at incredibly high prices

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Speaker 1: throughout the nineteen seventies because of the oil crisis, realized

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Speaker 1: that those dollars were vulnerable and that actually maybe they

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Speaker 1: should start buying more gold and increase their allocation to gold.

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Speaker 2: And what stopped the price from climbing more? When did

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Speaker 2: things start to reverse? Course?

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Speaker 1: People who trade it, who were trading at that time,

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Speaker 1: they describe it as this, you know, remarkable day. Gold

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Speaker 1: peaked at about eight hundred dollars announce in January nineteen eighty,

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Speaker 1: so eight hundred dollars in nineteen eighties money about thirty

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Speaker 1: six hundred dollars. I mean, it never returned there for

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Speaker 1: the rest of the twentieth century. It quickly tumbled in

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Speaker 1: the years following that as interest rates came up and

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Speaker 1: precious metals started to face into lots of different headwinds.

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Speaker 1: And so I guess maybe there is a cautionary tale

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Speaker 1: in that it's skyrocketed to a peak and then lost

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Speaker 1: ground and went through many years of kind of pretty

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Speaker 1: mediocre to poor performance.

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Speaker 2: Well, Jack, we've talked about some of the reasons why

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Speaker 2: people are flocking to gold and silver right now, but

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Speaker 2: not everyone is always so bullish on gold. I know

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Speaker 2: Warren Buffett is famously critical of the asset, saying it's

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Speaker 2: essentially a way to quote go long on fear gold

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Speaker 2: really doesn't have utility. I would bet I'm good producing businesses.

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Speaker 3: To outperform something that doesn't do anything.

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Speaker 2: What are the downsides of investing in gold right now

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Speaker 2: or ever?

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Speaker 1: Yeh, I mean there is absolutely valid criticisms of one

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Speaker 1: of the most basic and fundamental ones that is not

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Speaker 1: very useful. I guess any investor would and probably should

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Speaker 1: be nervous if they're buying into a market where they

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Speaker 1: look at the price chart and it's almost been a

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Speaker 1: straight line upwards for two three years. There's some sentiment

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Speaker 1: in the market that you might feel, is you know,

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Speaker 1: it feels a bit toppy, maybe that there's some spectative fervor.

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Speaker 1: Retail hasn't been a big part of the rally thus far,

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Speaker 1: but I suspect that might be changing. You can find

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Speaker 1: images online of gold buyers queuing outside refiners. One trader

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Speaker 1: sent that to me and he said, that's a bad sign.

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Speaker 1: But it's a bit like they say, you know, if

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Speaker 1: your dad calls you and said should I invest in this?

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Speaker 1: They are the last person who've heard about that.

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Speaker 2: It's already too late.

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Speaker 1: That is a word excited to get out.

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Speaker 2: Where do analysts expect these precious metals values to go

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Speaker 2: from here?

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Speaker 1: But it's remarkable how much gold has soared past almost

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Speaker 1: any analysts expectations at both this year and last year.

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Speaker 1: Looking into the next year, most banks most analysts are

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Speaker 1: pretty bullish. Bank for America sees five thousand dollars announced

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Speaker 1: by the end of next year. Most of the other banks,

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Speaker 1: according to the most recent reports see it going higher. Still,

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Speaker 1: it's a notoriously hard metal to predict and to price

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Speaker 1: because it doesn't generate an income. The value of any

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Speaker 1: financial security is a function of its income ultimately, and

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Speaker 1: the possibility of that changing. With gold, you don't have that,

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Speaker 1: And it's so sentiment driven that I really I do

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Speaker 1: feel sorry for anyone whose job it is is to

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Speaker 1: predict where it's going to go.

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Speaker 2: What could actually happen to seriously jolt the price back down.

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Speaker 1: It's a very important question to ask. It's a very

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Speaker 1: good question to ask. That could be kind of significant

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Speaker 1: easing of tensions in the Middle East or in Russia

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Speaker 1: and Ukraine.

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Speaker 2: More peace in the world.

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Speaker 1: Yeah, more good things and less bad things. If you're

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Speaker 1: willing to take that bet. Yeah, if geopolitics will to

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Speaker 1: turn that direction, then gold might find itself in a

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Speaker 1: more and more marginal role. There's not been many people

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Speaker 1: who've been willing to take that side of the bet,

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Speaker 1: to bet on kind of peace and trust and the

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Speaker 1: kind of rebuilding of multilateral institutions, and that is part

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Speaker 1: of the reason why gold has doubled in the last

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Speaker 1: two years.

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Speaker 2: This is the big take from Bloomberg News. I'm Sarah Holder.

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