WEBVTT - APAC Parses Mixed US Tech Earnings, Gold in Focus 0:00:02.440 --> 0:00:05.439 Good morning, and welcome to the Bloomberg day Break Asia podcast. 0:00:05.600 --> 0:00:08.200 I'm Doug Prisner. Here are the stories we're following today. 0:00:09.440 --> 0:00:12.159 I'm Charlie Pellett. Doug Prisoner is off this week. It 0:00:12.280 --> 0:00:15.080 was a mixed open for Asian markets this morning, as 0:00:15.160 --> 0:00:18.840 the region work through mixed US tech earnings. For more, 0:00:18.920 --> 0:00:22.120 we spoke with Adrian Zurker, co head of Global Asset 0:00:22.160 --> 0:00:25.480 Allocation at the UBS Global Wealth Management. 0:00:26.280 --> 0:00:29.720 You guys went overweight viewers equities across your portfolios. 0:00:30.480 --> 0:00:31.080 Tell us why. 0:00:31.640 --> 0:00:34.280 As you mentioned, actually the word looks very complex. We 0:00:34.360 --> 0:00:39.199 have election data coming in, inflation rates are going up. 0:00:39.240 --> 0:00:41.720 That doesn't really speak for high equity markets. But if 0:00:41.760 --> 0:00:44.239 you take a step back, I think in general we 0:00:44.240 --> 0:00:47.320 actually do see that the macroeconomic environment is are very solid. 0:00:47.400 --> 0:00:51.080 So there was talk about soft landing or hard landing. 0:00:51.159 --> 0:00:53.880 We think we actually be in no landing scenario where 0:00:53.960 --> 0:00:56.080 growth day is actually quite supported. 0:00:56.600 --> 0:00:59.640 Inflation is still coming off, maybe a bit slower than expected. 0:01:00.040 --> 0:01:02.880 The labor market is still solid, so that really points 0:01:02.920 --> 0:01:05.640 to solid earn's growth. We do expect double digits for 0:01:05.680 --> 0:01:08.679 this year, still very high single digit for next year. 0:01:09.400 --> 0:01:11.080 The market still looks attractive. 0:01:11.240 --> 0:01:13.760 We actually do think there's so much cash on the 0:01:13.840 --> 0:01:16.640 sideline that wants to go back to the market. They 0:01:16.680 --> 0:01:20.039 have missed the rally in the equity market, and we 0:01:20.080 --> 0:01:23.280 actually want to be positioned before the election because usually 0:01:23.560 --> 0:01:26.520 election makes a lot of uncertainties, but once the under 0:01:26.560 --> 0:01:29.200 inties is gone, it doesn't matter so much who actually 0:01:29.280 --> 0:01:29.959 gets elected. 0:01:30.040 --> 0:01:30.600 We actually do. 0:01:30.600 --> 0:01:33.520 Think that the market had sort of relief rally as 0:01:33.560 --> 0:01:35.480 well get to the end of the year, so a 0:01:35.560 --> 0:01:37.480 lot of positive supporting factors. 0:01:37.560 --> 0:01:41.760 There is that narrative though that if either candidate wins, 0:01:42.280 --> 0:01:44.920 you're going to see fiscal deficits. Rates are probably going 0:01:44.920 --> 0:01:47.280 to stay still elevated. At some point the Fed's going 0:01:47.360 --> 0:01:49.640 to be a bit restricted and how much they're going 0:01:49.680 --> 0:01:52.200 to cut. Does that impact your review on equities at all? 0:01:52.240 --> 0:01:52.480 Though? 0:01:53.160 --> 0:01:55.240 Well, two things on the election side, so we think 0:01:55.280 --> 0:01:56.600 it's very split at the. 0:01:56.560 --> 0:01:58.200 Moment fifty to fifty who could win. 0:01:58.560 --> 0:02:01.160 But we have a quite strong view that if Kamala 0:02:01.160 --> 0:02:04.279 Harris wins that it will be sort of a mixed 0:02:04.280 --> 0:02:07.760 garment with a basically red Senate. If Trump wins, it 0:02:07.800 --> 0:02:09.639 will be sort of a red sweep. So these are 0:02:09.760 --> 0:02:12.320 our key scenarios and I think both of these scenarios 0:02:12.320 --> 0:02:15.760 should be actually positive for equities. Yes, the FED might 0:02:15.800 --> 0:02:18.800 have to consider how much they can cut. We still 0:02:18.800 --> 0:02:21.120 have pencil in fifty basis points for the end of 0:02:21.400 --> 0:02:23.600 this year and one hundred basis points for next year. 0:02:23.919 --> 0:02:26.919 Maybe they will skip on one basis or one cut, 0:02:27.000 --> 0:02:30.120 but it will be based on strong numbers. And therefore 0:02:30.400 --> 0:02:33.400 I think the market looks through that. Eventually rates are 0:02:33.400 --> 0:02:35.440 still heading lower. It's not that the FED will start 0:02:35.480 --> 0:02:37.720 to talk about hiking interest rates. 0:02:37.880 --> 0:02:39.560 Yeah, and as you point out right, a lot of 0:02:39.600 --> 0:02:43.600 money still parked in money market assets. The one hundred 0:02:43.600 --> 0:02:46.800 and fifty basis points of cutstore doesn't sound like a 0:02:46.840 --> 0:02:50.320 no landing scenario. Why do we suspect the Fed styal 0:02:50.520 --> 0:02:52.680 is able to cut rates in a no landing scenario? 0:02:52.760 --> 0:02:54.680 I guess it's a question there. And why do equities 0:02:54.720 --> 0:02:58.880 do well in the absence of perhaps he's more easy 0:02:58.919 --> 0:02:59.760 coming out of the Fed. 0:03:00.120 --> 0:03:02.840 Well, Sha, don't forget that the FED had to overtighten, 0:03:02.960 --> 0:03:06.320 they lost control inflation, They overtight and we went above 0:03:06.360 --> 0:03:09.639 five percent. Neutral rate is probably somewhere and three to 0:03:09.720 --> 0:03:11.360 three and a half, and that's where they will have 0:03:11.440 --> 0:03:14.160 to guide it to. So just to keep MONTI policy 0:03:14.639 --> 0:03:17.600 stable and neutral and as it's not an easy mode 0:03:17.680 --> 0:03:20.760 actually they are going into so they're basically readjusting to 0:03:20.840 --> 0:03:23.079 the market environment. And I said at the end it 0:03:23.480 --> 0:03:28.200 all points down to ernest growth. Corporates are not earning 0:03:28.240 --> 0:03:31.360 real GDP growth. They actually are more in the nominal 0:03:31.840 --> 0:03:35.080 GDP world, and nominal GDP growth is declining, but it 0:03:35.240 --> 0:03:36.840 actually still remains. 0:03:36.560 --> 0:03:38.160 Very ropust to what we have seen in the last 0:03:38.240 --> 0:03:40.400 ten years. So there's a lot of aspects. We have 0:03:40.440 --> 0:03:42.280 structural drivers as AI. 0:03:42.920 --> 0:03:44.920 Yes, the market will look a bit more into the 0:03:44.920 --> 0:03:47.400 earnings do they really deliver and we can see it's 0:03:47.440 --> 0:03:52.280 actually also taking clear views. So if you are able 0:03:52.360 --> 0:03:55.880 to beat, you get rewarded. If not, you actually get 0:03:55.920 --> 0:03:59.320 also questioned. And basically market can trade lower, but it's 0:03:59.320 --> 0:04:02.400 still a two trade. It's not that you're surprising and 0:04:02.480 --> 0:04:06.040 nothing happens and you basically surprising negatively and the market 0:04:06.080 --> 0:04:08.320 is selling off. And I think so it still shows 0:04:08.320 --> 0:04:09.119 healthy environment. 0:04:09.840 --> 0:04:11.880 It seems like you're leaning more towards the equity side 0:04:11.880 --> 0:04:13.680 of things. What about when it comes to fixed income, 0:04:13.800 --> 0:04:16.280 do you think this market is cheap enough now that 0:04:16.320 --> 0:04:18.920 you can actually add some duration in your portfolio. 0:04:18.680 --> 0:04:20.880 So we actually started to add a bit. We were 0:04:21.200 --> 0:04:24.840 long the whole year. We actually cut basically our long 0:04:24.920 --> 0:04:29.039 duration positions roughly two three weeks before the first cut, 0:04:29.560 --> 0:04:32.200 and now we have seen rates backing up. We didn't 0:04:32.240 --> 0:04:35.359 expect that in this extent, but it definitely looks very interesting. 0:04:35.680 --> 0:04:38.000 You might want to wait for next week to see 0:04:38.040 --> 0:04:41.279 what's happening after the election, but it definitely starts to 0:04:41.279 --> 0:04:43.039 look like an interesting trade again. 0:04:43.320 --> 0:04:46.080 Yeah, well that takes us into income strategies, right, So 0:04:46.240 --> 0:04:49.320 what would be the preferred income strategies at this point 0:04:49.320 --> 0:04:50.680 in time. Is it in the equity market, is it 0:04:50.720 --> 0:04:52.040 in fixed income for example? 0:04:52.800 --> 0:04:55.320 It's probably a mix. So we still like dividend stocks. 0:04:55.360 --> 0:04:57.559 And I also have to say that we talked about 0:04:57.600 --> 0:05:00.800 Magnificent seven. So last year these were the companies that 0:05:00.920 --> 0:05:03.159 really had ernest growth. The rest of the four hundred 0:05:03.160 --> 0:05:05.440 and ninety three and average didn't have any earnest growth. 0:05:05.680 --> 0:05:07.400 It starts to be more balanced. 0:05:07.400 --> 0:05:09.640 So we see that the four hundred ninety three stocks, 0:05:09.720 --> 0:05:13.279 particularly the fourth quarter, will catch up a lot with 0:05:13.440 --> 0:05:16.320 the Magnificent seven. Darn's growth is coming off, so we 0:05:16.360 --> 0:05:19.400 think they will be broadening dividend stocks definitely look very interesting. 0:05:20.000 --> 0:05:22.640 But I would definitely go into the fixed income market 0:05:22.640 --> 0:05:23.280 as well. 0:05:23.440 --> 0:05:24.880 Definitely more interesting than cash. 0:05:24.920 --> 0:05:28.440 So we actually have maxed out our cash position to 0:05:28.520 --> 0:05:29.720 the lowest level. 0:05:29.520 --> 0:05:30.560 In our portfolios. 0:05:30.680 --> 0:05:35.000 Okay, but within fixed income, really still focus on quality 0:05:35.200 --> 0:05:38.680 evaluation in high yield is really unattractive and therefore be 0:05:38.839 --> 0:05:39.479 cautious there. 0:05:39.520 --> 0:05:42.480 How much does gold come up in your conversations? 0:05:42.560 --> 0:05:46.680 Yeah? Lot? Does it come up? Okay, up a lot? 0:05:48.200 --> 0:05:50.960 The question is I'm too late? Did I miss it? 0:05:52.080 --> 0:05:54.719 We have it in our portfolio. We went in, we 0:05:54.960 --> 0:05:58.440 cut our position by health probably also a bit too early, 0:05:58.480 --> 0:06:01.240 but we still let it run after say, it's a 0:06:01.240 --> 0:06:04.159 bit profy at this level. We still see upside fundamentally, 0:06:04.200 --> 0:06:08.240 but it was going up in very short period, maybe 0:06:08.240 --> 0:06:11.200 a bit too quick. There might be some profit taking 0:06:11.600 --> 0:06:16.120 here and there, but I would say fundamentally they're still upside. 0:06:16.160 --> 0:06:18.800 You have central banks that are trying to diversify their 0:06:18.839 --> 0:06:19.799 ethics reserves. 0:06:20.839 --> 0:06:21.839 You haven't seen very. 0:06:21.680 --> 0:06:24.600 Strong ETF flows, which we actually do expect will come in. 0:06:25.760 --> 0:06:28.920 We still expect the Fed to cut interest rates, and 0:06:29.000 --> 0:06:31.360 we still have a weeked all of you, which should 0:06:31.360 --> 0:06:33.680 be supported for stronger goal prices. 0:06:34.000 --> 0:06:35.960 So what is the best election hedge then? 0:06:36.320 --> 0:06:36.760 Is a goal? 0:06:36.920 --> 0:06:39.040 Is it yen? Given how cheap it is these days? 0:06:39.560 --> 0:06:41.039 What do you look at some something that you know? 0:06:41.120 --> 0:06:43.279 I know you're saying you can see through the noise 0:06:43.880 --> 0:06:45.920 and still in the US equities, But how are you 0:06:45.960 --> 0:06:47.640 actually protecting your portfolio as well? 0:06:47.800 --> 0:06:48.560 A very good point. 0:06:48.640 --> 0:06:51.919 I mean, we try to build very robus portfolios. So 0:06:51.960 --> 0:06:55.480 we have two key election hatches. One is actually despite 0:06:55.520 --> 0:06:58.599 the overweight equities, we have a few narratives in it 0:06:58.680 --> 0:07:02.520 that sort of flower out inside. The other key election 0:07:02.640 --> 0:07:05.599 hatch we have is just short a CNY versus US dollar. 0:07:05.640 --> 0:07:09.559 We actually do think the CNY could suffer further going 0:07:09.600 --> 0:07:14.040 into particular Trump presidency, and therefore I think that's a 0:07:14.160 --> 0:07:17.960 very interesting hetch because you get you're getting paid in 0:07:18.080 --> 0:07:21.760 news dollar interest, you're basically paying CNY interests, so you 0:07:21.800 --> 0:07:23.600 actually have a nice carry on top of that. 0:07:24.400 --> 0:07:25.360 If it doesn't, I just. 0:07:25.360 --> 0:07:27.520 Want to get your thoughts on is there still a 0:07:27.560 --> 0:07:30.520 cyclical trade to be made here, a tactical trade to 0:07:30.560 --> 0:07:31.880 be made in China? Do I need to wait for 0:07:31.880 --> 0:07:32.360 the elections? 0:07:32.400 --> 0:07:33.680 What's what's your overall view on that? 0:07:33.720 --> 0:07:37.440 Before me unpacked, Probably still some tactical upside, but I 0:07:37.440 --> 0:07:40.520 will probably wait for the election out common and we 0:07:40.520 --> 0:07:41.960 also see a test that down. 0:07:41.800 --> 0:07:42.280 A little bit. 0:07:42.440 --> 0:07:45.920 Everybody wants to know who they will face going forward, 0:07:46.280 --> 0:07:49.559 and then it could be actually a good still tactical trade. 0:07:49.560 --> 0:07:54.120 At least you mentioned any potential tactical rally in China 0:07:54.200 --> 0:07:56.880 might have to wait until the US elections are over. 0:07:57.320 --> 0:08:00.000 Do you think that Chinese policy makers will also need 0:08:00.040 --> 0:08:02.840 to wait who wins before they give us give us 0:08:02.840 --> 0:08:03.440 the goods. 0:08:03.920 --> 0:08:04.960 I think they want to wait. 0:08:05.200 --> 0:08:08.480 I mean the package and the rumors we have heard 0:08:08.560 --> 0:08:11.200 is probably in line what we also would expect, and 0:08:11.240 --> 0:08:15.440 I'm pretty sure the dates that has been set was 0:08:15.520 --> 0:08:17.920 related to the US election. They want to see how 0:08:18.000 --> 0:08:21.760 markets react who they will face as a president. Then 0:08:21.760 --> 0:08:25.480 they will announce basically stimulus package as well and probably 0:08:25.520 --> 0:08:29.280 readjust that. And I said, that's probably where you have potential. 0:08:28.920 --> 0:08:31.880 For a good sort of short term trade. If it's 0:08:31.920 --> 0:08:33.240 structure enough, we will see. 0:08:33.280 --> 0:08:36.679 I think the key issue in China currently is still 0:08:36.760 --> 0:08:39.600 you can throw a lot at this economy, and as said. 0:08:39.440 --> 0:08:40.280 Market is cheap. 0:08:40.960 --> 0:08:44.840 People in opposition that's probably driving some flows, but it's 0:08:44.880 --> 0:08:46.680 the real estate market and as long as you have 0:08:46.760 --> 0:08:51.040 real estate prices going down, it's very hard to convince 0:08:51.080 --> 0:08:54.199 the consumer and get is creating this positive feedback loop 0:08:54.200 --> 0:08:56.680 before the consumer to get back and spend. And I 0:08:56.679 --> 0:08:59.959 think that's if you look at the economy which is missed, 0:09:00.120 --> 0:09:03.000 and I think that's the biggest part where I'm still 0:09:03.000 --> 0:09:06.000 concerned about the structural challenges that China has. 0:09:06.120 --> 0:09:07.800 So do you think it's still more going to be 0:09:07.880 --> 0:09:10.960 domestically driven or do you think I look at you 0:09:10.960 --> 0:09:13.040 know what terriff risks for example, is that going to 0:09:13.080 --> 0:09:15.240 be a bigger overhang on this market. 0:09:16.040 --> 0:09:18.680 Well, if Trump gets elected and he follows up on 0:09:18.760 --> 0:09:21.520 his sixty percent tiis or whatever it is, that's definitely 0:09:21.559 --> 0:09:25.000 a major challenge that will impact GDP growth, definitely also 0:09:25.040 --> 0:09:29.720 impact the consumer spending. And so it's definitely much more 0:09:29.720 --> 0:09:32.400 domestically focused, and I think that's what they also have 0:09:32.480 --> 0:09:34.360 to do. The good thing is in China, it's a 0:09:34.440 --> 0:09:39.000 very big economy, so they have the flexibility also to 0:09:39.160 --> 0:09:43.160 engineer a domestic driven rebound. But as said, you have 0:09:43.240 --> 0:09:46.960 to basically stimulate the property market, which structure is probably 0:09:46.960 --> 0:09:48.960 not what you want to do to get sort of 0:09:48.960 --> 0:09:50.880 this positive feedback loop for the consumer. 0:09:51.200 --> 0:09:54.120 And you know, since if it is indeed the property 0:09:54.200 --> 0:09:57.559 market that will be you know, the ultimate acid test 0:09:57.640 --> 0:10:01.280 of you know, any potential bull market that might be 0:10:01.360 --> 0:10:04.440 at least still a year away. How do you think 0:10:04.840 --> 0:10:07.840 what is the appropriate exposure you think to Chinese equities 0:10:07.920 --> 0:10:09.680 or Chinese assets at that that do you think people 0:10:09.720 --> 0:10:12.280 should have? Well, we wait for that ship to eventually 0:10:12.320 --> 0:10:13.079 turn hopefully. 0:10:13.240 --> 0:10:17.240 So what we try to focus mainly really building solid 0:10:17.240 --> 0:10:21.600 global portfolios, and unfortunately China is a relatively small part 0:10:21.640 --> 0:10:24.360 out of that. We talk about maybe two percent exposure. 0:10:24.360 --> 0:10:26.400 If you want to have a bit more Asian focus 0:10:26.480 --> 0:10:26.760 for some. 0:10:26.800 --> 0:10:28.760 Cent exposure, yeah, if you want to have a. 0:10:28.679 --> 0:10:31.199 Bit more of an Asian focus for some of the clients, 0:10:31.240 --> 0:10:32.800 I want to have a bit of a home buas 0:10:33.040 --> 0:10:36.240 we still talk about six to seven percent exposure to China. 0:10:36.280 --> 0:10:37.000 Wow, that's not a lot. 0:10:37.280 --> 0:10:40.800 But also not forget I mean the compositions has changed, 0:10:40.840 --> 0:10:43.360 so India actually caught up with China largely. 0:10:43.480 --> 0:10:45.160 You have time on your Korea. 0:10:45.280 --> 0:10:47.600 I think if you take India, Korea and Time and together, 0:10:47.800 --> 0:10:51.280 it's almost forty five percent of the Asian extra pan market. 0:10:51.440 --> 0:10:55.720 So you see, Asia overall is growing. There's actually positive 0:10:55.800 --> 0:10:58.680 trends and so you have a much more balanced portfolio 0:10:58.679 --> 0:11:01.880 if you invest into Asia, then just basically be overly 0:11:01.920 --> 0:11:02.800 dependent on China. 0:11:03.400 --> 0:11:04.959 I was going to get your take. I mean, what 0:11:05.120 --> 0:11:10.560 is the playbook for this election? Can we do what 0:11:10.600 --> 0:11:13.000 we did back in twenty sixteen when Trump won? I 0:11:13.000 --> 0:11:17.079 mean at that time, inflation was way more controlled, rates 0:11:17.080 --> 0:11:20.320 for much lower and there was this rally that went 0:11:20.360 --> 0:11:22.600 on for about fifteen months after Trump won. I mean, 0:11:22.960 --> 0:11:25.640 can we subscribe those same sort of narratives this time around, 0:11:25.640 --> 0:11:28.400 because we've already seen aquen markets rally so much and 0:11:28.440 --> 0:11:29.680 things are not cheap anymore. 0:11:30.640 --> 0:11:31.760 That's a very good question. 0:11:32.440 --> 0:11:35.240 I think the environment is very different than we are 0:11:35.320 --> 0:11:38.520 much more advanced in the cycle. Well, the positive news 0:11:38.559 --> 0:11:41.920 is the Fed is cutting industrates are coming off, there 0:11:41.960 --> 0:11:44.280 will be more stimulus. I think the market at least 0:11:44.320 --> 0:11:47.600 initially will play sort of the playbook of twenty sixteen. 0:11:48.400 --> 0:11:52.200 But then once we actually go into next year and 0:11:52.240 --> 0:11:54.560 we start to see policies coming through, then we will 0:11:54.600 --> 0:11:57.480 have to see how solid the macroeconomic environment is, how 0:11:57.559 --> 0:12:01.400 much the economy can digest if it's overspent, how much 0:12:01.440 --> 0:12:04.360 it will influence inflation. So not forget in two and 0:12:04.480 --> 0:12:07.280 sixteen there was no inflation. They wanted to create inflation. 0:12:07.880 --> 0:12:10.720 Now we're sort of in a probably good environment and 0:12:10.760 --> 0:12:11.640 it's coming off. 0:12:12.040 --> 0:12:14.000 But if we're pushing too hard. 0:12:14.120 --> 0:12:16.680 Inflation might go up and I won't be something negative 0:12:16.840 --> 0:12:19.920 for the markets as well. So I think the market 0:12:19.960 --> 0:12:22.160 will played until the end of the year, until the 0:12:22.200 --> 0:12:25.480 inauguration the same way, but then afterwards might be a 0:12:25.559 --> 0:12:27.800 bit more nuanced on that part. 0:12:29.080 --> 0:12:32.199 Fancy, I guess if Harris takes it this time next week, 0:12:32.240 --> 0:12:33.960 what do you think market reaction will be the first 0:12:33.960 --> 0:12:35.800 forty eight hours? And if it's Trump, what do you 0:12:35.840 --> 0:12:36.920 think market reaction will be. 0:12:37.280 --> 0:12:40.480 It's not what we usually do, but I give you 0:12:40.880 --> 0:12:44.320 my indication is that I still think market will be 0:12:44.360 --> 0:12:47.800 positive because the Unswerta is a way we get more clarity, 0:12:48.200 --> 0:12:50.720 and I said it will be probably a red Senate, 0:12:50.840 --> 0:12:53.520 which also should dampen some of the policies that she 0:12:53.600 --> 0:12:54.440 wants to implement. 0:12:54.840 --> 0:12:56.920 Adre great to have you. Adrian's Rusher, their co head 0:12:56.920 --> 0:12:59.040 of Global asset Allocation at UBS. 0:12:59.200 --> 0:13:00.080 Global Wealth. 0:13:07.640 --> 0:13:10.640 Gold trading at a record extending a surge that has 0:13:10.679 --> 0:13:13.720 sent gold up over a third this year, joining US 0:13:13.720 --> 0:13:18.360 now George Milling Stanley, chief gold strategist at State Street 0:13:18.400 --> 0:13:22.040 Global Advisors. He is in our Hong Kong studio. So 0:13:22.280 --> 0:13:24.920 with gold at a record, what is it that got 0:13:25.000 --> 0:13:25.360 us here? 0:13:26.320 --> 0:13:28.120 I think there are really three things that got us 0:13:28.200 --> 0:13:30.680 up here. The first is that central banks have been 0:13:31.120 --> 0:13:34.439 very significant buyers of gold, now primarily central banks in 0:13:34.520 --> 0:13:37.760 the emerging markets, buying gold because they didn't have enough 0:13:37.800 --> 0:13:41.120 in their official reserves. And that's been a process that's 0:13:41.160 --> 0:13:43.560 been going on for fourteen straight years, not going to 0:13:43.559 --> 0:13:46.440 go away anytime soon. The second thing, we've seen a 0:13:46.440 --> 0:13:50.400 big revival in investment demand in China. I think Chinese 0:13:50.400 --> 0:13:53.600 investors responding to problems in the stock market related to 0:13:53.679 --> 0:13:56.800 real estate and turning to the traditional alternative, which has 0:13:56.840 --> 0:13:59.400 been gold for a very long period of time. And 0:13:59.440 --> 0:14:02.120 then for different reasons, we've seen a revival in Western 0:14:02.120 --> 0:14:07.000 world investment, Western Europe and North America, concerned about macroeconomic 0:14:07.120 --> 0:14:10.760 issues and also concerned about geopolitical issues. I think that 0:14:10.880 --> 0:14:13.360 combination is what to driven gold up to a whole 0:14:13.400 --> 0:14:15.280 succession of all time highs this year. 0:14:15.520 --> 0:14:20.680 Well, does the current price of gold then justify current valuations? 0:14:22.280 --> 0:14:24.640 I think it does. I mean, you know, if you 0:14:24.640 --> 0:14:28.000 think about it the kind of macroeconomic scenario that we're in, 0:14:28.280 --> 0:14:32.600 with inflation still being sticky, especially on the Fed's preferred measure, 0:14:33.760 --> 0:14:36.280 and with the Fed having started to cut interest rates 0:14:36.280 --> 0:14:39.600 and clearly embarking on a sustained period of rate cutting 0:14:39.640 --> 0:14:42.760 that's going to run through next year if everybody is 0:14:42.800 --> 0:14:45.600 to believe it to be believed that I think is 0:14:45.720 --> 0:14:49.200 likely to lead to dollar weakness and then consequently gold strength. 0:14:49.560 --> 0:14:53.360 And then the geopolitical background, a conflict in Europe with 0:14:53.400 --> 0:14:55.760 the potential to turn nuclear at the push of a button, 0:14:56.320 --> 0:14:59.080 and the Middle Eastern conflict having now spread way beyond 0:14:59.160 --> 0:15:02.400 Israel's borders where it was confined at the beginning, and 0:15:02.440 --> 0:15:05.960 now including open warfare with Iran and Lebanon, and the 0:15:06.000 --> 0:15:08.840 potential for that to get even worse. I think all 0:15:08.880 --> 0:15:12.000 of those things together historically have been very helpful for gold, 0:15:12.680 --> 0:15:15.400 and right now they're continuing to be very, very supportive, 0:15:15.400 --> 0:15:17.440 which is why we keep hitting this succession of all 0:15:17.480 --> 0:15:18.120 time highs. 0:15:18.360 --> 0:15:20.680 Well, let me throw in one more piece of uncertainty, 0:15:20.720 --> 0:15:24.120 and that is the American presidential election. Potentially what might 0:15:24.160 --> 0:15:25.480 that mean for the price of gold. 0:15:26.640 --> 0:15:30.640 I'm guessing that whoever becomes the president We're going to 0:15:30.640 --> 0:15:36.040 see continued spending, whether it's spending on domestic programs from 0:15:36.080 --> 0:15:39.360 the Democrats, or whether it's spending to finance, whether it's 0:15:39.480 --> 0:15:42.680 it's tax cuts. We're going to see bigger deficits whoever 0:15:42.680 --> 0:15:45.120 becomes the president, and that I think is going to 0:15:45.200 --> 0:15:48.960 lead to further dollar depreciation and quite possibly a renewal 0:15:48.960 --> 0:15:51.440 of inflation, which could be really very very damaging. 0:15:51.480 --> 0:15:55.520 At this point, is there a perhaps more bullish or 0:15:55.680 --> 0:15:58.120 bearish case depending on the outcome of the election. 0:15:59.600 --> 0:16:02.800 I think that as long as we avoid the dreaded trifecta, 0:16:02.880 --> 0:16:06.000 as long as we avoid one party getting the presidency, 0:16:06.320 --> 0:16:09.240 the House, and the Senate, which I think has always 0:16:09.320 --> 0:16:12.520 led to extremism in the past. I think that as 0:16:12.520 --> 0:16:14.960 long as we get the checks and balances that the 0:16:15.040 --> 0:16:18.760 US system is designed to incorporate, then I don't think 0:16:18.800 --> 0:16:21.160 that there is anything likely to be bearish for gold 0:16:21.240 --> 0:16:23.720 in there at all. My sense is that, you know, 0:16:23.800 --> 0:16:28.280 with likely increased spending, likely increased deficits, I've been hearing 0:16:28.320 --> 0:16:31.800 for twenty years that our deficit is unsustainable and we 0:16:31.880 --> 0:16:34.560 keep sustaining it somehow or other. I think that all 0:16:34.600 --> 0:16:37.680 of those things are going to lead to dollar depreciation, 0:16:38.080 --> 0:16:41.120 and that should lead in turn to a stronger goal price. 0:16:41.640 --> 0:16:45.280 What happens if we don't quickly know the election outcome, 0:16:45.320 --> 0:16:47.480 how might that play into the price of gold. 0:16:48.160 --> 0:16:49.680 I think all that would do, and I think is 0:16:49.680 --> 0:16:51.800 a very real possibility of that, given the way some 0:16:51.880 --> 0:16:54.560 of the candidates are talking, I think that all that 0:16:54.600 --> 0:16:57.200 would do is simply add to the general feeling of 0:16:57.280 --> 0:17:01.440 geopolitical uncertainty, the uncertainty about the conflict in Ukraine and 0:17:01.520 --> 0:17:03.680 the conflict in the Middle East. And if we have, 0:17:04.440 --> 0:17:07.520 let's hope it's not an armed conflict in the United States. 0:17:07.640 --> 0:17:10.520 But if we have a contentious election, which I think 0:17:10.600 --> 0:17:13.240 is a very likely outcome, I think that's simply going 0:17:13.280 --> 0:17:16.000 to be even further positive for gold. I don't see 0:17:16.040 --> 0:17:18.280 any negatives out there right now. It's hard to see 0:17:18.359 --> 0:17:20.560 where the headwinds might be coming from from the gold 0:17:20.560 --> 0:17:21.120 point of view. 0:17:21.280 --> 0:17:23.560 Well, certainly, we've got a lot ahead on the calendar. 0:17:23.560 --> 0:17:27.080 In addition to the presidential election, there's also a Federal 0:17:27.200 --> 0:17:30.800 Reserve meeting. What assumptions are you and your colleagues making 0:17:30.840 --> 0:17:34.200 about the Federal Reserve and the pace of further rate cuts. 0:17:35.080 --> 0:17:38.720 I think that you know Jerome Powell has said explicitly 0:17:38.840 --> 0:17:41.719 and many many times that he plans to be driven 0:17:41.760 --> 0:17:44.520 by the data, and that he's also trying not to 0:17:44.560 --> 0:17:48.320 be to put too much emphasis on any one month's 0:17:48.480 --> 0:17:52.080 particular set of economic statistics, because these are always open 0:17:52.119 --> 0:17:56.760 to revision. But if everything stays pretty much the same 0:17:56.800 --> 0:17:59.120 as we are right now, and he doesn't get any 0:17:59.160 --> 0:18:02.399 major surprises in the data, then it looks like the 0:18:02.440 --> 0:18:05.720 market consensus is right. The market consensus has now settled 0:18:05.720 --> 0:18:09.000 on two more twenty five basis point rate cuts, one 0:18:09.040 --> 0:18:11.760 at the November meeting, one at the December meeting, and 0:18:11.800 --> 0:18:16.080 then a sustained succession of small twenty five basis point 0:18:16.200 --> 0:18:19.439 rate cuts through the whole of twenty twenty five to 0:18:19.520 --> 0:18:22.399 bring FED funds rate down to somewhere around about the 0:18:22.440 --> 0:18:25.760 three percent level, probably a little bit higher than the 0:18:25.960 --> 0:18:29.119 sustainable normal rate, the neutral rate, if you like, as 0:18:29.160 --> 0:18:32.120 some of the economists want to call it, but your 0:18:32.160 --> 0:18:34.800 own power is indicated. If the data keep coming in 0:18:34.840 --> 0:18:38.080 the way that they are. Strong economy, some signs of 0:18:38.119 --> 0:18:40.320 a little wobble here and there in the labor market, 0:18:40.920 --> 0:18:44.760 but nothing really dramatic, then that will be the lightly outcome. 0:18:44.880 --> 0:18:45.520 Two more rate. 0:18:45.480 --> 0:18:47.920 Cuts this year, and then a succession of rate cuts 0:18:48.000 --> 0:18:50.879 next year, and then somewhere toward the end of twenty 0:18:50.920 --> 0:18:54.040 twenty five, the Fed will will take a little pause 0:18:54.760 --> 0:18:58.200 and have another macro view, if you like, the view 0:18:58.200 --> 0:19:01.199 from thirty five thousand feet, to see exactly where the 0:19:01.560 --> 0:19:05.080 general economy is and where all the other indicators that 0:19:05.119 --> 0:19:08.200 they're looking at, especially the labor market. But Jerome Power 0:19:08.240 --> 0:19:10.600 has made it very clear that he still wants to 0:19:10.640 --> 0:19:14.560 see an extended period of below trend growth, and he 0:19:14.640 --> 0:19:17.720 has seen nothing like that, and certainly in the last 0:19:17.720 --> 0:19:20.920 twelve months, and there are no real signs of anything 0:19:21.040 --> 0:19:24.360 like an extended period of below trend growth. That's what 0:19:24.400 --> 0:19:27.280 he wants to see, So he's not going to rush 0:19:27.400 --> 0:19:29.040