WEBVTT - Can Gold Keep Rallying? 0:00:02.720 --> 0:00:16.640 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:17.920 --> 0:00:20.239 Welcome to Merin Talks Money, the podcast in which people 0:00:20.239 --> 0:00:23.280 who know the markets explain the markets. I am merin 0:00:23.280 --> 0:00:26.000 Somerset Web. Now in this episode, we are going to 0:00:26.040 --> 0:00:30.960 focus on gold because of favorite metal keeps hitting new highs. 0:00:31.240 --> 0:00:34.560 We are recording this conversation on Wednesday, October. The gold 0:00:34.560 --> 0:00:37.360 has now been rallying for five days on the up 0:00:37.440 --> 0:00:39.519 to day because the US government has just begun its 0:00:39.600 --> 0:00:42.520 latest government shut down. But it's not just the last 0:00:42.560 --> 0:00:44.760 five days. Gold is up more than forty eight percent 0:00:44.840 --> 0:00:47.400 this year. It's on track for its biggest annual gain 0:00:47.520 --> 0:00:51.120 since nineteen seventy nine. It's been supported by central bank 0:00:51.159 --> 0:00:54.000 buying by rising holdings across the board gold back exchange 0:00:54.040 --> 0:00:58.080 traded funds as a federal reserve has resumed cutting interest rates. 0:00:58.280 --> 0:01:01.400 On Bloomberg data, monthly flows into gold etf so I 0:01:01.400 --> 0:01:04.600 should be clear in September we're the largest in three years. 0:01:04.880 --> 0:01:08.000 So what is going on here? Will it last? Should 0:01:08.040 --> 0:01:10.119 you be buying it? Should you be selling it? How 0:01:10.160 --> 0:01:12.800 does it fit into your portfolio? We have got today 0:01:12.800 --> 0:01:16.440 the perfect guest for all this, Dominic Frisbee. He's a 0:01:16.440 --> 0:01:18.120 friend of the show. Lots of you will have heard 0:01:18.160 --> 0:01:20.679 me talking to him before. Is the author of the 0:01:20.720 --> 0:01:24.520 investment newsletter The Flying Frisbee and also author of the 0:01:24.560 --> 0:01:27.000 book we are going to talk about today, The Secret 0:01:27.160 --> 0:01:30.920 History of Gold, which tells the epic and fascinating tale 0:01:31.040 --> 0:01:35.760 of the world's oldest and most treasured currency. Dominic, welcome back. 0:01:36.240 --> 0:01:38.199 Thank you very much for having me, Maren. It's always 0:01:38.200 --> 0:01:39.080 a pleasure to talk to you. 0:01:39.640 --> 0:01:42.279 It is always a pleasure for me as well. Now, Liisen, 0:01:42.319 --> 0:01:44.319 I have been reading your book. I love it. I 0:01:44.360 --> 0:01:47.520 strongly recommend it to all our listeners. That's full full 0:01:47.560 --> 0:01:49.880 of while everything you need to know about gold, honestly, 0:01:50.000 --> 0:01:52.960 but lots of stories, great toy storytelling about the history 0:01:52.960 --> 0:01:54.560 of gold, the way in which gold is embedded in 0:01:54.600 --> 0:01:58.120 our economies, our culture, and pretty much everything else. So 0:01:58.520 --> 0:02:01.720 I don't want to dwell too much on gold history 0:02:01.760 --> 0:02:04.760 through our civilizations today because we know everyone is feeling 0:02:05.000 --> 0:02:07.560 fairly here and now about gold. But I did want 0:02:07.640 --> 0:02:10.320 to start by talking about some of the things that 0:02:10.400 --> 0:02:14.720 you say in your introduction about the nature of gold. 0:02:15.000 --> 0:02:18.280 It's physical nature, the thing that makes it what it 0:02:18.360 --> 0:02:19.040 is to us. 0:02:19.320 --> 0:02:22.359 Well, it is the most incredible metal when you think 0:02:22.360 --> 0:02:28.880 about it, that it never loses it shine and depending 0:02:28.919 --> 0:02:31.640 on your narrative, whichever way you look at it, gold 0:02:31.840 --> 0:02:36.120 was here before the Solar System, and when these stars 0:02:36.200 --> 0:02:38.960 exploded and all the dust was sent out into outer space, 0:02:39.480 --> 0:02:41.880 that was how heavy metals were created. And then you 0:02:41.919 --> 0:02:45.400 think about the fact that you cannot destroy gold. It's 0:02:45.440 --> 0:02:48.440 incredibly malleable, but as I say, you can't destroy it. 0:02:48.680 --> 0:02:50.480 And then you think about the fact that it was 0:02:50.520 --> 0:02:53.280 invented before the Earth. Well, that means that that little 0:02:53.320 --> 0:02:55.840 bit of gold around your finger, around your neck is 0:02:55.960 --> 0:02:58.600 older not just than the Earth, but than the Solar 0:02:58.639 --> 0:03:02.240 System and shining all that time, and it will be 0:03:02.280 --> 0:03:06.160 shining long after humankind has shuffled off its mortal coil. 0:03:06.440 --> 0:03:07.640 And so one of the lines I say in the 0:03:07.639 --> 0:03:09.520 book is to touch gold as the closest you will 0:03:09.520 --> 0:03:11.079 ever come to touching eternity. 0:03:11.200 --> 0:03:13.600 I love that line. I love that line now is 0:03:13.680 --> 0:03:15.959 just before we started recording Dominic for You or I'd 0:03:15.960 --> 0:03:18.480 I was reading that line to Moses, our producer, and 0:03:18.520 --> 0:03:21.240 we were both feeling slightly awestruck by the idea. 0:03:21.800 --> 0:03:23.440 It's a lovely thought. And if you sort of type 0:03:23.480 --> 0:03:26.680 in eternity into your ai app as we all do 0:03:26.800 --> 0:03:30.240 every day, and it designs a picture of eternity. Eternity 0:03:30.280 --> 0:03:33.560 would be clouds and ethereal and celestial and all these 0:03:33.639 --> 0:03:39.280 kind of things. It wouldn't be a dull, inert, lifeless metal, 0:03:40.200 --> 0:03:41.240 but that's exactly what it is. 0:03:42.040 --> 0:03:45.080 Yeah, there is. There's another line in the introduction, or 0:03:45.120 --> 0:03:47.720 a couple of lines that is also just sums the 0:03:47.720 --> 0:03:49.920 whole thing up. In the Egyptian Museum in Kaira, there's 0:03:49.920 --> 0:03:52.560 a golden toothbridge, a gold wire used to bind teeth 0:03:52.600 --> 0:03:55.360 and dental implants, made of a four thousand years ago 0:03:55.480 --> 0:03:57.200 that is still in such good shape you could pop 0:03:57.200 --> 0:04:00.160 it in your mouth today. Yeah, genuinely and destruct. 0:04:00.760 --> 0:04:03.800 It really is, as Spandau Ballet so famously sang. 0:04:05.320 --> 0:04:07.480 And also crucially pretty. 0:04:07.360 --> 0:04:11.320 Yes, well, I think that's the lure of it. And 0:04:11.920 --> 0:04:14.200 you know, there's three functions of money. One is to 0:04:14.240 --> 0:04:16.200 be medium exchange, one has to be store of wealth. 0:04:16.200 --> 0:04:18.000 The other is to be a unit of account. And 0:04:18.040 --> 0:04:20.080 of course we all here in the UK we use 0:04:20.160 --> 0:04:22.280 pounds as our unit of account, but it's actually a 0:04:22.360 --> 0:04:25.360 rotten unit of account because the pound changes. The pound 0:04:25.400 --> 0:04:27.640 has lost forty percent of its purchasing power just since 0:04:27.680 --> 0:04:30.240 twenty twenty. I find that incredible. But it has you 0:04:30.320 --> 0:04:33.279 need a constant unit of account. But of course we 0:04:33.360 --> 0:04:35.280 use pounds and dollars of our unit of account because 0:04:35.279 --> 0:04:38.279 we have to declare our taxes in pounds and dollars. 0:04:38.440 --> 0:04:40.320 But really gold is a much better unit of account 0:04:40.360 --> 0:04:43.800 because it never changes. It really is constant, has some 0:04:43.920 --> 0:04:46.479 industrial use and teeth, but it's minimal in the grand 0:04:46.520 --> 0:04:51.200 scheme of things. It's useless, and yet it's pure wealth. 0:04:51.720 --> 0:04:55.480 And so Peter Bernstein's line is great line. Nothing is 0:04:55.520 --> 0:04:58.880 as useful and as useless at the same time. It 0:04:58.920 --> 0:05:01.000 was the first metal we ever use used, but we 0:05:01.120 --> 0:05:03.560 used it for the same reason we use it now 0:05:03.920 --> 0:05:06.520 as jewelry to adorn ourselves. 0:05:06.680 --> 0:05:09.719 I mean, it's relatively abundant, but if it was easy 0:05:09.760 --> 0:05:14.240 to get hold of, an easy to find and a mine, etc. 0:05:14.560 --> 0:05:16.960 Then it wouldn't necessarily be as valuable it is. So 0:05:17.040 --> 0:05:19.560 part of it's allure is not all the things that 0:05:19.600 --> 0:05:21.279 you've already described, but scarcity. 0:05:21.400 --> 0:05:24.560 Right, yeah, absolutely, and quite interesting stat for you. If 0:05:24.640 --> 0:05:27.880 you look at world gold supply and you plot a 0:05:27.960 --> 0:05:31.440 chant of population growth on the same chart, the two 0:05:31.720 --> 0:05:35.320 have grown at exactly the same rate throughout history, which 0:05:35.360 --> 0:05:37.560 is all the natural law advocates say, you know, it's 0:05:37.640 --> 0:05:40.560 natural money. The only time when that correlation got out 0:05:40.600 --> 0:05:42.159 of sink was in the gold rushes and in the 0:05:42.160 --> 0:05:45.240 second half of the nineteenth century, so when gold supply 0:05:45.279 --> 0:05:47.440 per capita increased by a little bit, went from about 0:05:47.440 --> 0:05:50.279 a third to two thirds of announce per capita. But 0:05:50.320 --> 0:05:52.400 apart from that, the two have grown, and they still 0:05:52.440 --> 0:05:54.280 grow at the same rate today, world mining supply and 0:05:54.320 --> 0:05:57.520 world population growth, so there's as much gold per person 0:05:57.839 --> 0:05:58.720 as there always has been. 0:06:00.000 --> 0:06:02.880 Okay, Dominic, I hope that we live long enough, you 0:06:02.920 --> 0:06:06.400 and I to see what happens when the global population 0:06:06.600 --> 0:06:07.320 starts falling. 0:06:08.640 --> 0:06:12.680 Well, the declines in Europe are being offset by the 0:06:12.680 --> 0:06:14.120 growth in Africa and Asia. 0:06:14.200 --> 0:06:16.479 Yeah, but that won't last forever. There will come a 0:06:16.560 --> 0:06:20.880 point when global fertility, not just European and developed world fertility, 0:06:20.960 --> 0:06:24.000 is such that the global population declines. And if that 0:06:24.200 --> 0:06:26.480 happens and the goals apply continues to go up bout 0:06:26.480 --> 0:06:28.799 three percent a year, then the whole thing might change. 0:06:28.839 --> 0:06:30.560 But that's maybe another part. 0:06:30.600 --> 0:06:33.680 I think it's it's not a concern of ours. It's 0:06:33.720 --> 0:06:35.159 still going to be shiny and lovely. 0:06:35.680 --> 0:06:39.920 Okay, good, let's skip through quite a few thousand years 0:06:39.960 --> 0:06:42.520 then and we can accept and you can go and 0:06:42.520 --> 0:06:45.760 read in the book about how gold is always money, 0:06:45.760 --> 0:06:49.480 always has been money, accepted as money by everybody. And 0:06:49.560 --> 0:06:53.799 then you have incidents where the idea of gold itself 0:06:53.880 --> 0:06:59.080 and currency become separated, right, and that's where things get tricky, 0:06:59.120 --> 0:07:01.000 and the most well known an example of that would 0:07:01.040 --> 0:07:01.919 be the Roman Empire. 0:07:02.320 --> 0:07:06.279 Well, yeah, by currency, I think we mean medium of exchange. 0:07:06.480 --> 0:07:11.040 The Romans, I use the word currency. Gold was never 0:07:11.440 --> 0:07:15.320 so much currency as in medium of exchange in the 0:07:15.320 --> 0:07:18.960 way that silver and copper and nickel and other metals were. 0:07:19.200 --> 0:07:21.640 For the simple reason is there's just so much wealth. 0:07:21.960 --> 0:07:24.360 Like if you imagine a two p coin today, if 0:07:24.400 --> 0:07:26.240 that was gold, it'd be about a quarter of an ounce, 0:07:26.280 --> 0:07:29.120 it'd be about seven hundred quid, you know, in a 0:07:29.160 --> 0:07:31.520 two p piece, And so it's just unrealistic to use 0:07:31.560 --> 0:07:33.840 that for day to day transactions. You might use it 0:07:33.880 --> 0:07:35.920 if you were buying a you know, a race horse 0:07:36.040 --> 0:07:38.520 or a house or something, you know, a nice suit 0:07:38.600 --> 0:07:39.800 or something, you wouldn't. 0:07:39.520 --> 0:07:41.640 Use say that, but at this rate of flat right 0:07:41.680 --> 0:07:44.080 it Pratt is going to cost seven hundred quick quite soon. 0:07:45.360 --> 0:07:51.400 And while the Romans famously debased their coinage and by 0:07:51.440 --> 0:07:53.760 the way, quite an interesting thing about the decline in 0:07:53.760 --> 0:07:57.600 the fall of Roman Empire is that, like most business 0:07:57.600 --> 0:08:01.240 models sort of prior to the twentieth century, war was 0:08:01.280 --> 0:08:05.520 a very effective business model because you conquered, you plundered, 0:08:05.840 --> 0:08:09.400 and then you taxed, so you know, it was very 0:08:09.480 --> 0:08:11.680 lucrative for kings and that's why they did it. But 0:08:11.920 --> 0:08:16.000 what's interesting is that the Roman Empire actually stopped expanding 0:08:16.080 --> 0:08:18.640 around about the time of Trajan and Hadrian. That was 0:08:18.680 --> 0:08:21.720 the point of the maximum of the Roman Empire, but 0:08:21.800 --> 0:08:25.880 the sort of decline of its money didn't really get 0:08:25.880 --> 0:08:28.680 going until about two or three hundred years later under Diocletian. 0:08:29.360 --> 0:08:32.720 So how was the Roman Empire able to expand itself 0:08:32.760 --> 0:08:35.760 over those two or three hundred years if it wasn't 0:08:35.800 --> 0:08:38.839 conquering and plundering. And the answer is it kept its 0:08:39.120 --> 0:08:43.160 money supply going through incredible mining operations in the north 0:08:43.160 --> 0:08:46.600 of Spain, and it was only when the mines depleted 0:08:46.960 --> 0:08:51.600 that suddenly the acceleration in the debasement of Roman coinage 0:08:51.640 --> 0:08:54.400 took place. So, you know, I think there's been something 0:08:54.440 --> 0:08:56.800 like two hundred different reasons offered for the decline and 0:08:56.840 --> 0:09:00.560 fall of the Roman Empire, ranging from alien invasion to 0:09:00.720 --> 0:09:04.319 climate change to too many hot baths. But the depletion 0:09:04.400 --> 0:09:07.960 of its mind supply is not a reason that's commonly offered, 0:09:08.000 --> 0:09:09.480 but it was actually a huge factor. 0:09:09.679 --> 0:09:12.800 Okay, just explain that a little further. Explain the connection 0:09:13.360 --> 0:09:17.760 how the currency was debased and how the separation of 0:09:17.880 --> 0:09:20.960 means of exchange from the value of gold came about. 0:09:21.320 --> 0:09:25.680 Funnily enough, the gold coins didn't get depleted in the 0:09:25.679 --> 0:09:26.920 way that the silver coins did. 0:09:27.040 --> 0:09:29.160 The silver coins were the ones that were consistently clipped. 0:09:29.240 --> 0:09:32.800 So the silver coins went from being completely pure to 0:09:33.480 --> 0:09:35.640 under Nero, they got mixed. I think they were like 0:09:35.760 --> 0:09:38.360 ninety percent pure something like that, and it was under 0:09:38.400 --> 0:09:41.280 Diocletian and then that they went from like fifty percent 0:09:41.320 --> 0:09:44.280 to twenty five percent to no silver at all and 0:09:44.360 --> 0:09:46.400 that and that was when they had sort of very 0:09:46.480 --> 0:09:49.320 strong inflation. What they did with the gold coins is 0:09:49.360 --> 0:09:52.880 the gold coins actually maintained their purity, but they just 0:09:52.880 --> 0:09:56.680 made them smaller, So they just got increased inly small 0:09:56.720 --> 0:09:59.320 So by the time of Diocletion, the gold coin had 0:09:59.360 --> 0:10:02.679 been the allus, and he replaced it with the solidus, 0:10:02.720 --> 0:10:05.240 which was about half the size of the aureus, as 0:10:05.760 --> 0:10:09.560 your aureus had originally been in the first century. And 0:10:09.600 --> 0:10:13.080 then the solidus became the gold coiner of the Byzantine Empire, 0:10:13.120 --> 0:10:15.959 and the Byzantines thought that they were Romans, even though 0:10:16.280 --> 0:10:19.160 we don't deem them as such, and the solidus became 0:10:19.200 --> 0:10:21.840 the sort of the go to, the equivalent of the sovereign, 0:10:21.880 --> 0:10:24.679 the sort of the go to gold coin of the Mediterranean. Interestingly, 0:10:24.720 --> 0:10:27.440 the Italian word soldi for money comes from the soliders. 0:10:27.960 --> 0:10:29.560 And of course if you were to dig one of 0:10:29.559 --> 0:10:31.640 those up today, it would look exactly as it did 0:10:31.720 --> 0:10:32.480 then it does. 0:10:32.520 --> 0:10:34.560 I've got one on my desk. I'll see if I 0:10:34.559 --> 0:10:36.360 can hold it up to the camera, shall I? 0:10:36.679 --> 0:10:38.120 Okay, hold it up, let. 0:10:38.040 --> 0:10:38.439 Me just see it. 0:10:38.760 --> 0:10:41.240 And those of you who have video can now see this. 0:10:41.280 --> 0:10:43.200 I'm fraid we haven't got full video. We will have 0:10:43.280 --> 0:10:46.520 coming soon listeners, by the way, coming soon, but we 0:10:46.559 --> 0:10:49.240 will but this clip up on YouTube. Assuming he eventually 0:10:49.320 --> 0:10:51.840 finds that those of you who can't see Dominic he's 0:10:51.920 --> 0:10:54.920 rummaging around in his desk because he's got so much 0:10:54.960 --> 0:10:57.440 extremely valuable stuff and his does that he currently can't 0:10:57.440 --> 0:10:58.959 find the five thousand quid coin. 0:10:59.520 --> 0:11:02.840 It's actually beautiful, this gold coin. This is so This 0:11:02.920 --> 0:11:08.320 is a Justinian solidus from six hundred AD. And you 0:11:08.360 --> 0:11:10.880 can buy these for not much more than their gold 0:11:10.960 --> 0:11:14.600 content they wear. This would be about four or five grams. 0:11:15.240 --> 0:11:16.400 It's a lovely little coin. 0:11:16.960 --> 0:11:19.480 Yeah, you'd pay capital gains tax on that though, wouldn't you? 0:11:19.480 --> 0:11:22.480 You do, but you don't on beautiful gold sovereigns. I've 0:11:22.480 --> 0:11:24.280 got one of those up here as well. The sovereigns 0:11:24.280 --> 0:11:27.680 aren't is a nice though, because the sovereigns so the 0:11:27.720 --> 0:11:29.880 sovereigns have been mixed with a little bit of copper, 0:11:30.880 --> 0:11:32.920 so they've got a slightly redishue. This is a Queen 0:11:32.920 --> 0:11:36.440 Elizabeth sovereign. I've got one of Victoria as well, and 0:11:36.520 --> 0:11:38.880 you could see the solidest. They're kind of similar size. 0:11:39.280 --> 0:11:43.800 The sovereign's a bit heavier. But you know, whoever's in 0:11:43.920 --> 0:11:46.319 charge makes the gold coin that becomes the coin of 0:11:46.360 --> 0:11:48.679 the world, whether it's the Romans or the British or 0:11:48.720 --> 0:11:50.600 the Americans or doesn't really matter. 0:11:51.080 --> 0:11:53.680 So if you would about a sovereign like that today, 0:11:53.880 --> 0:11:56.200 as I just said, they're technically legal tendency. You don't 0:11:56.200 --> 0:11:58.480 have to pay capital gains tax on them. How much 0:11:58.480 --> 0:11:59.960 of a premium would you pay over their. 0:12:00.720 --> 0:12:04.200 Not that many? Five percent something like that, maybe a bit. 0:12:04.080 --> 0:12:06.800 Okay, So anyone who's been holding a good number of 0:12:06.840 --> 0:12:09.160 those and has made preciable capital gains will be extremely 0:12:09.240 --> 0:12:10.079 peace of themselves. 0:12:10.240 --> 0:12:14.200 They will. And I mean I remember writing for Money 0:12:14.240 --> 0:12:15.960 Week back in two thousand and six, and we were 0:12:15.960 --> 0:12:18.120 telling people to buy sovereigns back then. So they've done 0:12:18.120 --> 0:12:18.840 incredibly well. 0:12:20.000 --> 0:12:21.800 Yeah, I'm sure lots of people listened. 0:12:22.640 --> 0:12:25.360 Right, I've got a question for you, actually, Marin, if I. 0:12:25.360 --> 0:12:27.440 May, i'll have his works Dominic. 0:12:28.160 --> 0:12:31.520 So you remember the incredible bull marketing gold from two 0:12:31.559 --> 0:12:34.240 thousand and one to twenty eleven, and it ended with 0:12:34.280 --> 0:12:37.479 gold at nineteen hundred an ounce and the Greek debt crisis, 0:12:37.600 --> 0:12:40.560 and everyone at that time was thinking gold is going 0:12:40.640 --> 0:12:42.840 to be some kind of official money once again. It 0:12:42.880 --> 0:12:47.160 really looked like and then I remember you sold or 0:12:47.200 --> 0:12:49.880 you wrote that you'd sold some of your gold at 0:12:50.240 --> 0:12:53.200 sixteen or seventeen hundred dollars an ounce. So you did 0:12:53.200 --> 0:12:55.920 what everyone did dreams of doing. You were very good. 0:12:56.160 --> 0:12:59.000 You got out within ten percent of the top. Yeah, 0:12:59.280 --> 0:13:01.240 and that's that's the secret. Can you get out within 0:13:01.280 --> 0:13:03.800 ten percent of the top? What made you do that? 0:13:04.240 --> 0:13:07.600 And how close to the top are we in this bullmarket? Now? 0:13:08.240 --> 0:13:10.240 This is literally not the way this works. Stuff. 0:13:10.360 --> 0:13:13.000 Yeah, well I'll add to what you say. 0:13:13.960 --> 0:13:17.640 Okay, I cannot remember I cannot actually talking to a 0:13:17.640 --> 0:13:20.000 group of finance people the other night about exactly this 0:13:20.440 --> 0:13:24.000 and why it is that as a journalist or someone 0:13:24.040 --> 0:13:26.400 like you and me who covers markets endlessly, how it 0:13:26.520 --> 0:13:28.440 is that you finally come to the point where you say, well, 0:13:28.480 --> 0:13:30.200 this is going to change or this is going to change. 0:13:30.280 --> 0:13:33.240 And the answer and for it is instinct. That's all it. 0:13:33.240 --> 0:13:33.400 Did. 0:13:33.480 --> 0:13:36.319 You know, you're taking in so much information all the time, 0:13:36.400 --> 0:13:38.040 and as you know, your brain works in so many 0:13:38.080 --> 0:13:41.360 subconscious ways. I can't tell you what made me say 0:13:41.440 --> 0:13:44.000 then I think we're done here. But that must have 0:13:44.120 --> 0:13:47.600 been just the constant inflow of information creating some conclusion. 0:13:48.120 --> 0:13:50.240 How do I feel now? I mean, you know, like 0:13:50.360 --> 0:13:52.920 you like, it's really toppy, like things gone very far, 0:13:53.080 --> 0:13:54.880 very fast, all those kinds of things. But then I 0:13:54.920 --> 0:14:00.920 also look around and I see now this debt crisis 0:14:00.960 --> 0:14:03.839 that will inevitably catch up with the developed world being 0:14:03.880 --> 0:14:05.840 closer than I've ever felt it as before. 0:14:06.280 --> 0:14:09.360 Yeah, I mean at the moment, the narratives that are 0:14:09.400 --> 0:14:13.480 driving this bull market is central bank buying. That's been 0:14:13.480 --> 0:14:16.200 the big narrative that's been going on since twenty fourteen. 0:14:16.240 --> 0:14:20.680 But it really accelerated when America confiscated Russian US dollar 0:14:20.720 --> 0:14:23.840 assets and basically every pullback to the fifty day moving 0:14:23.880 --> 0:14:27.040 average has been bought and it's just been a relentless climb. 0:14:27.200 --> 0:14:30.400 And retail has only really got involved in the last 0:14:30.680 --> 0:14:34.520 six months maybe, And in fact Germans Germany big second 0:14:34.520 --> 0:14:37.440 biggest retail market in the world I believe, actually can't be, 0:14:37.480 --> 0:14:39.600 it must be the third biggest, must be China, US 0:14:39.680 --> 0:14:43.280 then Germany anyway, big retail market. What about India oka fourth? 0:14:45.040 --> 0:14:47.840 But German retail investors have been next sellers, which is 0:14:47.880 --> 0:14:52.000 just unusual until this year. And it's retail that usually 0:14:52.080 --> 0:14:55.480 drives mining, and gold mining has not really got going 0:14:55.560 --> 0:14:58.480 until about a year ago, and so it's lagged gold 0:14:59.200 --> 0:15:01.240 and as I say, but the narrative has been central 0:15:01.280 --> 0:15:01.840 bank buying. 0:15:02.480 --> 0:15:03.840 Right, Well, we need to go back a bit, We 0:15:03.880 --> 0:15:05.880 need to go back, Okay, we need to go back 0:15:05.920 --> 0:15:09.880 and talk about this turn in central bank buying. I mean, obviously, 0:15:09.920 --> 0:15:11.960 the big central banks have always had lots of gold, 0:15:12.000 --> 0:15:13.240 and it's one of the things that we've talked about 0:15:13.280 --> 0:15:15.040 over the years is everyone goes, wow, gold, no one 0:15:15.040 --> 0:15:17.320 needs gold anymore. Gold is over, et cetera, et cetera. 0:15:17.400 --> 0:15:19.960 Gold is nothing, it'll never have value, etc. And we've 0:15:19.960 --> 0:15:22.320 still gone, well, hang on a tick. If gold is nothing, 0:15:22.840 --> 0:15:25.680 how come the central banks still holds so much of it? 0:15:25.800 --> 0:15:27.880 You know, how come they keep these reserves in gold 0:15:27.920 --> 0:15:30.560 If gold is an absolute nothing. Of course it's not nothing, 0:15:30.720 --> 0:15:33.920 it's real, and you should watch what central banks hold. 0:15:34.440 --> 0:15:37.600 And then the amount that central banks hold started to 0:15:37.720 --> 0:15:40.520 rise and rise and rise. So let's talk about that. 0:15:40.680 --> 0:15:43.600 What happened there? What made the central banks, Chinese Central 0:15:43.600 --> 0:15:46.520 Bank in particular, start saying, do you know what, we 0:15:46.600 --> 0:15:48.920 don't have enough gold. We're going to really add to 0:15:48.960 --> 0:15:50.600 our reserves in massive volume. 0:15:51.160 --> 0:15:53.200 Well, I think one of the reasons that central banks 0:15:53.200 --> 0:15:56.800 held on through the eighties and nineties is they probably 0:15:56.800 --> 0:15:59.560 just didn't know what else to do with it and 0:16:00.320 --> 0:16:02.680 just leave it. And of course one of the reasons 0:16:02.680 --> 0:16:03.359 that Gordon. 0:16:03.360 --> 0:16:06.440 Got adminertia, are you honestly suggesting that central bank policy 0:16:06.520 --> 0:16:08.240 is a function of admin inertia. 0:16:08.280 --> 0:16:11.840 Well, I think one of the reasons they didn't sell 0:16:12.000 --> 0:16:13.440 is they didn't know what else to do with it, 0:16:13.920 --> 0:16:16.320 and there was no one of the reasons. There was 0:16:16.320 --> 0:16:18.800 all sorts of reasons why Gordon Brown sold, but one 0:16:19.320 --> 0:16:22.080 key reason is he thought Switzerland was about to sell, 0:16:22.200 --> 0:16:24.240 because Switzerland was about to come off the gold standard 0:16:24.280 --> 0:16:26.400 in nineteen ninety nine, and he was one of the 0:16:26.440 --> 0:16:31.480 front run Switzerland. And of course Switzerland never sold, but 0:16:31.960 --> 0:16:34.360 in any case, it was only I'm going to say 0:16:34.360 --> 0:16:37.280 twenty thirteen, twenty fourteen, twenty fifteen, that kind of period. 0:16:37.320 --> 0:16:41.000 Then gold reached ten percent of central bank holdings and 0:16:41.000 --> 0:16:43.760 that's when the turn came. So in the bear market, 0:16:44.160 --> 0:16:46.040 you know, twenty fourteen twenty fifteen, gold was in a 0:16:46.040 --> 0:16:48.440 bear market. And if you go back and you look 0:16:48.480 --> 0:16:52.680 at China in particular, China was became a net seller 0:16:52.880 --> 0:16:56.160 of US treasuries. It's been reducing its holdings of US treasuries, 0:16:56.280 --> 0:16:58.840 not of US dollars, but of US treasuries ever since 0:16:58.840 --> 0:17:01.440 twenty fourteen. Just at the point that it began growing, 0:17:01.440 --> 0:17:04.600 its central banks became net buyers of gold. And by 0:17:04.600 --> 0:17:07.280 the way, China does not declare its real goal, that 0:17:07.359 --> 0:17:10.680 it's understated its reserves by a factor of at least 0:17:10.760 --> 0:17:13.200 five for reasons that we can come to in a moment. 0:17:14.040 --> 0:17:18.360 But by earlier this year gold had gone over ten 0:17:18.480 --> 0:17:22.080 years from ten percent of central bank holdings to twenty percent, 0:17:22.280 --> 0:17:26.240 so it had doubled. Meanwhile, it overtook the Euro as 0:17:26.359 --> 0:17:29.800 a percentage of central bank holdings, and it overtook US treasuries, 0:17:30.400 --> 0:17:33.680 and the US dollar meanwhile fell below fifty percent. It's 0:17:33.720 --> 0:17:36.200 now and I think forty eight, forty nine percent something 0:17:36.240 --> 0:17:39.240 like that, maybe even a little bit less. And so 0:17:40.320 --> 0:17:42.159 you know, goal's at twenty percent now, a little bit 0:17:42.160 --> 0:17:44.600 more than twenty percent. There's no reason why it'll fact 0:17:44.640 --> 0:17:47.879 it'll be more because of the rising gold price increases 0:17:47.920 --> 0:17:51.400 the amount effectively, even if they don't actually buy more. 0:17:51.680 --> 0:17:53.600 But there's no reason why that shouldn't be forty percent 0:17:53.600 --> 0:17:54.720 in another ten years. 0:17:55.480 --> 0:17:57.399 Why is any reason it shouldn't be forty percent. 0:17:57.840 --> 0:18:03.520 There's two reasons, this process of de dollarization. So there 0:18:03.520 --> 0:18:06.360 are lots of countries they might not necessarily be enemies 0:18:06.560 --> 0:18:09.520 of the US, although in some cases they are, but 0:18:10.200 --> 0:18:12.200 and they might be you know, big trading partners of 0:18:12.240 --> 0:18:14.199 the US, like China is a big trading partner at 0:18:14.200 --> 0:18:17.280 the US. But they must be looking at their portfolios 0:18:17.320 --> 0:18:21.000 and seeing what happened with Russia and thinking America could 0:18:21.040 --> 0:18:23.399 just confiscate our dollars at any time if we do 0:18:23.480 --> 0:18:26.479 the wrong thing. So we're just in America's power. So 0:18:26.520 --> 0:18:29.160 we need another asset that doesn't put us in America's power. 0:18:29.400 --> 0:18:31.480 And of course that asset is gold, because it's nobody 0:18:31.480 --> 0:18:34.640 else's liability, it's wealth in and of itself. And that's 0:18:34.640 --> 0:18:38.119 the attraction of gold. And the big accumulators of gold 0:18:38.359 --> 0:18:42.560 have all been countries along the Silk Road in the 0:18:42.560 --> 0:18:47.040 Shanghai Cooperation Organization, so China, India, Russia at one point, 0:18:47.040 --> 0:18:50.200 although they've stopped buying, and then all the various Stans 0:18:50.240 --> 0:18:54.000 to Jikistan and kyrgyz Stan and all these stans. They've 0:18:54.000 --> 0:18:56.240 been the net buyers Iran as well. And some of 0:18:56.240 --> 0:18:58.119 those are actual enemies of the US, but some of 0:18:58.160 --> 0:19:01.399 them are not exactly strong allies of the US. And 0:19:01.480 --> 0:19:04.359 so it's all part of this process of de dollarization, 0:19:04.720 --> 0:19:05.159 and there. 0:19:05.040 --> 0:19:09.200 Isn't something else they could use instead. This is GOLDI 0:19:09.520 --> 0:19:10.240 what I. 0:19:10.200 --> 0:19:13.320 Mean they could use the Euro potentially, then you've got 0:19:13.359 --> 0:19:18.280 to deal with the EU. The yuan isn't internationally tradeable 0:19:18.359 --> 0:19:20.000 in a way that the dollar is. It's just not 0:19:20.040 --> 0:19:22.280 really possible with the yuan. So what else do you use? 0:19:23.480 --> 0:19:25.960 And you wouldn't necessarily want Yeah, and you don't want 0:19:25.960 --> 0:19:27.840 to use a currency that you expect to be and 0:19:27.920 --> 0:19:30.199 floated away as a direct result of the high levels 0:19:30.280 --> 0:19:32.399 of debt. Did GDP rats across Europe? 0:19:32.400 --> 0:19:35.320 And well, well that too. And now we've got this 0:19:35.800 --> 0:19:39.280 new thing, which is a really interesting development part of 0:19:39.320 --> 0:19:43.240 the same story, which is this idea of Triffin's dilemma, 0:19:44.000 --> 0:19:48.880 which is this notion that the country that issues the 0:19:48.920 --> 0:19:52.720 reserve currency of the world will inevitably run trade deficits 0:19:52.760 --> 0:19:55.560