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  [Music] thank you I'm Charlotte McLeod with the investing News Network and here today with me is Joe capatoni market strategist for the Americas at the world gold Council thank you so much for joining me today great to see you online great to be here Charlotte thanks for having me really excited to be talking to you it's it's a really exciting week for Gold so probably the best time to have you on really if we think about it we had gold go over 2 000 per ounce earlier this week and I believe as we're speaking

right now on March 23rd it's kind of teetering on the edge again so we'll see what happens there so the first thing I want to ask you is what do you think is the most important driver for the metal right now so I would qualify what you said and I'd say it's been a really interesting 2023 after a really fantastic 2022. so what's happening right now is best described on how we talk about the gold market tactical drivers and strategic drivers and the first thing I'd say is front of

mind and top of mind for everyone is the Tactical application of gold as a result of the financial cracks that are appearing with the banks we've had three domestic Regional Banks and one global bank that have all suffered a severe financial implications and potentially even been shut down that's actually a systemic event and that's actually driving flows and attention to gold as a safe haven asset now coupled with that is something that we've been talking about in our annual Outlook and our

mid-year Outlook and have been talking about regularly for several years now and that is the ongoing concerns of inflation risk and monetary policy and how that's weighing in as a headwind to the gold price now what we've just experienced this week has been a Slowdown in the pace with which the FED in the U.S has actually raised rates 25 basis points as of yesterday and what we're starting to get a flavor for from the investment Community is what exactly is that going to mean for the economic

Outlook are we going to tip from where we are which is a concern around inflation buoyant prices and ongoing heavy-handed monetary policy into a world of recession which we think is possibly the likely outcome and if that is the case then that's where gold is going to continue to play a key role more strategically as a long-term asset which performs exceptional in a world of recessions now in the world of recession you know you can look at the last seven recessions that the U.S has experienced

and five of those recessions gold has performed well yes and that leads into the next thing I wanted to ask you so there's so much uncertainty as you've just been outlining I think what a lot of people in the markets are doing right now is trying to see does this line up with anything we've seen historically and what happened then so we can understand what might happen now so can you put this into some historical context when it comes to Gold absolutely again I'm going to highlight kind of systemic

issues or Market risk issues that are non-recurring and kind of um eventful in the markets you can talk about the onset of the pandemic which was absolutely um highlighted in early 2020 you can talk about the Russian invasion of the Ukraine these are kind of moments in time when you have the safe haven role and gold playing a key part a part of a portfolio in that way you know actually taking place and you can see a flight to Quality a flight of fear into a safe haven asset those are two two good

examples we can also kind of take a step back and look back at 2008 when we had the global financial crisis we had banking concerns we had concerns around the financial system in general and ultimately what you see in those instances again may be gold being used as a source of liquidity for people who are holding it but ultimately as we navigate through a 2008 as an example gold playing a key role and then price appreciation again after the 2008 Global financial crisis and gold performing its role as a an allocation for Safe Haven

and more of a long-term term balance in the portfolio offering the diversification benefits that you get from it but again back on that recession point that I had mentioned again seven recessions that we can put down on paper five of which you've got return profiles for gold so as we look at this more strategic kind of shift in the overall Financial landscape you should be expecting to see gold perform exceptionally well that's what we've seen five of those seven moments four 4 to 12 in terms of the return profile as

we come out of those recessionary types of environments and really it's all about people feeling good about the fact that they want to have something that preserves its value it has a long-term trajectory of returns it has the kind of liquidity that they want you know gold trade somewhere around 150 billion dollars a day that's a large Market from a liquidity perspective and it adds that right kind of diversification to your portfolio correlates positively when assets are rising and actually

correlates negatively when assets are risk off so when things are declining equities are declining it gets the right kind of diversification benefits to your portfolio I think it's really helpful to look at those previous patterns and pass data and when it comes to data I have another point that I want to bring up for you so I just came back from pdac and I can tell you one of the things that came up talking about the gold market with lots of experts who were there was the volume of Central Bank buying that we saw in

2022 which people are looking at the report put out by the roll gold Council so I wanted to go over that with you talk about the buying that we saw from the central banks last year and if you could put that into context for us as well in terms of what we've seen previously yeah that's a great question and a really interesting topic now this goes back to 30 years that we've been producing the gold demand Trends report and if you go back to the beginning and you look at the report we've just issued

last year you'll find that the report will highlight for you that most of the consumption of gold was consumer based and jewelry based and over the course of the years what we've seen has been a gravitation of investment into the gold market so you're seeing investors institutional investors more consumers using gold as an investment and in particular you've seen a a growth in the Central Bank consumption now Reserve portfolios tend to be traditionally conservative they have very uh you know strict guidelines of

where they can and how they can invest and gold fits perfectly into that portfolio for them it's safe there's no credit risk and what you've seen over the last 13 years particularly has been a trend of ongoing net buying by central banks mainly driven by Emerging Market central banks but to a certain extent some domestic or some large developed Market um the central banks as well but ultimately what you're seeing is this trend continue a good asset for the reserve portfolio the right kind of

return profile the right kind of inflation protection and it fits nicely into the bucket of what they have so you've seen activity amongst Emerging Market central banks you've seen this globally and last year like we said we had over 1100 tons of gold that was purchased by central banks into the 2022 year which which set a record in terms of the overall level of traced and tracked gold purchased by central banks so the highest level we've ever seen on record which has been super exciting

it has been exciting as I mentioned I think everyone's really noticing that we've now made it about three months into 2023 or thereabouts do we know yet anything about whether this buying from central banks is continuing this year so it's a space for watching carefully now what we have to be careful on is the speed and and the consistency with which everything gets reported through uh channels that we can trust and we can actually make sure that people are aware of for the IMF for example but our

expectation is that we're going to continue to see some level of buying and the verse the the the reason we see that potentially playing out is that the question and concerns around the US economy the US dollar and how diversification in a reserve portfolio might unfold so our expectation is that will we see a record year like we did in 2022 we don't know but we don't think that central banks will be slowing down entirely on they're purchasing so we should expect to see more okay really really interesting and the

last thing I want to ask you about Central Bank buying is you started to mention which countries were actually the largest buyers last year so we had turkey the Middle East as a region was a big buyer China started to buy again what does it tell us about the fact that these regions in particular are are purchasing yeah I think I think each Central Bank is unique and each Central Bank has motivations that drive their their overall reasons for allocating to Gold but what we just talked about no credit risk when you own the gold uh the

right kind of return profile that right kind of liquidity that you really need to make sure you have that can help out when you want to diversify your portfolio and in the case of current uh turkey I think they've had you know some pressure on their local currency so to stockpile the right kind of Assets in their Reserve portfolio could be to their benefit and in the case of china uh you know it's very interesting Market it's a large Central Bank a very key critical Central Bank globally but what

you have is the largest production largest consumption whether it's in an investment format or in a consumer format for the gold market so you have lots of reasons and lots of consistencies around gold in China and the affinity for gold in China to be one where you could see why a large dollar-based Reserve portfolio might want diversification into that kind of an asset whether it's treasuries or US Dollars direct that they're that they're using as the source of uh the funding of

their gold position all right so Central Bank buying was very interesting and exciting but retail investors also did their part when it comes to Gold demand last year and I know part of what the world gold Council does is you try to introduce gold to people who might not know about it already so can you tell me about some of those efforts that you're making well there's a lot of things that we're working on um part of it is in the form of client Outreach through our research our data

and our insights plus a team of people who are dedicated to go out and Lead education whether it's with retail or institutions we have people that are dedicated to that cause we have people that are focused on different parts of the world where we see the the size of the opportunity for gold to be consumed on the investment landscape to actually come into the fold working with large outsourced CIO platforms or investment Consultants also working with large pension schemes and large institutional

buyers that could actually make a big difference with their portfolio allocation if they get educated when they get educated on gold and make the allocation but we also do a number of different exercises to make sure that we can improve um the understanding of gold and Trust around gold and one of the key projects that I think I'd like to highlight focused on the retail Community again in Europe in the U.S big markets for retail consumptions bars and coins not Collectibles but bars and coins for the

purposes of investment so we have a retail gold investment principles framework which we're using with these firms in these different markets Singapore Germany the UK the US India where we're trying to help educate and help raise the trust through guidelines and principles that these organizations can actually certify to and adhere to and ultimately use this framework to raise trust and transparency and ultimately give people confidence that they're doing the right thing by investing in gold and doing it in a safe

way where they can feel good about their investment so lots of different ways of Outreach a lot around information and data but also around education and making sure that people can trust and Trace very important work so thank you for explaining what's going on there one point I wanted to make is you know when we have a high gold price like we're seeing currently up at 2 000 that really ignites interest from people and again people who might not have been paying attention before might now take

note but of course we know that it's probably not the best strategy to enter the market when the gold price is so high so I wondered if you could share any thoughts on how to balance that out for people who might be noticing gold at the moment so I look at it differently so a high price may or may not necessarily be an impediment for someone who's making a strategic allocation to gold and the reason I think it's important to step back from The Price is tactically of course people are going to

be hypersensitized to where the price point is at any point in time but when you start talking about a strategic allocation and you're really Shifting the mindset of what you're doing around a portfolio the price is important but what you'll see with the data that we can provide you that the expected long-term returns for gold can range from four to five percent based on what you're looking at in the time Horizon that you're expecting to hold the position so when it comes to implementing I think the the

the question that many people are asking above and beyond like where's the price and is it a good entry point is how am I funding this what is my time Horizon for the funding of this position and once we've made this decision what are the overall implications for the behavior in the portfolio remember when prices of all assets risk assets go down the correlation Behavior you might find in Gold might be a better impact to your portfolio than just simply thinking that you know everything's going to go up and

everything's going to go down intend that diversification benefit that you get is just as important as your entry point and the behavior of gold in a portfolio so it's a complicated question kind of giving you a complicated answer to it but I think it's important for people to understand if you're tactically just punting the asset and we don't necessarily think that that's a great thing to do in the gold space we're actually talking about strategic allocations and the price point is

important but also more important than that is how does it behave when things are moving uh in the future and how's that going to add to your overall portfolio overturn no I really appreciate the nuanced look at it and I think it's important for investors to go through all those considerations so talking a little bit more about World goal Council initiatives there's the gold 24 7 program I'm probably going to oversimplify this but as I understand it's about tracking gold from the mine

using blockchain technology ultimately we'll have kind of a digital transformation there so I wondered if you could go into the details there what we should know about that yes it's a it's a great question and it's actually a pretty substantial initiative that we've started off with for the gold market we're working with the gold market for the benefit of the gold market so organizations like the lbma are partnering with us to make sure that we can actually bring the gold market future forward and

that's the idea so the gold market is a sound Global Market and it is a substantial Market but there are areas that we've identified working with organizations like the financial Market supervisory board the fmsb where we can see opportunities to improve it starting with that tracking and tracing and that's part of the Integrity Channel within our gold 247 program which has Integrity accessibility and fungibility and where we've really made the first initial strides on a very long project

is really around Integrity so we've worked with a few organizations uh one being exegris and the other being peer ledger to roll out systems that are blockchain enabled to help us track and Trace the Integrity of bars and ultimately giving us a centralized view of what's in the ecosystem for gold because as it stands today there is no Central database for all gold in the world can we get to the aspirational goal of achieving that that's one of our hopes and ultimately that's what we're

looking at these firms are able to look at where a bar or actually the Dory itself comes from through the system all the way from mine to Market and give us the opportunity to develop out the technology to trace and track all of that information giving us a better landscape for trusting the gold market ultimately and in our view it's the first step along a very big journey to kind of continue to bring the gold market forward that forward momentum could involve the digitalization of gold which is like

dematerializing gold into a true form of digital access and ultimately looking at all forms of gold that could sit in some form of universal custody that ultimately could be deemed fungible so you don't have to worry about what bar I have and where do I have it and and what kind of coin am I buying and What premium am I paying that's very aspirational and that's a lot of work to get to it but that's the road that we're on it's exciting work but a lot of heavy lifting really interesting and it does

sound very complex we'll have to keep watching as that progresses on the note of Supply I wanted to ask if there are any trends that you can identify when it comes to Gold Supply I know that the market doesn't tend to react to supply and demand so much as other metals we've been talking about all these macro factors that maybe play a bigger influence we do hear things like gold miners haven't done enough to replenish their reserves so if there's anything that you can say about Supply

sure I I think the gold Supply and Mining production production landscape is is um kind of really centering around a couple of different themes that we've seen in 2022 and continue to see into 2023. um and that is actually increasing the efficiency of the existing mining sites and then also there's there's a question around ongoing the potential for m a in the space but just kind of looking forward for the production estimates and metals Focus who we work closely with to keep an eye on the space of gold and and

our data sets are indicating between one to three percent uh increase in the production the supply of gold over the course of 22 in terms of finalized numbers and into 2023. um and look those those areas that are going to see the most in terms of production growth are likely to be North America mainly Canada Central and South America and Oceana in terms of a region um and this all matters because it all factors into what we refer to as the all unsustainable cost a level of price for gold where production is actually

profitable for these mining companies and you know what we've seen is an increase in that number factors like the cost of money financing ultimately the the the price of fuel gold or oil and I should say gas to to run a production site that might be impacted by an increase in oil prices and so forth and these consumables that might be involved in mining in the gold space as well as long as challenges around kind of bringing on staff to the mindset so all these things have played into a higher all and sustainable cost

but the good news for the gold mining industry is that the price of gold driven by these demands for gold continues to put it in an area where they can squeeze more from existing sites and actually look at how they can manage their financials and and and the world of production going forward including some some sort of uh view on Recycling and ultimately find the right way to go ahead and fuel the demand that's out there okay great points on Supply we've been through a lot of topics related to gold

and as we're wrapping up I just wanted to ask if there are any final items that you would leave our investor audience with today sure I think the one thing to make sure that we always remind everyone of is while there might be a lot of attention on a U.S market and its implications on the gold price today don't forget that gold is global what we've seen over the last 12 months has been a reopening of China away from their Zero Tolerance policy from covid and actually what we're seeing there is

an increase in retail demand which had gone somewhat muted over the course of time of the time with respect to um uh what was happening with covet but just remember that gold is global and it's Unique in that nature and it's also unique in its nature of being dual natured that it performs well in good times and it will be the safe haven for you in bad times all right I think that's a great note to wrap up on so thank you so much for coming on to talk about what's going on in the gold market I think that was very

valuable thank you once again I'm Charlotte McLeod with the investing East Network and this is Joe capatoni with the world gold Council foreign