Gold news

 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Don Hansen Don is a private investor who's been investing in gold and silver mining stocks for decades at this coin and for our Chunnel you'll you'll recognize Don from our many previous interviews at this point and I've I've been assured that this is going to be perhaps the best one yet so really the one I'm most excited about yes yes really excited as well to hear all the research that

you've been doing I know you've been working very hard on it so we'll we'll get right down to business and the first question for today we're going to look at historical background on the US Dollar's role as the world's Reserve currency so let's let's start there okay in 1945 the US economy was almost only major econ who was the only major economy that was even functioning well because everywhere else the war had destroyed so much that it was probably 70 or 75% of the world economy at the

time and it had 16,000 ounces or tons of gold in reserve and so when they created a new monetary system and the Redwoods New Hampshire 1944 the dollar was made basically the world's Reserve ccy being backed by gold at the fixed price of $35 an ounce and that made sense at the time and um they function sort of okay but there was a major mistake that was made with that and that was that the gold price was fixed at $35 an ounce but the money supply of the US and everywhere else was going up like that so that it

was inevitable that it was going to fail and the irony of that to me is that in 1922 when the British put the pound sterling back on the gold standard after World War I they put it back on at the same price as before the war after they had printed all these pound sterlings to pay for the war it was a disaster but they never learned anything from that and they did it again so that by 1971 then you had Tred so many dollars and and the world's central banks were cashing in their dollars for gold and so

the stash of gold in the US went from 60,000 tons to 8,000 and that's when the French decided then no they would and what did so they were bailing out right and left the very famous uh treasury secretary in France under President deul called the US dollar situation at ex orbited privilege and that was basically because the US us was able to buy all of their Imports for counterfeit money the dollars were they they were backed by gold for a while but that went away in 71 of course because they were

creating so many dollars so the exorbitant privilege was then that long after 71 the US was able to buy things that had intrinsic value with something that did not and the whole point of this discussion is the consequences of that and the fact that that's now catching up to the whole system and everything's changing and uh but that's the backround yeah that was a that was a very concise good overview of the background there and now we're going to look at why the US dollar rule as a reserve currency is

is declining so tell me your thoughts there what have you found War there's a lot to to Le I'm going to give some statistics just to indicate what's happened there um for one thing the US dollars US debt it has gone from uh well would have been 6 trillion in 2008 and 24 trillion in 2024 and that was the publicly held debt that at the current time we have $34 trillion in debt but only 24 Public held the other 10 is held by the fed and by the Social Security trust fund okay so you had a increase then that would be

publicly available from 6 to 24 okay but when you looked at the US debt overall from 2014 to 2024 a 10-year period it went from 17 trillion to 34 in 10 years it took 200 and some years to get up to 17 to begin with so the rest of the world is looking at that and saying well wait a a minute this this this is this doesn't really make sense and the other thing that's interesting about it is that the world central banks bought zero of that additional $17 trillion in USDA none and yet the we are calling the US

dollar the world's Reserve currency the fact is reserve currency has two functions as a reserve asset for central banks hold saas and as a medium of change well as a reserve asset they stopped in 2014 it's already over okay with the the amount of um the central banks holding a publicly uh available debt in the market in uh 2008 was 40% of the total so they were seriously holding us securities and why 2024 is down to 14% because they didn't take any of the new stuff so they basically they're

opted out already it's already over then the question is where are we going and and that we'll get into because where we're going is is is go as the world reserve aset and I'll explain why that's true but that's that's this fascinating to see that evolving because most people are not aware of that it's already happening yes I I think people are not aware of that although now they will be a hope lots of people are listening yeah yes yes and I think you also have some some data that we want to

look at in terms of a big change around 2008 2010 that we want to go into next that was a really critical turning the in a major way in I say again getting back to about Reserve asset between 1992 and 2010 the world's Central ranks sold B every year and I added it all up it was approximately 7,000 tons which is kind of interesting because they bought 8,000 tons from the US between 1945 and 71 so it was like they sold what they bought okay so we but it came out then in 2010 that was the huge chief that nobody

talks about from that year on all the central Banks bought gold every year and the aggregate of that was 77,000 tons so they got back to where they were he did in 71 actually what did what happened in the Central Bank between 71 and 92 I don't know I don't think very much but I could not find any data about that but anyway that just shows you that that change was Monumental but it was the beginning of when the world central banks began to f figure out that they didn't want to hold uh US dollar dominated assets and

and that makes all kinds of sense when you recognize in 2000 the price of gold in dollars was under $300 and now it's $2,000 right and the way I look at that is that that's not really telling us about gold it means that the dollar has declined by that much that you have to pay that many more dollars to get an ounce of gold so it's it told you that the depreciation of AD do was huge and the central banks are looking at that and saying you know why anybody in their right mind would hold

an asset with being depreciated debased at that extent instead of instead of holding goal it made no sense and that's why we saw this shift that in 2010 okay okay thank you for going into that as well and the next component that we want to discuss here is China and this is very complex and it's quite fascinating you've explained this to me a little bit beforehand but let's go into China's role here because you've done some very interesting research here as well well it was fascinating to me

because China is kind of being portrayed as a boogeyman and that what they're doing is to you know is in aggressive or competitive nature with the US and there may be some elements of that but the reality is that China absolutely has to do what they're doing and that is because they're very large exporting country they the world's manufacturing center for many reasons okay but the other problem that they have that is unique to them is that they have a very large economy now but they have no

resources they have to import everything they import over a trillion dollars worth of stuff whether it's energy food uh uh Commodities everything so their predicament is over time number one they're getting paid in dollars which is depreciating that isn't working out for them but as time goes on the Chinese exports is going to go down and the Imports is going to go up I'll explain why the exports are going to go down because there's more competition for manufacturing in India Indonesia IIA

the Philippines Vietnam and other developing countries they all want a piece of the action the other piece of it is the uh geopolitics and Co and everything has caused the the US and Europe to want to bring manufacturing back or do what they call friend Shoring which is maybe move it to Mexico because they they're cheap but they're more supposedly friendly to the US and so that's going to reduce their exports on the import side China has 1.4 billion people and they want to have a better

standard of living in order to have a better standard of living they have to import stuff energy Metals all these things so that means that the import's going to go up we and the commodity Market is due to be in a bull phase it's been poor everybody here and lighting business rully is abundantly aware of that but that's going to turn as it always does so that means that the import prices for Chinese are going to go up so they're going to get closer and closer to break even they can't allow

that because they have to import so much and if they can get into a deficit position then they have to go out and buy dollars to buy imports which means when they do that the value that you want goes down which puts them in a really negative situation so they very smartly have decided to head that off with the pass they tend to be long-term thinkers anyway well compared to the US which thinks about the next quarter's earnings and and not much else but so what they've done is they basically said

we have to be able to buy our Imports to a substantial extent with our own currency with the U okay and they're already doing that uh 20% of the oil market now in 2023 is now being done in other than the doll I think mostly in the youan with Russia Saudi Arabia Iran and so forth these countries that are part of the bricks and and friendlier but the the thing that that they need to do is in order to buy the Imports in Yan you give the uh Yan say for soybeans from Brazil you then the Brazilians have

Yuan they could do two things I could buy manufactured goods from China or they can now go to Shanghai and exchange the youan for gold and the Chinese are brilliant because what they've done with that system is they didn't make the mistake that the British and the Americans made before the price of gold is not fixed it they take the youan to go to to Shanghai and they get the market price for gold and that's so that system can last for a long time because it doesn't have it in here it instability to it and it's

actually good for China because they theyve accumulated a lot of gold then that gold is worse more and their people China's been encouraging their citizens to to buy gold well then if they if the Chinese government needs some they they their people have got tons of the stuff and so they they're set up and they they've been encouraging that they see that coming so this is their way to do that but it's going to change the Dynamics of the world economy for decad and it's going to get them out

from under the pressure at US dollar issues and the the fact that they're losing money on the value of their excites because the Dollar's crashing so that's the story with that that's the story with that and I think all the pieces you can see them come together that's why we needed the context in the first place now we see how it all is fitting and where we want to look next is you have some data on the relationship between the gold price and the S&P 500 that if we look at it

maybe tells us about where each of those things may be headed okay I did a significant amount of research on that and I looked up on the Internet the uh prices of the SV 500 igal from 1972 until the Pres and what I found was that there was really two very distinct cycles that came in one 28 year another 20 24 years the second one with this very same patterns and it was just fascinating to see how it unfolded but let me read the numbers and and and one of the obvious conclusions when you look at the data is to to recognize that in

fact the S&P 500 and the gold market have an almost perfect inverse correlation when when one's on a bull phase the others on a bare phase and vice versa so I'll read it to you to see where it was if we go from 1972 to 1990 the S&P on an inflation adjusted price which is much more important because you're looking at the purchasing code of the money at that time okay and you're factoring in the inflation from 1972 to 1990 the S&P 500 did zero you were actually back where you started after 18

years then the S&P from 92 to 2000 was up 220% who was in a bull big bull face then then when it started again in 2000 the next cycle and went from 202000 to 2016 juston went to the SC G did zero again you were back in 16 years at the same place where you started again and then in 2016 the 2024 we're now out to in the stock market roughly 100% because of what's gone on like but then it's just the inverse with goyi from 72 to 1990 Gold was up 187% when that all when the S&P did zero

then in uh 1990 to 2000 old was down 47% when the S&P was up 220 then we get to the next side from 2000 to 2016 go was up 179% and go and h&p was zero and then in the 2016 to 24 gold was up 41 while as the S&P was up a of res that so notice anything odd there in the first cycle when the S&P was in the bull phase gold was down 47 in the in the S&P bear phase the second time it was up 43 guess why that's because of the Central Bank buying and selling in 2010 it flipped so in the first cycle with

Central Bank for selling so during that bare pay bull went down 47 but in the second cycle of the bull phase and B from the S500 the central Banker B it actually went up even though so there was an inverse but it was a major difference so it just indicated the magnitude or the importance of the central banks bike at 2010 and how much an impact that had on on gold the other piece that's really fascinating about that same data in terms of the Central Bank lying is that we had another critical point and that was

2022 the Central Bank lying from 2000 to uh what it would be 2010 to 2022 it was about average about 400 TS a year in 2022 and 23 it was up to 1100 tons a year in other words there was another major ship where their buying went up over 100% almost out joing off on well what happened why was that well that was really pretty obvious actually in 19 in 2022 in March the Ukraine warar the US government then did this so-called sanctions business that they're going to punish the russing so they basically because they control the

Swift system that P the banking system worldwide they were able to sequester $600 billion worth of Russian assets they weaponized the doll going to face that and all the other countries including China and all these other people had money them very of dollars and treasury bills either so said well wait a minute if we do something the US doesn't like they can take our money too which then really had a big impact on the so-called Reserve currency status why are they going to trust the Americans not only does their money

debase but now they can steal what we've got and so then the Cesar bag said okay enough with that crap and so then they up they're they're buying by this the huge amount from 400 to 1100 would be over the next two years and that's that's not going to change that's going to keep going and C of that is because of what China's already doing and there's already a lot of countries that want to join the bricks cuz they want to get in on the action to help this because it basically that removes but

strangle all the US and over the world's monetary system so that that's why I say in reserve gy status in the US isn't done it's already happening get used to it okay okay this was this was also really good when you put those numbers side by side I think it does start to become very clear especially with all the background context that you provided and so we've got the got another piece of the puzzle to add here and that's gold supply and demand how that is shaping up and I'm maybe I'm maybe most

excited for this C so tell me what you're seeing there well you know um having had training in economics and finance uh I tend to think in numbers and so we talk about Supply demand oh okay let's see what the demand on Supply curbs look like and so I did that and I will just show you what I saw and we see this you see that this is a normal Supply demand curve where the demand curve looks like that because normally if um the price goes down the demand goes up which is why the demand for looks the way it does on okay and

that's that's what every normal thing does and then of course if you have a situation where the supply can respond to it it does and so that Arrangement then it moderates the up and down movement of the price it'll bet such extremes the gold market and the stock market are both oddballs even that the demand curve is completely in inverted and we know this because instead of where the r price goes down the demand goes up in the gold market the gold and the mining Shares are down and nobody wants it whereas

when the price starts going up everybody wants to buy it the same thing is true with the stock market so you get and then the supply curve is also different because it's basically vertic the demand goes up the supply doesn't because you got a gold mine you can't break it up and down like a buos it you're stuck by there so then you got this situation where the um or price if price goes up then the demand goes out and you get a feedback loop and it causes then the price to time curve to look like that

which the mathematicians called pay the um exponential curve because the the slope of the line or increasingly accelerates and gets higher and higher all the typ so it's the second Aran is the mathematician but then what it does because it glees up this way very rapidly it gets to a peak which I think stops when all the buyers have already exhausted their money there isn't any more virus all of a sudden and it goes big time so that's where you have these markets I call them bipolar because it's good the reason

borally ey or they're totally depressed and need to be on meds kind of thing okay that's these kinds of markets but that's get used to it if you're a gold investor okay that's the way it is because of that I think I think certainly gold investors can identify with that okay yes and but the exciting part to me is that when we look at the previous data you can see that the stock market phase is about to end it's had it very high level and and it's at the end of its period it's already done this and

we and we can look at the fundamentals and see how we that's true um the most famous investor in history probably is Warren buff right and he used a particular metric TR that is now called the buffet indicator and what it is is to relate the aggregate market cap of all the US Stocks divided by the gross domestic product of the United States economy okay in the long run average of 70 years that number is about 75% look okay in 2000 before the docon crash that number was 145% and then went down then the NASDAQ

went down 85% within a year and a half or whatever oh guess what it is now it's 180% so you know we are we are we are due the the buyers are going to finally run out of money okay again the numbers and then the whole cycle will return and go to do a third cycle just like the first two that I already this right but the useful thing is that we happen to be talking about the end of the second cycle so that it seemes very clear that okay that's what it does and there's reasons for that we probably don't understand

but Cycles in and in human Affairs and in markets especially they tend to repeat not always maybe not actually but they rhyme as some people to say I'm so and there's are a lot of reasons why that's true yes okay I I so appreciate all the numbers because when you look at what happened in the past and what's happening now it does it starts to become so much clearer so so you've given us you given us a lot of information today and I I think just as we are finishing conclusions conclusions

if we put all this together anything you would leave us with well yeah I would I I I like to share of a few things just now that we talked about the buffet indicators um but one thing to recognize the relations of the go price is that the total aggregate market cap oh the US Stocks is roughly $45 trillion 12 trillion of that is owned by forwarders by the way which is very inter the aggregate market cap of the gold mining industry is 300 billion it's a 15th of it in other words it's less

than a rounding error so what that means is that it doesn't take very money much money that comes out of that in the process of this where going down for it to find a new hole The Leverage to the gold price is in noas so you don't have to see percentage it's it's tiny that's so take art it's and and because it's bipolar and it goes up then you're going to get more and more of it so yeah with and let's see what was I was going to tell you um well of course the other every

bubble if did breaks because it's it's a pin has found it I and people ask me well when's the bubble going to break I don't have any idea NE it is anybody else really but if you were to look at all the pins how bear there's a lot of them and there's one that is particularly troubling to me but nobody's really talking about in relation to this and that is the election of presidential election in November in the US okay because no matter who wins there's going to be tens of

millions of Americans who are going to be royally upset about that and I don't see that St a turn up right it's just one more H but there's they're all over the place they got two Wars going on we've got all kinds of Elections around the world this year in different countries because people are upset about a whole lot of different things particularly this standard of living declining mainly because of all the money printing that's gone on around the world and we know that because of the gold

price because that's just an inverse of the debasement of the currencies so you know as as this is the fact that a money printing at and is also benefited the rich in every country and hurt the middle class than the poor mean when I was growing up almost every family that I knew could live on it with Father self then Mom was home with the kids and these are working for people they're not college educated either and mean that's a bad TR you hear nowadays the um median income family cannot afford to buy the median priced

out and Longs have to work where they can't make ends man this is is that trend is just continuing because 0% interest rates favored the rich because when you print a lot of money what happens when you counterfeit the people who benefit are the ones who get their hands on it first and by the time it trinkles down to the regular folks they're the ones who lose and that's the process has been going on through most of my life but that's not sustainable and that's just one more pit

of people being unhappy where our government's trying to tell us why's wrong with you people you know everything's wonderful you should be happy except they're not because they can't pay their bills and they have to charge food on their credit cards me it's still all right you you have given us so much information today and I want to check in just before we wrap up did we cover with everything that you wanted to go over I think we did okay and I will add just for people who may be watch

watching if they're wondering you know how to build a portfolio and precious Monas how to look at the stocks we've done interviews on that as well and I will I will link those in the video description for this one if people want to go take a look at those previous ones yeah I I never recommend Scots because uh I would only first I'd want to talk about the person and their into the circumstances their age their family size their needs and W and all this their uh risk tolerance there's so many

things so others it would be really wrong for me to talk about what we might should be best there I would I don't want I it troubles me that a lot of people are looking for that and uh they're really mean and to get a good advice to know a lot more about them as people before you start suggesting what to do what they want it tell I I will never do that I completely agree and but you have given them some tools in order to get started so well one thing is buy go at at the very least buy go it's it's it's your it's your

fire insurance and you want to buy the fire insurance policy before the house starts burning okay and the house is about to start so by gold at the very least do that very good okay thank you so much for for coming today to take a r through all of these topics this is very informative for me always I always enjoy talking to you I hope we can do it again I enjoy doing it very much oh that's so nice to hear okay so we'll finish for today once again I'm Charlotte W cloud with investin news.com and this is John

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