[Music] I'm Charlotte McLoud with investingnews docomo thank you so much for joining me great to have you here yeah thanks good morning really good to be speaking with you I think definitely we at an exciting time for gold right now and I'm hoping that you can help sort out for our audience what's going on with the price we really saw gold breakout over the last few weeks and I think that people are looking at what happened and wondering what the driver was there especially because we've got so many


underlying points that have been providing support for for quite a long time so I'm going to start with that kind of Broad and big question there on what you think the trigger was for this price increase that we've seen for gold yeah know I think a lot of people have been wondering you know why the gold price has suddenly uh become in favor um and so you've seen a pretty big move over the past month and a half or so and it really kicked off on the first Friday of March is when they released uh the


ISM Manufacturing survey for the United States basically showing a deceleration in manufacturing activity so further contraction in that and you know as as everyone does these days they're very attentive to what the FED might do in response to any economic data and so people were really anticipating I guess based on that report uh fed Cuts uh probably starting in June and I think to me that's what probably kicked off at least some part of this gold rally but again I don't think it's the only


explanation but it's the one noticeable one where you can see literally within you know a minute of the release of the report you know gold price kicked up and frankly hasn't looked back since okay I think it's it's interesting to touch on the FED because okay so if that was the starting point there that makes that makes a lot of sense and people are always watching closely what's going on with the fed and just this week we got the latest us CPI data and it showed inflation coming in hotter than expected


and I think that prompted people to start asking questions about what's next from the fed you know we were anticipating maybe those cuts begin in the summer maybe now they'll be pushed out further so I'm wondering what are you think think we could see from the FED moving forward this year when do you think those cuts may start yeah know it's a great question um and I think you know it is only one element of the gold story in my opinion and you know I guess for a rate cut perspective obviously with inflation


coming in hotter than I think most people were expecting uh it is becoming a little less likely that they're going to have three Cuts this year probably going to go down to two or less uh so we'll see how that goes but there are there's some other components as well that people should be looking at just in terms of gold and I think this is probably why you know people aren't universally convinced of one particular reason why gold price is appreciated you know to me one of the other big stories


has been over the past couple years is gold buying by the central banks around the world most notably China being probably the most dominant of the lot and to me I think one of the interesting Dynamics about gold is that it's completely independent from the financial system and you know when Russia invaded Ukraine and then had its assets Frozen from a foreign Exchange Reserve perspective related to US Dollars I think that's sent a pretty big shock wave you know around the world in terms of how people hold uh their


foreign exchange reserves and so now I think people you know central banks specifically are recalibrating uh the mix of what they hold and I think they're doing that at the Central Bank level but I also think they're doing that on the trade level as well which to me is probably the more interesting and dynamic part of the whole gold narrative and probably will continue as long as we go down this path of De globalization and geopolitical tension yeah do you think you can go into what you mean thereby by the trade


narrative among the central banks because I think people are quite familiar with the strong central bank buying we've seen maybe they don't know about about that element yeah I think you know if you look at you know specifically countries like China China Russia like the bricks type countries know they've long wanted um another currency or another alternative except for the US dollar uh they've talked about it very openly and you know I think with the conflicts that have emerged whether it's between Russia


and the West Ukraine or China and the United States specifically and I think people are really starting to shift around you know how they actually transact in various Goods so you can see you know maybe you know China may be purchasing oil with gold or that type of thing and so I can definitely see gold being used a lot more on a transactional basis and I guess you know from my perspective when I'm looking at at things that basically just means more demand for gold you know as as us has a dominant place in the world as the


reserve currency by that fact alone it actually tends to generate quite a bit of demand for the US dollar which is hugely beneficial uh to the United States typically get lower interest rates and so forth uh from the non-stage perspective and in Gold it's the exact same way I mean just a sense that obviously you get more demand for its use you'll obviously get probably a higher price as more people want it and I think more and more you'll have people wanting to transact in more neutral whether it's currencies or gold


or some sort of other item that really can't be influenced by another government yes okay definitely makes a lot of sense and I want to talk about Sprout's recent report that went out on what's going on in Gold I think it highlights that strong central bank buying and kind of in contrast mentions what's going on with cftc and ETF gold Holdings which are lower so I wondered if you could talk about what you see going on there and how that's playing into what's going on with gold right now yeah probably one


of the most unusual parts of this gold rally over the past month and a half is that you've actually continued to see a decline in Gold Holdings by global ETFs and so if you look I think over this year you've seen roughly a 4% decline in Gold Holdings in ETFs uh but it's actually down by about 25% if you go back from its peak a few years ago uh which is very interesting because historically when gold prices rally you've often seen that follow through come through and express through uh the


ETFs that hold physical gold which makes sense and so this one is this rally is much more interesting because it's actually the rally has happened despite the fact you've had actual outflows uh of gold Holdings via the ETFs so to me I think there's probably a whole another leg that's missing uh a potential gold demand whether you're talking about retail investors or maybe some institutional investors who would typically play play things through an ETF that holds physical goal versus


buying the bars themselves so to me I think it's a very unique circumstance and one the I think we're probably going to see reverse and probably add to uh what are already pretty good gains on the gold price that that is very interesting so it's not that it's not necessarily coming that retail and institutional demand there it's that it hasn't got there yet what do you think is the reason that it's it's lagging a little bit Yeah I think there's probably a few


different things I think certainly in the United States where I'm bed you know the S&P 500 has done extremely well and I I think people don't feel compelled uh to take any other positions at the minute you know that's done very well so they're kind of sticking with it is sort of have that risk on mentality to a degree uh however we are starting to see kind of the early signs I would say of people seeking things that uncorrelated to the S&P 500 and gold probably being one of the most notable


and logical moves that you can make in that department to get into something that's completely uncorrelated and frankly that's divorced from the financial system uh we can talk a little bit about you know the Sovereign risk and so forth which to me is going to be increasing uh certainly over the next decade yeah and definitely I was going to ask you we've gone over a number of gold price drivers but if there's anything else on your radar that we haven't covered let me know yeah I'd probably say one of the


things that least sort of in the midterm I would say would just be focused on increased risk on The Sovereign level you know I think a lot of people you know if you look back back over the past few crisis we've had whether it's covid whether it was um you know the financial crisis of 0809 even the.com you had a significant bailout basically coming from uh Federal governments around the world and the interesting thing about that is when that all started more than two decades ago starting with the


Doom bubble you've had a significant increase in debt levels uh taken on by federal governments and you know the United States in particular to me is at a point where you know you've got a deficit of about 6% of GDP a year you've got you know debt to GDP at about 100% And you know if you rewind back 20 years ago it was probably like you know quarter of that or something maybe a little more than that but significantly different uh than what it is today and so the ability I think for Sovereign


governments to actually take care of these problems that we often have is going to be probably a little bit more diminished and to me one of the sort of canaries in the coal mine was um uh Britain where you had Liz truss's government uh you know proposing basically some tax cuts effectively basically effectively increasing the deficit uh to propel things in their economy and you looked at the currency went into a tail spin immediately yield spiked immediately and to me that that is such a small thing uh that they did


but it was what tipped them over the edge and I guess my point is you definitely don't want to be anywhere close to the edge with something so Grand on like on the sov level so I think people should start taking note and I think people are already talking about a little bit uh but to me I think you probably want to start getting a little bit at least of some protection like goal uh sooner rather than later very good point thank you for going into that I think if we if we put all this together and and look up what


you've been saying it sounds like for you although the gold price it's historically high at the moment it looks like there's still could be room for it to move higher and I think I think many people are looking at it and they're they're excited to see gold this high but they do wonder if it's sustainable so I wondered if we could talk a little bit about gold's price potential moving forward this year and what we might see there from your perspective yeah I guess you know I guess it's all relative right


I mean every investment should be measured against the opportunity cost of others of not holding others and so I guess when I look at things you I think people are so heavily weighted particularly United States in S&P 500 stocks where trading at all-time record values so if you look at you know the Shiller price earnings ratio multiple uh it's trading at about 31 times normalized earnings and the historic average is actually half of that and so you're you're way above me uh the norm


uh and that's also not including the fact that we're also basically at Peak profit margins as well so that number actually probably understates uh the value differential between that and I would say average valuations and then so I look at gold um and if you if you truly believe that you know the countries are going to continue to be Reckless whether it's fiscally or even on a geopolitical side you know to me it is much much better to have something uh that you know is not overpriced uh and that can be used in


transactions all over the world that no one can touch when you get to these types of levels of risk I would say whether it's financial markets risk or geopolitical risk and so to me gold is probably one of the few elements that actually exhibits those okay and I'm hoping we can touch a little bit on the gold stocks as well because I think that people are looking at Gold stocks they're seeing price very high and I I believe gold stocks have moved to an extent but maybe not to the extent that people would like to see


them move so what are you seeing there when you look at the Gold stocks what what do you see moving forward for them this year yeah gold stocks are interesting because they've lagged the gold price which is actually pretty unusual so year to dat gold price is up about 14% And The Gold stocks are up about %. and typically if you look at just the margin expansion that they have based on increased gold price you typically expect sort of a two to1 ratio so if gold price were to go up 1% we'd expect


profits for the underlying gold companies to go up about 2% therefore the share prices go up about 2% and the unusual part I guess is we haven't seen that and it's actually only been very recently probably in the last two two and a half weeks that you actually see actually gold equity's become positive even though the gold price has been positive for quite a while this year and so they're just starting to catch up but there's still Fair bit of room there in my mind to catch up and I think you know


to me I look at the Gold space being kind of a very tactical opportunity that you can take advantage of because like any cyclical business you get times where valuations are really high you know you've got a lot of people interested and then conversely like today you've got valuations that are very low you have disinterested investment population uh and so to me now is now is a great time to be you know in the gold equities in particular and take advantage of both the gold price and actually the low sentiment in the gold


Ling space itself and so to me it's probably a great spot to be on theet side and is the Lang that we're seeing there is that again related to maybe people are more interested in the tech sector they don't want to be in Golden precious metals right now what are you seeing as as the reason for that yeah I think that's probably a good answer to the question um you know I think you know if you look back historically at gold mining companies usually uh it's been a lot more speculative I would say


in terms of what people are doing with gold equities and some of that maybe it's been taken out a little bit by Bitcoin or so forth but I think now that people are kind of coming back to Gold to just early stages I would say from the physical sense to me the next logical step it is them moving into the equity side and they'll typically start off with i' say a larger more Diversified players in the gold space and think of you know the big ones likeo Eagle baric numont the bigger players uh


and also probably the royalty companies as well uh given those are well Diversified and probably the safer way I guess you're just going to di your toe into the gold Equity side of things okay yeah so certainly it just seems like we're in a little bit of a waiting game right now but but things will start to move at some point thank you for going into that as well so gold great to go over what's happening in Gold we should also though make sure to touch on Silver so silver I think we do


expect to lag behind gold which of course it's been doing but it has been on the move and this week I saw it over $28 which made me really do a double take on the screen when I saw that number so silver I'm wondering if you can shed some light on what's going on with silver is it following gold up right now or are there things going on on its industrial side that are also at Play well after long lagging gold it's finally getting some love uh not a lot but a little bit finally um just a bit


uh but to me it absolutely should um you know it's partly viewed in some circles as a monetary metal partly in other circles as an industrial metal uh and it's not a lot of good things going for it so I guess just on the industrial side for one you've got solar panels being a dominant part of the growth growth story in demand for silver and to me that is absolutely going to continue you as we Electrify the world with clean energy and so to me that that is Absolut natural and on the monetary side um


what's interesting to me is that it's probably the more affordable way for IID say retail investors to actually take advantage of i' would say monetary debasement that people usually focus on with gold you know being obviously a fraction of the cost on a pars basis and so typically you know you get actually some magnification in the returns when you invest and silver tends to be a little more volatile than gold and so you know to me we expect gold to continue to move up and we'd expect


silver to follow and maybe even exceed uh gold price appreciation given the lag and also the 10 10 for the commodity to actually overshoot gold both on the upside and on the downside terms of price performance yes so so looking at this silver price you know what would you say is is the main level we should be looking for right now I think in my head I have 30 is a big number that we should look out for but I I don't know if that's exactly correct so what are what are you thinking yeah I


would definitely have $30 in mind for sure I don't think that's a stretch at all um and again I I continue to think over time it'll continue to increase uh just like we're forecasting for gold so good long-term future ahead of that for sure yeah and you know on the note of silver I think one of my my favorite questions to ask when it comes to silver is we have this big deficit we've had deficits for I think the last several years these very large deficits and it's so interesting to me that that is


happening but the price is not well it's moving a little bit right now but in general kind of staying in that rangeb area so so any thoughts on on that and why why there is that situation yeah for the last several years we've had huge deficits on the silver side and really they've been supplied by the inventories that that are kept above ground and but what's interesting about that is no one knows exactly the full quantity of inventories that exist there's some estimates out


there uh but you can imagine they're dwindling quite rapidly and what I've observed over time with with any commodity is that you know you can have these deficits for a little while uh and then literally one day people wake up for one reason or another and all of a sudden you get the move and the price starts running away pretty quickly on you and so to me you always wanted be positioned even though you can't explain kind of when exactly might happen you really want to be positioned kind of


ahead of that and to me that's kind of the perfect setup for silver now so to me I would use it as opportunity less of a frustrating aspect of it just understanding the Dynamics of it and so you having seen all kinds of different Commodities go through it to me patience is one of the things uh that is absolutely required and frankly usually were well rewarded as well very very good reminder not to get frustrated when you're presented with what what could be an opportunity okay I think we've gone


through quite a bit on gold and silver but before we wrap up I'll put it back to you ask if you have any final points that you would leave investors with yeah I would just say just from a gold perspective I mean you know it's broad here we recommend people have 10% of their wealth uh in physical gold and from a gold Equity side we usually recommend anywhere from Z to 5% portfolio again just on a tactical basis you know 0% when things are overvalued frothy prices have gone up a lot and then 5% when things are kind of down and


out low valuations and no one cares about the space just like any other cyclical space so to me we're definitely in that five category where no one cares but you can feel people are starting to care and to me it's one of those things that you can take advantage of the gold price and the optionality that gold equities have okay I think that's that's a great place to wrap it up for today thank you so much for coming on to go over what's going on in gold and silver this was really good thank you of course and once


again I'm Charlotte McLoud with investing news.com and this is Ryan McIntyre of sprot thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]