August 3, 2023 • 44 mins
The price of gold tends to do well in times of elevated uncertainty about economies and financial systems—something the world has seen a lot of in the past few years. Yet each time the precious metal rallies above $2,000 an ounce, it quickly falls back below that threshold.
Why is that? Joe Cavatoni, strategist at the World Gold Council, joined the What Goes Up podcast to explain what drives the price of gold, what buyers need to know and why that magic number has served as a ceiling. One main reason, he says, is that when prices go that high, they tend to reduce the real-world demand for gold—including from buyers of jewelry in China and India.
“These are price-sensitive businesses and price-sensitive consumers,” Cavatoni says. “So when you start seeing those types of price levels develop, that’s when you see those types of consumers back away from buying—and investors aren’t ready to step back in in the long-term.”
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Episode Transcript
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Speaker 1 (00:13):
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg, and.
Speaker 2 (00:20):
I'm Bildana Hairik, across Acid reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, we're going to talk
about one of the oldest and, let's be honest, most
often misunderstood investments, gold. What exactly is it? Is it
an inflation hedge, is it an interest rate hedge? Is
it a risk asset or is it a risk off asset.
We're going to get into it with an expert on
that shiny yellow metal. But first I have to ask
(00:45):
you had yet another luxurious, glorious vacation. Where'd you go?
Speaker 2 (00:51):
We went to Italy? But this was my first vacation
of this entire year. Oh yeah, so you can't say
yet another that makes it sound like I'm like jet
setting all the time.
Speaker 1 (00:59):
Yeah, but you have you ever had a staycation? You
were always like, yeah, doing COVID yeah, but otherwise you're
like you're you're a globe trotter.
Speaker 2 (01:07):
But if you're sitting around at home, you know, like
then you get anxious and then you're like, what do
I do with myself.
Speaker 1 (01:13):
Yeah, that's that's how I end up in Italy. Well,
I really enjoy a nice as the one does.
Speaker 2 (01:23):
There was one day where wildfires broke out like all
over where we were in Italy.
Speaker 3 (01:29):
Yeah.
Speaker 2 (01:29):
I've never seen that really, like very close up.
Speaker 1 (01:32):
That's scary.
Speaker 2 (01:33):
I know it was an experience. Anyway, we're keeping our
guests waiting. Maybe he has thoughts about vacationing in Italy.
Find it's Joe Cavatoni. He's a market strategist and head
of America's at the World Gold Council. Joe, welcome to
the show.
Speaker 3 (01:50):
Thanks for having me.
Speaker 2 (01:51):
Maybe you've been to Italy recently and me and you
can be in the same group, the jet setting group.
Speaker 4 (01:57):
Recently now not since COVID. I haven't been back since COVID,
but I've been there many times.
Speaker 1 (02:02):
See something about your last name made me think that.
Speaker 3 (02:05):
Joe.
Speaker 4 (02:06):
Yeah, my suggestion is to go to the first two
weeks of December. Yeah December, no crowds, no holiday rush,
no students.
Speaker 1 (02:17):
Yeah, huh, good advice. He's got gold and vacation strategy.
Speaker 2 (02:21):
We want to hear more about gold, so I'm hoping
you can start out telling us about your role and
actually telling us a bit more about World Gold Council.
Speaker 4 (02:28):
Got it, okay, So my role is to help people
understand what this asset is, how to consider analyzing it,
getting the data that you need to understand it, and
actually finding a place in your investment portfolio or in
your consumption life, and feeling comfortable and confident that you've
(02:48):
made the right decision. So we have data, insights and research,
and as an organization we are made up of the
world's largest mining members in gold. But this not profit organization,
The World Goal Council spends its time working on market
structure issues. Again adding to that market structure that insight,
(03:08):
research and information that we provide people, but also looking
at policies and market structure where we can actually help
evolve the market in a way to make it easier
to access, easier to understand, and most importantly trusted, because
that's the thing that people need to understand the most
about gold is what I've bought. I understand it, and
I can trust that it's what I bought, and that's
(03:30):
what we do well.
Speaker 3 (03:31):
Joe.
Speaker 1 (03:31):
You know, as I mentioned in the introduction, I feel
like the narrative, the explanation of what's driving gold prices
is kind of a moving target, So help us think
about what drives the price of gold up or down.
I mean sometimes you hear it as a risk off asset,
and you obviously see it rally on days when the markets,
(03:52):
the rest of the markets are in turmoil. For years,
I heard it was an inflation heade interest rate. What
are the main drivers of the price of gold.
Speaker 4 (04:00):
It's where we usually start every one of the discussions
we have, particularly with institutional investors, is in this very
point we talk about gold in the context of strategic
and tactical drivers as an asset. It's very unique because
when you think about the strategic drivers of gold and
(04:21):
how gold is consumed worldwide, it's consumed in the consumption way,
which is through jewelry, small bars, and coins, maybe in
technology like your iPhone, where it's a component that's in there,
and those types of consumption behaviors are driven strategically through
economic expansion. Simply put, you get wealthier, you feel comfortable
(04:43):
about buying jewelry, or you buy more technology, and you
actually see economic expansion putting money in pockets and people
actually using that to invest in things, including gold.
Speaker 3 (04:54):
The consumer side of things.
Speaker 1 (04:55):
Do you list that first, because that's the primary main
driver in your opinion.
Speaker 4 (04:59):
It is, But I'm going to come back around and
talk about the big markets like China and India, where
there's a bit of a mix because it is consumer,
but there's also an element of savings there. And then secondly,
you look at the investment side. So when market risk
and uncertainty develops, higher levels of volatility, confusion around what's
going to play out for the next period of time,
(05:21):
whether it's one month, one year, whatever the case may be,
long term, which is how we often make sure people understand.
That's how you need to view gold. The market risk
and uncertainty is benefited when gold is added to your
portfolio because in that context, investors see the type of
diversification benefit you get from gold in your portfolio helpful.
(05:45):
So it correlates positively when equities, for example, S and
P five hundred goes up, and it correlates negative when
the SMP goes down. Simply put, So you've got those
two strategic drivers. Adding to that, you've got a global asset,
so it's not just something bought here in the US,
but it's bought and sold in the US, Canada, Latin America,
(06:06):
South America, all over the world, China and India two
huge markets from a consumption perspective. And in addition to that,
this asset is actually produced and supplied on a global
scale as well. So you've got a global element, you've
got a regional element, you've got a consumer behavior, you've
got an investment behavior. And it's really kind of exciting
(06:28):
because you really don't know that until you start really
digging into the detail.
Speaker 3 (06:32):
Now in the.
Speaker 4 (06:33):
US market in particular, it can be a little frustrating
because what you tend to find with people is they
want to shout from a pit on a trading floor
about the next thirty minutes of what's going to happen
with gold and the futures, et cetera, et cetera. And
that's the tactical things that you need to understand. That's
the noise you need to tolerate when you look strategically
(06:53):
at it. So there you've got opportunity cost and momentum
the two driving factors there. Opportunity cost is like what
we've been seeing for the last call it nine months,
rates are moving. How should I be looking at most
opportunistic moments. Let's use a pool of liquidity that I
can get to, like gold, very liquid asset. We'll talk
about that, and then when it comes to momentum, is
(07:16):
something happening quick? Is something happening now? Those two factors
move gold on the short term.
Speaker 2 (07:22):
So Joe, can you talk a bit about what the
price of gold has done this year? You mentioned monetary
policy for instance, like how that impacts things or even
you know we have the US credit downgrade news this week,
how might something like that impact the price of gold.
Speaker 4 (07:38):
So this year what we've seen are two things. Number one,
the monetary policy, we'll bring that in now continuing to
be a headwind, the opportunity cost, the rotation of assets,
and a portfolio risk asset behavior, how people are dealing
with their risk assets. That's a moment where we see
(07:59):
headwinds for gold. People don't look to gold in those
moments when movement and rates and movement in those risk
assets is taking place. We often see it a headwind
for gold because it's used as a liquidity source. And
then once people have made their allocation, they come back
around to gold and they put in their portfolio of
that ballast of kind of holding three, five, ten percent
(08:20):
of their portfolio. So the price behavior this year has
seen a lot of that, but within the course of
the year, we've also seen systemic events or moments, events
that have kicked into place a banking crisis. For lack
of a better way of putting it, you're a Silicon
valley bank, your first republic, your credit sueze. Moments where
(08:42):
there's a crisis and people say, hey, look, I need
to make sure that I can preserve my asset, all
my real assets need to go up. My safe haven asset,
which is often how it's referred to, is where people
go with gold. And so we've seen these moments and
now over the course of the last three to six months,
we've had a few, but not a lot. I think
that I was expecting to potentially see Wednesday's announced cut
(09:05):
by Fitch in the rate for the US the long
term debt rating to potentially be a flight to quality
for gold, but it hasn't been just yet. So what
it has been is it's been something that's had a
negative impact on the price, and ultimately what that means
is we're going to start to see the price rebound
when people move away from it being a liquidity source.
So you see a gold price that right now because
(09:28):
of the possibility of things that are happening in the
monetary policy space. When are the rate hikes going to
stop peak and we're going to start to see the
other side of this when the fense managed to cool
off the economy. Once that starts to develop, that monetary
policy will loosen up the ability for goal to start
to see itself run. Right now, what we're seeing is
(09:49):
range bound pricing on the gold market. So you see
us holding firm at about a eighteen fifty nineteen hundred,
almost nineteen fifty level, but not breaking out. We had
a moment earlier in the year around that banking crisis
where we did break out. We're not really breaking out
just yet, and it's simply because most institutional investors have
not come back to the table. The range bound pricing
(10:11):
behavior we're getting is being held up by mainly a
lot of buying by central banks, which is a trend
we've been seeing for a long time.
Speaker 1 (10:19):
Yeah, Joe, you know, it's interesting when I look at
a long term chart of the price of gold, that
two thousand dollars an ounce level is really interesting, you know,
it peaked a little bit above it for a hot
minute in twenty twenty, again in twenty twenty two, and
I think again this year. And you know, looking at
that chart, the technical analysts would call it, I guess
a triple top, you know, suggesting that two thousand level
(10:42):
is kind of the ceiling for gold. And I wonder
how you think about that. How important are the technicals
like that for the price of gold. Does the fact
that it keeps testing that two thousand dollars level signal
anything that maybe it'll eventually break out above it?
Speaker 3 (10:56):
You know?
Speaker 1 (10:56):
How important are these technicals and especially that round number
of two thousand and ounce.
Speaker 4 (11:01):
I think they're important and they're not to be ignored.
And I think that where it comes into the context
with which we're speaking to our investors and central banks
and sovereign wealth funds and talk to them about it
is really to help them understand their entry point into
the gold market now that two thousand point and those
technicals they start to impact some of this other area
(11:25):
of demand for gold I mentioned consumers, so jewelry in
China and India. These are price sensitive businesses and price
sensitive consumers. So when you start seeing those types of
price levels developed. That's when you see those types of
consumers back away from buying. Now, if they're backing away
at a two twenty and seventy five, I think is
(11:46):
where we hit. They start backing away, and our investors
aren't ready to step back in. The long term investors
aren't ready to step back in. That's why you're seeing
us peek out and kind of hold off. So what
we need to see next is some sort of understanding
by the investment community that the policies that the FED
are dealing with are leading to a clearer outcome, a
(12:08):
clearer roadmap, and then you're going to see our expectations.
You'll see these investors come back to the table and
gold will again have that slow, steady rise in its
price point. Now you see these spikes when it comes
into play around moments events. Again, earlier in the year
we hit that over two thousand level, and it was
again around that banking crisis. You start seeing those peaks.
(12:29):
So it's important, but it's not the only factor to
take into consideration.
Speaker 2 (12:33):
I'm interested in the idea of gold as a haven asset.
So let's say we do have some of these instances
that you were talking about that we've had this year.
Why go for gold as the haven asset versus something
like treasuries.
Speaker 4 (12:46):
I think what you start to see are two factors
that are pretty significant in terms of performance. It's a
limited source asset.
Speaker 3 (12:55):
So over long term performance.
Speaker 4 (12:57):
You'll see that gold will act appreciate, okay, And ultimately
what you find with the asset is, second, it's very liquid.
The asset trades about one hundred and fifty billion dollars
a day. So what I'd say is those factors really
weigh in and actually make people feel comfortable and confident.
(13:18):
And they are not linked to anything like a credit
rating or a dollar currency or whatever the case may
be that could have another level of impact on the
overall price performance and trading activity of an asset. So
you're really looking at a unique asset that stands by
itself and ultimately, with these unique drivers for consumption, will
(13:39):
continue to push the price higher over time. And that's
why I think people feel comfortable and confident putting it
as a component, not the only component. Again, a component
and a portfolio.
Speaker 1 (13:57):
You know, Joe, I'm curious about the supply side when
it comes to gold. You know, the world gold Council,
as you mentioned, represents a lot of the gold miners
of the world. And you know, the supply chain story
was such a big story with almost everything there for
a few years, shortage of workers, shortage of industrial equipment,
higher interest rates, everything sort of combining to cause some
(14:19):
major supply chain issues, you know, a whole variety of products.
Did that hit the mining the gold mining sector at all,
And how does that supply side sort of affect the
price or is it more you know, the miners are
reacting to the price rather than you know, affecting the price,
if you know what I mean.
Speaker 4 (14:39):
Yeah, it's a great question. And I'd say that no industry,
at least from what I could see, was immune to
what we experienced in the early days of COVID.
Speaker 3 (14:49):
As a matter of.
Speaker 4 (14:50):
Fact, the piece that impacted the gold market the most
was transportation movement of assets around the globe. We are
a physical asset, and when planes were grounded or space
on planes was limited, or people were uncomfortable touching things
for lack of a better way of dealing with it.
(15:11):
We literally saw, for example, in the US comec's futures
prices going out of think with what the underlying gold
price was doing simply because they were trading at a premium,
simply because it could not be matched with the gold
that needed to be flown into New York, put into
the vaults and actually collapse at premium. So we saw
(15:33):
it there probably the most where you have an inability
for assets to move around the globe. Now, mind sits refiners.
They weren't in any way only impacted. They were all impacted.
Mind sits refiners. They were all impacted in terms of
the same way other corporations were impacted. Send employees home,
you know, figure out how to reopen, deal with the
(15:56):
PPP issues. All of those things came into play and
they slowly came back online. What I think was also
very challenging for us was when you've got gold sitting
in a vault, how do you get in? How can
you do your inspections? And every one of these organizations
was scrambling to make it all work efficiently. Now, more
than the constraints on the market, the safe haven nature
(16:19):
of gold basically saw the benefits, and that's where the
price moved. When people were concerned about risk, concerned about
what's going to happen with their portfolio, they moved into gold,
and that drove the price more than the limited amount
of supply. When the mining companies were able to get open,
the refiners were able to get open, they came back online.
Transportation came on slowly and they came back online. So
(16:39):
it had an impact like everywhere else. But we also
saw that price appreciation was a consequence of people having
that fear and that need for a safe haven asset.
Speaker 2 (16:50):
What about on the demand side, who are the biggest
buyers of gold? I think you mentioned consumers already. I'm
also interested in the central bank aspect, like how who
which central banks and how much demand is coming from
the central bank side as well.
Speaker 4 (17:05):
So far and away, the two largest markets for consumption
of gold tend to be China and India, and that
tends to be consumers that are retail oriented, mainly jewelry,
but also small bars and coins, so a real consumer
type market. It's grown out of a history and tradition
of the affinity for gold, where people may not have
(17:28):
had bank accounts, they may not have had access to
the securities markets, and ultimately this was a mechanism for
having something precious in terms of what they were looking
to own but also saving their money. So those are
the two markets that i'd say stand out prominently and continually,
and they've developed and evolved over the last twenty years
(17:48):
in a very fantastic way to even bring financial markets
and financial assets to those markets as well. So you're
seeing that more in China, but it's starting to appen
in India. On the central banking side, what we've been
seeing for let's call it thirteen years, is emerging market
central banks diversifying their reserve currency portfolios and adding gold.
(18:11):
What they're doing is they're moving into the asset for
the concerns around inflation, concerns around need for liquidity, looking
at how they diversify their foreign currency exposures to the
dollar and the Euro. We just recently published our annual
survey where we have over fifty five central banks that
respond to us, and most have indicated that they're looking
(18:32):
over the next five years to lower their reliance on
the dollar and the euro, not just the dollar, the
euro as well, and actually looking at gold and looking
to increase the overall allocations that they're making there. Again,
these are emerging market central banks mainly, and they're spread
out across the globe. It's been a really interesting trend.
Speaker 1 (18:51):
One thing that's really interesting about gold as an investment
is there are a variety ways to purchase it. You know,
you can buy the GLD ETF. Many of our listeners,
I'm sure are professionals who perhaps dabble in the futures market,
that's the other way. But then there's this whole other
world of gold coins that's gotten a lot of scrutiny lately.
(19:13):
I'm I'm sure you know what I'm talking about quote
unquote gold IRA companies. Washington Post out a story recently
saying over the past decade, more than thirty customers in
twenty states have sued a dozen gold IRA companies. Federal
regulators have sued four companies, two in the past year alone,
claiming investors were systematically charged as much as triple the
(19:35):
coin's value. You know, if you're not a sophisticated investor
working at a hedge fund, trading futures, or even dabbling
in the ETF space, what do you need to know
about buying gold in some of these schemes? You know,
what's sort of the the alarm bells that go off,
And furthermore, you know, I get the sense that it's
(19:56):
hard to regulate these type of operations.
Speaker 3 (19:57):
And that's only a regulated asset.
Speaker 1 (19:59):
It's really they're not selling a regulated outset. So how
are you thinking about these type of operations and what
the listeners need to know about them.
Speaker 2 (20:06):
My dad's always telling me to buy gold bars.
Speaker 1 (20:08):
Buy just the big bars. Yeah, yeah, he goes big.
Speaker 4 (20:13):
That's a great point. I should take him on holiday
to Italy for saying that. Let me unpack this a
little bit, because I think there's a couple of things
that are embedded in this question that people really need
to have an appreciation for. So I want everybody to
have a visual We often talk about the swimming pools, right,
like the swimming pools and all the gold in the
world gets stacked up around that whole thing. But think
(20:34):
about what you've seen in photographs or maybe even in
the real world when you visit them like the FED
or you go on a tour the vault and there
are large bars, the very large four hundred ounce large
bar format was what we refer to. That large bar
format is probably one of the largest markets.
Speaker 3 (20:52):
For gold worldwide.
Speaker 4 (20:53):
Okay, so everyone wants to just go to coins and
little bars, and they're talking about those little tiny ones
that are about the size of a of a simcard
or maybe a little bit bigger than that. I want
everybody to remember that the largest component that they need
to be understanding is that when we buy gold for
GLD for example, that's the kind of gold that we're
transacting in. That is a wholesale large bar market. There
(21:16):
are lots of institutional traders that are doing the work
in that market. There's big banks like JP Morgan, HSBCICBC
that are facilitating that through their role in.
Speaker 3 (21:26):
The London market.
Speaker 4 (21:27):
And those markets are open for large institutions to buy.
So when we hear about pensions buying like in Texas
or in Alaska and other places, these organizations are buying
those types of large bars.
Speaker 3 (21:39):
That's a huge element of the gold market.
Speaker 1 (21:42):
So when we say nineteen hundred and fifty dollars an ounce,
it's referring to one of those gold bars sitting in
a warehouse at the LME or somewhere like that.
Speaker 4 (21:52):
That's right, it's the four hundred ounce reference to the
ounce that's primarily that level. Everything else starts to derive
its price off the back of that. A kilo bar
is about the size of an iPhone, and actually, when
you think about a kilo bar, that's what's backing a
lot of the contracts at the CMEME. That's what people
may be buying and putting in a safe or in
a safe deposit box. And those are very common too,
(22:14):
and they are a huge market as well. But smaller
bars tends to lead to the more higher level of
risk for fraud because they're easier access, they're easier to manipulate.
And then you get smaller bars in that and then
you get into the world of coins. Now, often what
we hear about in the US market are fraudulent activities
taking place, and most of it is around sales practices.
(22:37):
And this is the disappointing thing and why we are
focusing on it in terms of an initiative that we
have and I'll talk to that in a moment, but
the sales practice that talks to confusion in the investment
market around the numismatic value of a coin, something that's
highly collectible, and then a premium to that ounce price
you're talking about because of the scarcity of a coin
(22:58):
issuance and then just coin price. So once people start
getting confused by that, and they get pressured from high
sales pressured environments, people working the phones heavily and pushing hard.
They move quickly to sell you something at the wrong price.
And often that's what we're dealing with. Most of the time.
(23:18):
The value of the underlying coin isn't a problem. It's
usually that moment of sale. You're catching me at a
weak moment, or you're telling me it's too good to
be true, and I fall for it, okay. And that's
why we have our process around responsible gold investment principles
(23:38):
and our practices that we have on our website to
tell people, Look, if you're going to do what you're
going to do, which is by retail, please go and
check out these principles that we have. Ask the right questions.
If it says it's too good to be true, it's
probably too good to be true. And that's why we
are pushing that initiative in India, China, Germany, the US
(24:01):
and working with reputable firms to say, how can we
take these principles that we have, How can you work
with us to self certify against these types of principles
so we can get that message out to people because
we are dealing in a world of gold, and it's
not regulated in the US markets, and these sales firms
aren't subject to licensing to sell these coins. But what
(24:21):
we are subject to is trying to get to people
to understand. Look, best practices can be achieved. You don't
have to buy in a haste, and you don't have
to buy in an urgent moment. And the CFTC will
come down on people and they will use their ability
to find people and reprimand people, and they'll do that,
but they have to hear of the cases, they have
to go out and investigate, and it's a moment that's
(24:43):
too late in the process. So we encourage people to
slow it down, understand what you're trying to achieve, ask
the right questions, and that's what we would say to people.
Speaker 3 (24:51):
Now.
Speaker 4 (24:51):
Part of why the ETF has been such a success,
but remember it's only about two to three percent of
the global gold market in terms of all the ETF
worldwide assets, is that it democratized and it put an
unregulated asset into a regulated environment. So you can feel
good if you're going to buy an ETF, but you
can buy physical Just slow it down and understand what
(25:12):
you're doing own an ETF and you're getting price performance
and it's regulated and you shift feel good about what
you own there, or use futures and it's regulated again,
another rapper that's regulated by CFTC.
Speaker 1 (25:25):
Yeah, So I was looking at the GLD the management
cost of it. I think it is forty basis points
something like that, sort of high for an ETF. But
I guess for you know, gold, there's a whole lot
more going on. You have to store it ensured and
all that. So you know, is that ETF probably you know,
for your average investor, do you think that's the most efficient,
sort of cost effective way to get exposure to gold?
Speaker 4 (25:48):
The way we approach it with our clients and when
asked and by the way, the World Wal Council is
the sponsor for GLD, but we're happy to talk to
them about all the different mechanisms to own gold and
actually all different ETFs as well. What people need to
understand is how large is my position going to be,
what's my period for wanting to hold it? How often
(26:10):
do I think I might need to rebalance it? And
then look at each one of these instruments. So GLD
is a forty bases point product. But it is the
most liquid ETF worldwide that's physically backed by gold, and
it is the largest asset worldwide physically backed by gold
by far. But there are other alternatives that are less
expensive from a management fee perspective. But you need to
(26:32):
understand is the asset liquid, is it going to perform
and track the gold price like I wanted to? And
what's that management fee? So what is my total cost
of ownership calculation I'd use with every other ETF if
I'm looking at it, like the cost of commissions, the
cost of impact of trading, the management fee, and the drag.
And then this case is tracking costs as opposed to
(26:52):
ERIC because of the fees that go along with understanding,
you know, vaulting and custody and things along those lines.
But you know, look, gld is a perfectly acceptable instrument.
Still about a fifty to fifty split between institutional and
retail platforms that are owning it. But you've got GLDM,
You've got IAU, SGOL, bar AAAU, you know a bunch
(27:14):
of different assets that are out there. That's the US alone,
about eighty five instruments worldwide.
Speaker 1 (27:19):
Wow, eighty five instruments world right.
Speaker 2 (27:22):
I also was looking at gold. I noticed it had
outflows the last two three months or so. So I'm
curious when you do see investors actually putting money towards
something like GLD, like, what do the circumstances have to
look like? And how did it hold up when we
saw inflation? When you know, because we do talk about
(27:43):
gold as an inflation hedge, did it hold up as
an inflation hedge the last couple of years?
Speaker 4 (27:47):
Number one attracts the gold price and it's tracked the
gold price for almost this next fall twenty twenty four
to be twenty years. So yes, it performs and tracks
the gold price, no questions asked. So operationally efficient. What's
interesting about the dynamic with GLD first asset to market
in the US, second asset to market in the world.
(28:08):
The first was in Australia. So when that happens in
the world of ETFs, what happened in the past with
ETFs is that you cornered the market on being that
capital markets instrument over ninety five percent, if not ninety
nine percent of the related instruments in the derivative market,
option trading and so forth is really written only on GLD.
(28:32):
So what you end up with our institutions that are
buying and selling in the asset itself and the institutions
that are trading in those options markets, so they're feeding
on that total overall liquidity and overall size of the fund.
But that leads to a layer of AUM that will
basically be speculating and trading. So you'll see that gold
will have a higher level of volatility in its flows
(28:54):
than any other instrument in the market. So to your question,
how did it hold up in inflation, what we saw
with the asset was actually flows that we're actually trading
in that range probably about ten percent of the overall AUM,
and then a hold on the part of most of
the investors. And that's what we continue to hear today
is most of the conversations are about when do I
(29:14):
go back in, not should I keep holding my asset?
So the asset flows out from the US have stopped
slowed and people are on hold, waiting to see when
there's the next move in Again. At that top end
where you have that AUM that's linked to trading options
and the like that's been volatile, that's when people are
trying to time the market pick the spot to sell,
(29:36):
to buy, to cover the shorts, et cetera.
Speaker 1 (29:53):
You know, Joe the Don and I over the years
have talked to a lot of cryptocurrency officionados will all
the digital goal, digital gold, and that is always the
the sales pitch I which the listeners could see Joe's
face reacting to that, but that you know, that's among
the many sales pitches that come and go for bitcoin
(30:15):
and other cryptos is digital gold, you know, a safe
way to store your money, blah blah blah, Yeah, inflation edge.
I'm guessing you and your colleagues haven't lost a lot
of sleep over that, or have you? How do you
you know? Does does crypto really compete with gold for
all the same investment cases that people are attracted to
(30:36):
gold for.
Speaker 4 (30:37):
I'm going to start by saying, the evolution of technology
is amazing. The ability to have better, faster, more comprehensive
access to database management, transparency around pricing really cool stuff. Now,
as it relates to bitcoin and gold, we've done a
(31:01):
lot of work to try and make sure everybody understands
that these are two different assets. They behave differently, they
actually correlate differently, and bitcoin correlates more like a tech stock,
not the kind of tech stocks that are running as
of late, either, but tech stocks in general, because, like
I said, a lot of people see the same thing
I see, which is the technology is really amazing. Now,
(31:24):
how will it evolve over time in the form of
a currency. I don't know, but I know that the
big challenge that they're facing in the category today is
that they tend to want to be a hammer looking
for a nail. You say inflation, I can hedge inflation.
They don't hedge inflation. When you look at the performance,
(31:44):
you say I need safe haven asseid, they say, I'm
safe haven acid. Then guess what they aren't. You say,
I want to, you know, use it for payments to
buy a diet coke down at the seven to eleven.
Speaker 3 (31:54):
They go, yeah, you can do that too.
Speaker 4 (31:55):
They want to be everything and everything for everyone without
really kind of nailing down exactly what they are, which
makes it really challenging for people to analyze the asset
the same way you can analyze gold and say, look,
central banks are buying for the following reasons. Jewelry sales
are down in China because people are locked down under
COVID so that's going to kind of keep us price
(32:16):
range bound. Right now, you can use these assets and
the data that we have and the information to kind
of understand, analyze and make a sensible investment in gold
and look at it and get exactly what you expect
out of a portfolio performance from it. But in the
case of bitcoin, and it is pure speculation and look
have at it. And where we've gotten to with our
dialogue with clients today, guess what we say to them, Sure,
(32:38):
you want to buy that risk asset. You might want
to consider a gold allocation to offset the risk that
comes with it. So buy them both, because that's over
there with your equities and your bonds and your private
equity and your risk and over here is a safe
haven asset. And it's wrong to say it's a digital
version of gold, because gold's used in technology. It's used
(32:59):
in medical applications, which is a small component of the
big markets that we talk about, but it's a growing component.
But it's also used like you know, it's in your iPhone,
And it's hard to kind of pinpoint exactly what bitcoin
is doing. But look, I'm not saying it's not a
good asset. It's not a right asset. I'm just simply
saying it's a wrong comparison to say gold is in
(33:19):
the digital form in that case. And just two other
quick points on this, because I know I'm banging on
a little bit on.
Speaker 1 (33:25):
I thought I thought you'd have some thoughts on this je.
Speaker 4 (33:28):
But the digital technology that we're using in the gold market,
like we're on a journey as we speak. The LBMA
and the World Gold Council are on a journey piloting
technologies to better track and trace the underlying goal that's
in the market. Our it's known as our Gold Bar
Integuity Program, and it's really cool what we're doing. We're
(33:49):
we're I mean, it's going to take a long time
to have this happen, but we're working with organizations that
can track and trace every bar. We're working with organizations
who can actually look at the value or or i
should say the quality, the purity, and the traceability of
all the gold all the way back to the mind sights.
I mean, that's amazing, and that's coming off the similar
types of technologies. This digital edge of technology is helping
(34:11):
us in all the gold market. So to just simply
say it's another it's a digital version of gold. It isn't.
It's a it's a cryptocurrency that has valuations based off
of different factors. What we're dealing with is a real
world asset that at some point in time will be
successfully tokenized, which it hasn't been today. And last, but
not least, I'd simply say, hey, everything in that space
(34:32):
is traceable and trade and and and the anonymity that
they claim you can get is the questionable.
Speaker 1 (34:37):
Yeah. Joe Cavatoni, strategist at the World Gold Council. Joe,
I gotta admit when vill Donna said she'd book you,
I was picturing a guy with like mister t gold
chains all over, like a ring on every finger. He's
just a normal guy. But I uh, very fascinating conversation, Joe.
We really appreciate it. We can't let you go just yet.
Speaker 3 (34:58):
Though.
Speaker 1 (34:59):
We got a tradition here where it's time for the
craziest things we've seen in markets this week. Well, Donna,
why don't you get a start?
Speaker 2 (35:06):
Okay, I was going to go with this, but I
figured you were gonna yell at me because it's not
markets related.
Speaker 1 (35:11):
It's that I've never yelled at you all the.
Speaker 2 (35:13):
Time, especially when we're not recording. There's that guy in
Japan who spent fourteen thousand dollars on a costume to
make himself look like a dog. Did you see it?
Speaker 3 (35:25):
Yes?
Speaker 2 (35:25):
Yes, there's videos everywhere. And when I saw the video
without reading the captions, I thought it was a real dog.
Speaker 1 (35:33):
He thought it was real, a real dog.
Speaker 2 (35:35):
Yes, I mean it looks like a real dog.
Speaker 1 (35:38):
And does he walk around on all fours? Yes?
Speaker 2 (35:41):
Yeah, and he like paused at the four fourteen thousand.
But it's not markets related.
Speaker 1 (35:46):
So well, that's that's pretty good though. It's like, well,
there's the bears in the zoo in China that yeah,
too convinced.
Speaker 2 (35:55):
I'm convinced because it wrinkled in the back on his legs. Yeah,
but I was going to go with Actually, something also
related to the ETF space, which is that we've had
a ton of filings from issuers for ether futures ETFs.
Speaker 1 (36:11):
Yeah, like seven or something.
Speaker 2 (36:13):
Six issuers, seven different applications so far, and it was
just in May that actually a bunch of them had
to withdraw those same applications. So something has changed, Something
is giving people the idea that and actually Joe the
reason I wanted to go with this is because you
spend time at black Rock, right, so maybe you have
(36:35):
thoughts about what's going on with the ETF landscape.
Speaker 4 (36:39):
Well, I you hit the nail on the head in
terms of where I was going to go with my
idea for the week. I did look at that collie
and it was kind of disturbing because I was actually
I was actually slightly chat lagged, and I was looking
at it in you know, the wee hours of the morning,
and I'm like, what the world is that? And I
(37:01):
was like, you confuse over whether it was real or not.
But I had I had a couple of reads into it.
I realized it was a fourteen thousand dollars bizarre moment.
I'm gonna go I'm going to go back in time
to when I was at Merrill Inch and I was
a junior analyst on hedge funds and there was a
particular headsphind manager that I was like one of the
guys in the corner of the room and we were
talking this manager and he insisted on saying, I'm going
(37:22):
to cap out my fund at a billion dollars, and
a billion dollars is going to be all I want
to manage and I don't want any more. And it's
not because I can't run my strategy or my trades
with more than a billion dollars. I worry about what
people who are facilitating my trades around me, basically looking
at people like Merrill ech and brokers and saying, hey,
(37:43):
you guys are running around telling everybody what I'm doing.
And the moment my trade becomes well known everybody just
follows my lead, they collapsed the opportunity for me. And
so my idea of like, what's really warping me over
the last weeks, would say maybe even months, is that
moment of people chasing the trade with no analysis.
Speaker 3 (38:07):
And I actually think.
Speaker 4 (38:08):
That when I look at an organization that, over the
course of twenty four months has a one hundred and
eighty degree turn in their attitude and their behavior and
the resulting filing and the resulting market behavior at least
to a twenty six percent return, it makes me think
I'm actually happy I'm sitting at the World Gold Council
so I can go to the tell these people you
(38:30):
might need to look at gold in that portfolio if
you're chasing a twenty six percent return on the back
of a filing with no real change in what's going
on in the world other than the potential for some
lawsuits and cases to kind of come to light and
maybe some rulings to come down the line. I don't
think anybody has a smoking gun or a silver bullet
(38:52):
or whatever. The expression I should be using is that
I don't think they do. Will they get approval any
of these organizations, I don't know. But does it really
merit a twenty six percent return in an asset simply
because of a filing you mean.
Speaker 2 (39:05):
For a bitcoin or a spot bitcoiny TF, for an
ether future CT. We've had so many of these filings. Yeah.
Speaker 1 (39:14):
Yeah, man, the prices move.
Speaker 4 (39:16):
This goes back to this point we were just talking to.
The prices move pretty substantially just on a filing.
Speaker 1 (39:21):
Yeah, especially, I mean when you can just buy bitcoin,
you know, like a gold ETF. Okay, I don't want
to have to have a gold vault in my house.
I kind of see the selling point more of the
ETF wrapper for that. But well, it's interesting, Joe, So
it's an interesting way to think of it. Let me
give you my my craziest thing. I'm going to the
London real estate market, the very hot real estate market
(39:44):
these days. I own a lot of hostile Oh, I'm
sure you do. I'm sure you do. The New York
Times has a story the headline's great. A stairway to
nowhere sells for blank in London. I'm not going to
give you the dollar figure, obviously, because it's time for
our game show. The price is precise. So let me
(40:05):
tell you about this. It's a four story stairwell, metal
stairwell with like this translucent glass or plastic wrapper around it.
It was the stairwell, the exterior stairwell for story office
building that was converted to residential. Now, in the conversion process,
they cut off the access to the stairwell, so the
(40:27):
developer of the project ended up owning the stairwell just
by itself, just stair A stairway to nowhere?
Speaker 2 (40:35):
Can you like wheel it around stories?
Speaker 1 (40:37):
No, it can't be detached, and it's not it can't
be entered from the actual building. But someone bought it,
so why well, I'll tell you.
Speaker 3 (40:48):
Let me.
Speaker 1 (40:49):
It's a guy who co founded a firm called help Bank,
which is a company that supports budding entrepreneurs. He bought it.
Now The guy quoted in the Time story is his
chief marketing officer, which I think gives you a hint
at why they bought it. Here we are talking about it.
It was any times, I will say the crazy part
(41:09):
is not necessarily the price of the thing. I actually
think the price that he bought it for is personally,
I think is reach. You may think it's crazy. I
just think it's crazy that they sold a stairway to nowhere.
And this guy says, well, you know he backs startups
and entrepreneurs. He said, I'm thinking I'm going to put
(41:30):
a desk on each landing for a budding entrepreneur.
Speaker 2 (41:34):
But is it open? Is it like outdoors?
Speaker 1 (41:37):
No, it's it's enclosed. It's enclosed. I don't know if
there's power or heat or anything like that. I my
guess is not. But maybe they could wire that up
our bathroom.
Speaker 3 (41:45):
And he said the fourth Floyd, do I have to
go through three other?
Speaker 1 (41:51):
You got to pass three other future billionaire? Startup?
Speaker 5 (41:54):
Isn't in a nice location the London neighborhood of Twickenham.
I don't know much about that part of London. It
sounds sounds very nice, Southwest London. It's home to England's
National Rugby Stadium.
Speaker 3 (42:06):
That's where twicking in the stadium is.
Speaker 1 (42:07):
Yeah, yeah, so, and they're saying he might apply, you
know whatever the London equivalent of zoning is wherever they
call it that over there, to allow them to put
beds in there and make it residential.
Speaker 2 (42:20):
So how big is this thing?
Speaker 1 (42:22):
It's not that big. Now you would have like a
single bed on the landing of a stairwell or in
a desk you could turn into an airbnb. Yeah, I have.
Speaker 4 (42:30):
A price in mind, me too, and I think you
could also kind of use it on the out and
the exterior for advertising.
Speaker 1 (42:36):
No they're talking about that. Yep, that was another thing
to imagine they're going to talk to But it's yeah,
that kind of cloudy.
Speaker 2 (42:44):
How can you have a bed?
Speaker 1 (42:46):
I guess you'd get some curtains, But price is precise.
What's your bid filled on at nineteen pounds nineteen thousand pounds?
Remember prices right, rules are in effect.
Speaker 4 (42:56):
I'm going to say it was a lot more expensive
than that. And the reason I think it's a lot
more expensive than that is I think that they marketing
person has probably gotten in and overpaid for it. And
I'm going to say, a million sterling, a million shurty, Oh,
a million sterling.
Speaker 2 (43:09):
It can't be that high because Mike thinks it's reasonable.
Speaker 1 (43:14):
I did think it was reasonably priced. Twenty five thousand pounds, wow,
thirty two thousand dollars. It's only about twelve ounces of gold, right, No,
fifteen ounces of gold.
Speaker 3 (43:24):
Not a lot. See, who would have thought I was
way off the value?
Speaker 1 (43:28):
But I do think it was underpriced. I think they
got a deal. I don't know if i'd go as
a million sterling. Yeah, very good anyway. Joe Caviatoni of
the World Gold Council. Really fascinating conversation, Joe, and it's
great to hear sort of a level headed explanation of
the gold market for those who sort of already in
the weeds of it. And we really appreciate your time.
Speaker 3 (43:51):
Thank you for your time as well.
Speaker 2 (44:00):
What goes up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Waldona Hirich. Mike Reagan is
at Reaganonymous. You can also follow Bloomberg Podcasts at podcasts.
(44:25):
What Goes Up is produced by Stacy Wong and our
head of podcast is Stage Bauman. Thanks for listening, We'll
see you next week.
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg, and.
Speaker 2 (00:20):
I'm Bildana Hairik, across Acid reporter with Bloomberg.
Speaker 1 (00:23):
And this week on the show, we're going to talk
about one of the oldest and, let's be honest, most
often misunderstood investments, gold. What exactly is it? Is it
an inflation hedge, is it an interest rate hedge? Is
it a risk asset or is it a risk off asset.
We're going to get into it with an expert on
that shiny yellow metal. But first I have to ask
(00:45):
you had yet another luxurious, glorious vacation. Where'd you go?
Speaker 2 (00:51):
We went to Italy? But this was my first vacation
of this entire year. Oh yeah, so you can't say
yet another that makes it sound like I'm like jet
setting all the time.
Speaker 1 (00:59):
Yeah, but you have you ever had a staycation? You
were always like, yeah, doing COVID yeah, but otherwise you're
like you're you're a globe trotter.
Speaker 2 (01:07):
But if you're sitting around at home, you know, like
then you get anxious and then you're like, what do
I do with myself.
Speaker 1 (01:13):
Yeah, that's that's how I end up in Italy. Well,
I really enjoy a nice as the one does.
Speaker 2 (01:23):
There was one day where wildfires broke out like all
over where we were in Italy.
Speaker 3 (01:29):
Yeah.
Speaker 2 (01:29):
I've never seen that really, like very close up.
Speaker 1 (01:32):
That's scary.
Speaker 2 (01:33):
I know it was an experience. Anyway, we're keeping our
guests waiting. Maybe he has thoughts about vacationing in Italy.
Find it's Joe Cavatoni. He's a market strategist and head
of America's at the World Gold Council. Joe, welcome to
the show.
Speaker 3 (01:50):
Thanks for having me.
Speaker 2 (01:51):
Maybe you've been to Italy recently and me and you
can be in the same group, the jet setting group.
Speaker 4 (01:57):
Recently now not since COVID. I haven't been back since COVID,
but I've been there many times.
Speaker 1 (02:02):
See something about your last name made me think that.
Speaker 3 (02:05):
Joe.
Speaker 4 (02:06):
Yeah, my suggestion is to go to the first two
weeks of December. Yeah December, no crowds, no holiday rush,
no students.
Speaker 1 (02:17):
Yeah, huh, good advice. He's got gold and vacation strategy.
Speaker 2 (02:21):
We want to hear more about gold, so I'm hoping
you can start out telling us about your role and
actually telling us a bit more about World Gold Council.
Speaker 4 (02:28):
Got it, okay, So my role is to help people
understand what this asset is, how to consider analyzing it,
getting the data that you need to understand it, and
actually finding a place in your investment portfolio or in
your consumption life, and feeling comfortable and confident that you've
(02:48):
made the right decision. So we have data, insights and research,
and as an organization we are made up of the
world's largest mining members in gold. But this not profit organization,
The World Goal Council spends its time working on market
structure issues. Again adding to that market structure that insight,
(03:08):
research and information that we provide people, but also looking
at policies and market structure where we can actually help
evolve the market in a way to make it easier
to access, easier to understand, and most importantly trusted, because
that's the thing that people need to understand the most
about gold is what I've bought. I understand it, and
I can trust that it's what I bought, and that's
(03:30):
what we do well.
Speaker 3 (03:31):
Joe.
Speaker 1 (03:31):
You know, as I mentioned in the introduction, I feel
like the narrative, the explanation of what's driving gold prices
is kind of a moving target, So help us think
about what drives the price of gold up or down.
I mean sometimes you hear it as a risk off asset,
and you obviously see it rally on days when the markets,
(03:52):
the rest of the markets are in turmoil. For years,
I heard it was an inflation heade interest rate. What
are the main drivers of the price of gold.
Speaker 4 (04:00):
It's where we usually start every one of the discussions
we have, particularly with institutional investors, is in this very
point we talk about gold in the context of strategic
and tactical drivers as an asset. It's very unique because
when you think about the strategic drivers of gold and
(04:21):
how gold is consumed worldwide, it's consumed in the consumption way,
which is through jewelry, small bars, and coins, maybe in
technology like your iPhone, where it's a component that's in there,
and those types of consumption behaviors are driven strategically through
economic expansion. Simply put, you get wealthier, you feel comfortable
(04:43):
about buying jewelry, or you buy more technology, and you
actually see economic expansion putting money in pockets and people
actually using that to invest in things, including gold.
Speaker 3 (04:54):
The consumer side of things.
Speaker 1 (04:55):
Do you list that first, because that's the primary main
driver in your opinion.
Speaker 4 (04:59):
It is, But I'm going to come back around and
talk about the big markets like China and India, where
there's a bit of a mix because it is consumer,
but there's also an element of savings there. And then secondly,
you look at the investment side. So when market risk
and uncertainty develops, higher levels of volatility, confusion around what's
going to play out for the next period of time,
(05:21):
whether it's one month, one year, whatever the case may be,
long term, which is how we often make sure people understand.
That's how you need to view gold. The market risk
and uncertainty is benefited when gold is added to your
portfolio because in that context, investors see the type of
diversification benefit you get from gold in your portfolio helpful.
(05:45):
So it correlates positively when equities, for example, S and
P five hundred goes up, and it correlates negative when
the SMP goes down. Simply put, So you've got those
two strategic drivers. Adding to that, you've got a global asset,
so it's not just something bought here in the US,
but it's bought and sold in the US, Canada, Latin America,
(06:06):
South America, all over the world, China and India two
huge markets from a consumption perspective. And in addition to that,
this asset is actually produced and supplied on a global
scale as well. So you've got a global element, you've
got a regional element, you've got a consumer behavior, you've
got an investment behavior. And it's really kind of exciting
(06:28):
because you really don't know that until you start really
digging into the detail.
Speaker 3 (06:32):
Now in the.
Speaker 4 (06:33):
US market in particular, it can be a little frustrating
because what you tend to find with people is they
want to shout from a pit on a trading floor
about the next thirty minutes of what's going to happen
with gold and the futures, et cetera, et cetera. And
that's the tactical things that you need to understand. That's
the noise you need to tolerate when you look strategically
(06:53):
at it. So there you've got opportunity cost and momentum
the two driving factors there. Opportunity cost is like what
we've been seeing for the last call it nine months,
rates are moving. How should I be looking at most
opportunistic moments. Let's use a pool of liquidity that I
can get to, like gold, very liquid asset. We'll talk
about that, and then when it comes to momentum, is
(07:16):
something happening quick? Is something happening now? Those two factors
move gold on the short term.
Speaker 2 (07:22):
So Joe, can you talk a bit about what the
price of gold has done this year? You mentioned monetary
policy for instance, like how that impacts things or even
you know we have the US credit downgrade news this week,
how might something like that impact the price of gold.
Speaker 4 (07:38):
So this year what we've seen are two things. Number one,
the monetary policy, we'll bring that in now continuing to
be a headwind, the opportunity cost, the rotation of assets,
and a portfolio risk asset behavior, how people are dealing
with their risk assets. That's a moment where we see
(07:59):
headwinds for gold. People don't look to gold in those
moments when movement and rates and movement in those risk
assets is taking place. We often see it a headwind
for gold because it's used as a liquidity source. And
then once people have made their allocation, they come back
around to gold and they put in their portfolio of
that ballast of kind of holding three, five, ten percent
(08:20):
of their portfolio. So the price behavior this year has
seen a lot of that, but within the course of
the year, we've also seen systemic events or moments, events
that have kicked into place a banking crisis. For lack
of a better way of putting it, you're a Silicon
valley bank, your first republic, your credit sueze. Moments where
(08:42):
there's a crisis and people say, hey, look, I need
to make sure that I can preserve my asset, all
my real assets need to go up. My safe haven asset,
which is often how it's referred to, is where people
go with gold. And so we've seen these moments and
now over the course of the last three to six months,
we've had a few, but not a lot. I think
that I was expecting to potentially see Wednesday's announced cut
(09:05):
by Fitch in the rate for the US the long
term debt rating to potentially be a flight to quality
for gold, but it hasn't been just yet. So what
it has been is it's been something that's had a
negative impact on the price, and ultimately what that means
is we're going to start to see the price rebound
when people move away from it being a liquidity source.
So you see a gold price that right now because
(09:28):
of the possibility of things that are happening in the
monetary policy space. When are the rate hikes going to
stop peak and we're going to start to see the
other side of this when the fense managed to cool
off the economy. Once that starts to develop, that monetary
policy will loosen up the ability for goal to start
to see itself run. Right now, what we're seeing is
(09:49):
range bound pricing on the gold market. So you see
us holding firm at about a eighteen fifty nineteen hundred,
almost nineteen fifty level, but not breaking out. We had
a moment earlier in the year around that banking crisis
where we did break out. We're not really breaking out
just yet, and it's simply because most institutional investors have
not come back to the table. The range bound pricing
(10:11):
behavior we're getting is being held up by mainly a
lot of buying by central banks, which is a trend
we've been seeing for a long time.
Speaker 1 (10:19):
Yeah, Joe, you know, it's interesting when I look at
a long term chart of the price of gold, that
two thousand dollars an ounce level is really interesting, you know,
it peaked a little bit above it for a hot
minute in twenty twenty, again in twenty twenty two, and
I think again this year. And you know, looking at
that chart, the technical analysts would call it, I guess
a triple top, you know, suggesting that two thousand level
(10:42):
is kind of the ceiling for gold. And I wonder
how you think about that. How important are the technicals
like that for the price of gold. Does the fact
that it keeps testing that two thousand dollars level signal
anything that maybe it'll eventually break out above it?
Speaker 3 (10:56):
You know?
Speaker 1 (10:56):
How important are these technicals and especially that round number
of two thousand and ounce.
Speaker 4 (11:01):
I think they're important and they're not to be ignored.
And I think that where it comes into the context
with which we're speaking to our investors and central banks
and sovereign wealth funds and talk to them about it
is really to help them understand their entry point into
the gold market now that two thousand point and those
technicals they start to impact some of this other area
(11:25):
of demand for gold I mentioned consumers, so jewelry in
China and India. These are price sensitive businesses and price
sensitive consumers. So when you start seeing those types of
price levels developed. That's when you see those types of
consumers back away from buying. Now, if they're backing away
at a two twenty and seventy five, I think is
(11:46):
where we hit. They start backing away, and our investors
aren't ready to step back in. The long term investors
aren't ready to step back in. That's why you're seeing
us peek out and kind of hold off. So what
we need to see next is some sort of understanding
by the investment community that the policies that the FED
are dealing with are leading to a clearer outcome, a
(12:08):
clearer roadmap, and then you're going to see our expectations.
You'll see these investors come back to the table and
gold will again have that slow, steady rise in its
price point. Now you see these spikes when it comes
into play around moments events. Again, earlier in the year
we hit that over two thousand level, and it was
again around that banking crisis. You start seeing those peaks.
(12:29):
So it's important, but it's not the only factor to
take into consideration.
Speaker 2 (12:33):
I'm interested in the idea of gold as a haven asset.
So let's say we do have some of these instances
that you were talking about that we've had this year.
Why go for gold as the haven asset versus something
like treasuries.
Speaker 4 (12:46):
I think what you start to see are two factors
that are pretty significant in terms of performance. It's a
limited source asset.
Speaker 3 (12:55):
So over long term performance.
Speaker 4 (12:57):
You'll see that gold will act appreciate, okay, And ultimately
what you find with the asset is, second, it's very liquid.
The asset trades about one hundred and fifty billion dollars
a day. So what I'd say is those factors really
weigh in and actually make people feel comfortable and confident.
(13:18):
And they are not linked to anything like a credit
rating or a dollar currency or whatever the case may
be that could have another level of impact on the
overall price performance and trading activity of an asset. So
you're really looking at a unique asset that stands by
itself and ultimately, with these unique drivers for consumption, will
(13:39):
continue to push the price higher over time. And that's
why I think people feel comfortable and confident putting it
as a component, not the only component. Again, a component
and a portfolio.
Speaker 1 (13:57):
You know, Joe, I'm curious about the supply side when
it comes to gold. You know, the world gold Council,
as you mentioned, represents a lot of the gold miners
of the world. And you know, the supply chain story
was such a big story with almost everything there for
a few years, shortage of workers, shortage of industrial equipment,
higher interest rates, everything sort of combining to cause some
(14:19):
major supply chain issues, you know, a whole variety of products.
Did that hit the mining the gold mining sector at all,
And how does that supply side sort of affect the
price or is it more you know, the miners are
reacting to the price rather than you know, affecting the price,
if you know what I mean.
Speaker 4 (14:39):
Yeah, it's a great question. And I'd say that no industry,
at least from what I could see, was immune to
what we experienced in the early days of COVID.
Speaker 3 (14:49):
As a matter of.
Speaker 4 (14:50):
Fact, the piece that impacted the gold market the most
was transportation movement of assets around the globe. We are
a physical asset, and when planes were grounded or space
on planes was limited, or people were uncomfortable touching things
for lack of a better way of dealing with it.
(15:11):
We literally saw, for example, in the US comec's futures
prices going out of think with what the underlying gold
price was doing simply because they were trading at a premium,
simply because it could not be matched with the gold
that needed to be flown into New York, put into
the vaults and actually collapse at premium. So we saw
(15:33):
it there probably the most where you have an inability
for assets to move around the globe. Now, mind sits refiners.
They weren't in any way only impacted. They were all impacted.
Mind sits refiners. They were all impacted in terms of
the same way other corporations were impacted. Send employees home,
you know, figure out how to reopen, deal with the
(15:56):
PPP issues. All of those things came into play and
they slowly came back online. What I think was also
very challenging for us was when you've got gold sitting
in a vault, how do you get in? How can
you do your inspections? And every one of these organizations
was scrambling to make it all work efficiently. Now, more
than the constraints on the market, the safe haven nature
(16:19):
of gold basically saw the benefits, and that's where the
price moved. When people were concerned about risk, concerned about
what's going to happen with their portfolio, they moved into gold,
and that drove the price more than the limited amount
of supply. When the mining companies were able to get open,
the refiners were able to get open, they came back online.
Transportation came on slowly and they came back online. So
(16:39):
it had an impact like everywhere else. But we also
saw that price appreciation was a consequence of people having
that fear and that need for a safe haven asset.
Speaker 2 (16:50):
What about on the demand side, who are the biggest
buyers of gold? I think you mentioned consumers already. I'm
also interested in the central bank aspect, like how who
which central banks and how much demand is coming from
the central bank side as well.
Speaker 4 (17:05):
So far and away, the two largest markets for consumption
of gold tend to be China and India, and that
tends to be consumers that are retail oriented, mainly jewelry,
but also small bars and coins, so a real consumer
type market. It's grown out of a history and tradition
of the affinity for gold, where people may not have
(17:28):
had bank accounts, they may not have had access to
the securities markets, and ultimately this was a mechanism for
having something precious in terms of what they were looking
to own but also saving their money. So those are
the two markets that i'd say stand out prominently and continually,
and they've developed and evolved over the last twenty years
(17:48):
in a very fantastic way to even bring financial markets
and financial assets to those markets as well. So you're
seeing that more in China, but it's starting to appen
in India. On the central banking side, what we've been
seeing for let's call it thirteen years, is emerging market
central banks diversifying their reserve currency portfolios and adding gold.
(18:11):
What they're doing is they're moving into the asset for
the concerns around inflation, concerns around need for liquidity, looking
at how they diversify their foreign currency exposures to the
dollar and the Euro. We just recently published our annual
survey where we have over fifty five central banks that
respond to us, and most have indicated that they're looking
(18:32):
over the next five years to lower their reliance on
the dollar and the euro, not just the dollar, the
euro as well, and actually looking at gold and looking
to increase the overall allocations that they're making there. Again,
these are emerging market central banks mainly, and they're spread
out across the globe. It's been a really interesting trend.
Speaker 1 (18:51):
One thing that's really interesting about gold as an investment
is there are a variety ways to purchase it. You know,
you can buy the GLD ETF. Many of our listeners,
I'm sure are professionals who perhaps dabble in the futures market,
that's the other way. But then there's this whole other
world of gold coins that's gotten a lot of scrutiny lately.
(19:13):
I'm I'm sure you know what I'm talking about quote
unquote gold IRA companies. Washington Post out a story recently
saying over the past decade, more than thirty customers in
twenty states have sued a dozen gold IRA companies. Federal
regulators have sued four companies, two in the past year alone,
claiming investors were systematically charged as much as triple the
(19:35):
coin's value. You know, if you're not a sophisticated investor
working at a hedge fund, trading futures, or even dabbling
in the ETF space, what do you need to know
about buying gold in some of these schemes? You know,
what's sort of the the alarm bells that go off,
And furthermore, you know, I get the sense that it's
(19:56):
hard to regulate these type of operations.
Speaker 3 (19:57):
And that's only a regulated asset.
Speaker 1 (19:59):
It's really they're not selling a regulated outset. So how
are you thinking about these type of operations and what
the listeners need to know about them.
Speaker 2 (20:06):
My dad's always telling me to buy gold bars.
Speaker 1 (20:08):
Buy just the big bars. Yeah, yeah, he goes big.
Speaker 4 (20:13):
That's a great point. I should take him on holiday
to Italy for saying that. Let me unpack this a
little bit, because I think there's a couple of things
that are embedded in this question that people really need
to have an appreciation for. So I want everybody to
have a visual We often talk about the swimming pools, right,
like the swimming pools and all the gold in the
world gets stacked up around that whole thing. But think
(20:34):
about what you've seen in photographs or maybe even in
the real world when you visit them like the FED
or you go on a tour the vault and there
are large bars, the very large four hundred ounce large
bar format was what we refer to. That large bar
format is probably one of the largest markets.
Speaker 3 (20:52):
For gold worldwide.
Speaker 4 (20:53):
Okay, so everyone wants to just go to coins and
little bars, and they're talking about those little tiny ones
that are about the size of a of a simcard
or maybe a little bit bigger than that. I want
everybody to remember that the largest component that they need
to be understanding is that when we buy gold for
GLD for example, that's the kind of gold that we're
transacting in. That is a wholesale large bar market. There
(21:16):
are lots of institutional traders that are doing the work
in that market. There's big banks like JP Morgan, HSBCICBC
that are facilitating that through their role in.
Speaker 3 (21:26):
The London market.
Speaker 4 (21:27):
And those markets are open for large institutions to buy.
So when we hear about pensions buying like in Texas
or in Alaska and other places, these organizations are buying
those types of large bars.
Speaker 3 (21:39):
That's a huge element of the gold market.
Speaker 1 (21:42):
So when we say nineteen hundred and fifty dollars an ounce,
it's referring to one of those gold bars sitting in
a warehouse at the LME or somewhere like that.
Speaker 4 (21:52):
That's right, it's the four hundred ounce reference to the
ounce that's primarily that level. Everything else starts to derive
its price off the back of that. A kilo bar
is about the size of an iPhone, and actually, when
you think about a kilo bar, that's what's backing a
lot of the contracts at the CMEME. That's what people
may be buying and putting in a safe or in
a safe deposit box. And those are very common too,
(22:14):
and they are a huge market as well. But smaller
bars tends to lead to the more higher level of
risk for fraud because they're easier access, they're easier to manipulate.
And then you get smaller bars in that and then
you get into the world of coins. Now, often what
we hear about in the US market are fraudulent activities
taking place, and most of it is around sales practices.
(22:37):
And this is the disappointing thing and why we are
focusing on it in terms of an initiative that we
have and I'll talk to that in a moment, but
the sales practice that talks to confusion in the investment
market around the numismatic value of a coin, something that's
highly collectible, and then a premium to that ounce price
you're talking about because of the scarcity of a coin
(22:58):
issuance and then just coin price. So once people start
getting confused by that, and they get pressured from high
sales pressured environments, people working the phones heavily and pushing hard.
They move quickly to sell you something at the wrong price.
And often that's what we're dealing with. Most of the time.
(23:18):
The value of the underlying coin isn't a problem. It's
usually that moment of sale. You're catching me at a
weak moment, or you're telling me it's too good to
be true, and I fall for it, okay. And that's
why we have our process around responsible gold investment principles
(23:38):
and our practices that we have on our website to
tell people, Look, if you're going to do what you're
going to do, which is by retail, please go and
check out these principles that we have. Ask the right questions.
If it says it's too good to be true, it's
probably too good to be true. And that's why we
are pushing that initiative in India, China, Germany, the US
(24:01):
and working with reputable firms to say, how can we
take these principles that we have, How can you work
with us to self certify against these types of principles
so we can get that message out to people because
we are dealing in a world of gold, and it's
not regulated in the US markets, and these sales firms
aren't subject to licensing to sell these coins. But what
(24:21):
we are subject to is trying to get to people
to understand. Look, best practices can be achieved. You don't
have to buy in a haste, and you don't have
to buy in an urgent moment. And the CFTC will
come down on people and they will use their ability
to find people and reprimand people, and they'll do that,
but they have to hear of the cases, they have
to go out and investigate, and it's a moment that's
(24:43):
too late in the process. So we encourage people to
slow it down, understand what you're trying to achieve, ask
the right questions, and that's what we would say to people.
Speaker 3 (24:51):
Now.
Speaker 4 (24:51):
Part of why the ETF has been such a success,
but remember it's only about two to three percent of
the global gold market in terms of all the ETF
worldwide assets, is that it democratized and it put an
unregulated asset into a regulated environment. So you can feel
good if you're going to buy an ETF, but you
can buy physical Just slow it down and understand what
(25:12):
you're doing own an ETF and you're getting price performance
and it's regulated and you shift feel good about what
you own there, or use futures and it's regulated again,
another rapper that's regulated by CFTC.
Speaker 1 (25:25):
Yeah, So I was looking at the GLD the management
cost of it. I think it is forty basis points
something like that, sort of high for an ETF. But
I guess for you know, gold, there's a whole lot
more going on. You have to store it ensured and
all that. So you know, is that ETF probably you know,
for your average investor, do you think that's the most efficient,
sort of cost effective way to get exposure to gold?
Speaker 4 (25:48):
The way we approach it with our clients and when
asked and by the way, the World Wal Council is
the sponsor for GLD, but we're happy to talk to
them about all the different mechanisms to own gold and
actually all different ETFs as well. What people need to
understand is how large is my position going to be,
what's my period for wanting to hold it? How often
(26:10):
do I think I might need to rebalance it? And
then look at each one of these instruments. So GLD
is a forty bases point product. But it is the
most liquid ETF worldwide that's physically backed by gold, and
it is the largest asset worldwide physically backed by gold
by far. But there are other alternatives that are less
expensive from a management fee perspective. But you need to
(26:32):
understand is the asset liquid, is it going to perform
and track the gold price like I wanted to? And
what's that management fee? So what is my total cost
of ownership calculation I'd use with every other ETF if
I'm looking at it, like the cost of commissions, the
cost of impact of trading, the management fee, and the drag.
And then this case is tracking costs as opposed to
(26:52):
ERIC because of the fees that go along with understanding,
you know, vaulting and custody and things along those lines.
But you know, look, gld is a perfectly acceptable instrument.
Still about a fifty to fifty split between institutional and
retail platforms that are owning it. But you've got GLDM,
You've got IAU, SGOL, bar AAAU, you know a bunch
(27:14):
of different assets that are out there. That's the US alone,
about eighty five instruments worldwide.
Speaker 1 (27:19):
Wow, eighty five instruments world right.
Speaker 2 (27:22):
I also was looking at gold. I noticed it had
outflows the last two three months or so. So I'm
curious when you do see investors actually putting money towards
something like GLD, like, what do the circumstances have to
look like? And how did it hold up when we
saw inflation? When you know, because we do talk about
(27:43):
gold as an inflation hedge, did it hold up as
an inflation hedge the last couple of years?
Speaker 4 (27:47):
Number one attracts the gold price and it's tracked the
gold price for almost this next fall twenty twenty four
to be twenty years. So yes, it performs and tracks
the gold price, no questions asked. So operationally efficient. What's
interesting about the dynamic with GLD first asset to market
in the US, second asset to market in the world.
(28:08):
The first was in Australia. So when that happens in
the world of ETFs, what happened in the past with
ETFs is that you cornered the market on being that
capital markets instrument over ninety five percent, if not ninety
nine percent of the related instruments in the derivative market,
option trading and so forth is really written only on GLD.
(28:32):
So what you end up with our institutions that are
buying and selling in the asset itself and the institutions
that are trading in those options markets, so they're feeding
on that total overall liquidity and overall size of the fund.
But that leads to a layer of AUM that will
basically be speculating and trading. So you'll see that gold
will have a higher level of volatility in its flows
(28:54):
than any other instrument in the market. So to your question,
how did it hold up in inflation, what we saw
with the asset was actually flows that we're actually trading
in that range probably about ten percent of the overall AUM,
and then a hold on the part of most of
the investors. And that's what we continue to hear today
is most of the conversations are about when do I
(29:14):
go back in, not should I keep holding my asset?
So the asset flows out from the US have stopped
slowed and people are on hold, waiting to see when
there's the next move in Again. At that top end
where you have that AUM that's linked to trading options
and the like that's been volatile, that's when people are
trying to time the market pick the spot to sell,
(29:36):
to buy, to cover the shorts, et cetera.
Speaker 1 (29:53):
You know, Joe the Don and I over the years
have talked to a lot of cryptocurrency officionados will all
the digital goal, digital gold, and that is always the
the sales pitch I which the listeners could see Joe's
face reacting to that, but that you know, that's among
the many sales pitches that come and go for bitcoin
(30:15):
and other cryptos is digital gold, you know, a safe
way to store your money, blah blah blah, Yeah, inflation edge.
I'm guessing you and your colleagues haven't lost a lot
of sleep over that, or have you? How do you
you know? Does does crypto really compete with gold for
all the same investment cases that people are attracted to
(30:36):
gold for.
Speaker 4 (30:37):
I'm going to start by saying, the evolution of technology
is amazing. The ability to have better, faster, more comprehensive
access to database management, transparency around pricing really cool stuff. Now,
as it relates to bitcoin and gold, we've done a
(31:01):
lot of work to try and make sure everybody understands
that these are two different assets. They behave differently, they
actually correlate differently, and bitcoin correlates more like a tech stock,
not the kind of tech stocks that are running as
of late, either, but tech stocks in general, because, like
I said, a lot of people see the same thing
I see, which is the technology is really amazing. Now,
(31:24):
how will it evolve over time in the form of
a currency. I don't know, but I know that the
big challenge that they're facing in the category today is
that they tend to want to be a hammer looking
for a nail. You say inflation, I can hedge inflation.
They don't hedge inflation. When you look at the performance,
(31:44):
you say I need safe haven asseid, they say, I'm
safe haven acid. Then guess what they aren't. You say,
I want to, you know, use it for payments to
buy a diet coke down at the seven to eleven.
Speaker 3 (31:54):
They go, yeah, you can do that too.
Speaker 4 (31:55):
They want to be everything and everything for everyone without
really kind of nailing down exactly what they are, which
makes it really challenging for people to analyze the asset
the same way you can analyze gold and say, look,
central banks are buying for the following reasons. Jewelry sales
are down in China because people are locked down under
COVID so that's going to kind of keep us price
(32:16):
range bound. Right now, you can use these assets and
the data that we have and the information to kind
of understand, analyze and make a sensible investment in gold
and look at it and get exactly what you expect
out of a portfolio performance from it. But in the
case of bitcoin, and it is pure speculation and look
have at it. And where we've gotten to with our
dialogue with clients today, guess what we say to them, Sure,
(32:38):
you want to buy that risk asset. You might want
to consider a gold allocation to offset the risk that
comes with it. So buy them both, because that's over
there with your equities and your bonds and your private
equity and your risk and over here is a safe
haven asset. And it's wrong to say it's a digital
version of gold, because gold's used in technology. It's used
(32:59):
in medical applications, which is a small component of the
big markets that we talk about, but it's a growing component.
But it's also used like you know, it's in your iPhone,
And it's hard to kind of pinpoint exactly what bitcoin
is doing. But look, I'm not saying it's not a
good asset. It's not a right asset. I'm just simply
saying it's a wrong comparison to say gold is in
(33:19):
the digital form in that case. And just two other
quick points on this, because I know I'm banging on
a little bit on.
Speaker 1 (33:25):
I thought I thought you'd have some thoughts on this je.
Speaker 4 (33:28):
But the digital technology that we're using in the gold market,
like we're on a journey as we speak. The LBMA
and the World Gold Council are on a journey piloting
technologies to better track and trace the underlying goal that's
in the market. Our it's known as our Gold Bar
Integuity Program, and it's really cool what we're doing. We're
(33:49):
we're I mean, it's going to take a long time
to have this happen, but we're working with organizations that
can track and trace every bar. We're working with organizations
who can actually look at the value or or i
should say the quality, the purity, and the traceability of
all the gold all the way back to the mind sights.
I mean, that's amazing, and that's coming off the similar
types of technologies. This digital edge of technology is helping
(34:11):
us in all the gold market. So to just simply
say it's another it's a digital version of gold. It isn't.
It's a it's a cryptocurrency that has valuations based off
of different factors. What we're dealing with is a real
world asset that at some point in time will be
successfully tokenized, which it hasn't been today. And last, but
not least, I'd simply say, hey, everything in that space
(34:32):
is traceable and trade and and and the anonymity that
they claim you can get is the questionable.
Speaker 1 (34:37):
Yeah. Joe Cavatoni, strategist at the World Gold Council. Joe,
I gotta admit when vill Donna said she'd book you,
I was picturing a guy with like mister t gold
chains all over, like a ring on every finger. He's
just a normal guy. But I uh, very fascinating conversation, Joe.
We really appreciate it. We can't let you go just yet.
Speaker 3 (34:58):
Though.
Speaker 1 (34:59):
We got a tradition here where it's time for the
craziest things we've seen in markets this week. Well, Donna,
why don't you get a start?
Speaker 2 (35:06):
Okay, I was going to go with this, but I
figured you were gonna yell at me because it's not
markets related.
Speaker 1 (35:11):
It's that I've never yelled at you all the.
Speaker 2 (35:13):
Time, especially when we're not recording. There's that guy in
Japan who spent fourteen thousand dollars on a costume to
make himself look like a dog. Did you see it?
Speaker 3 (35:25):
Yes?
Speaker 2 (35:25):
Yes, there's videos everywhere. And when I saw the video
without reading the captions, I thought it was a real dog.
Speaker 1 (35:33):
He thought it was real, a real dog.
Speaker 2 (35:35):
Yes, I mean it looks like a real dog.
Speaker 1 (35:38):
And does he walk around on all fours? Yes?
Speaker 2 (35:41):
Yeah, and he like paused at the four fourteen thousand.
But it's not markets related.
Speaker 1 (35:46):
So well, that's that's pretty good though. It's like, well,
there's the bears in the zoo in China that yeah,
too convinced.
Speaker 2 (35:55):
I'm convinced because it wrinkled in the back on his legs. Yeah,
but I was going to go with Actually, something also
related to the ETF space, which is that we've had
a ton of filings from issuers for ether futures ETFs.
Speaker 1 (36:11):
Yeah, like seven or something.
Speaker 2 (36:13):
Six issuers, seven different applications so far, and it was
just in May that actually a bunch of them had
to withdraw those same applications. So something has changed, Something
is giving people the idea that and actually Joe the
reason I wanted to go with this is because you
spend time at black Rock, right, so maybe you have
(36:35):
thoughts about what's going on with the ETF landscape.
Speaker 4 (36:39):
Well, I you hit the nail on the head in
terms of where I was going to go with my
idea for the week. I did look at that collie
and it was kind of disturbing because I was actually
I was actually slightly chat lagged, and I was looking
at it in you know, the wee hours of the morning,
and I'm like, what the world is that? And I
(37:01):
was like, you confuse over whether it was real or not.
But I had I had a couple of reads into it.
I realized it was a fourteen thousand dollars bizarre moment.
I'm gonna go I'm going to go back in time
to when I was at Merrill Inch and I was
a junior analyst on hedge funds and there was a
particular headsphind manager that I was like one of the
guys in the corner of the room and we were
talking this manager and he insisted on saying, I'm going
(37:22):
to cap out my fund at a billion dollars, and
a billion dollars is going to be all I want
to manage and I don't want any more. And it's
not because I can't run my strategy or my trades
with more than a billion dollars. I worry about what
people who are facilitating my trades around me, basically looking
at people like Merrill ech and brokers and saying, hey,
(37:43):
you guys are running around telling everybody what I'm doing.
And the moment my trade becomes well known everybody just
follows my lead, they collapsed the opportunity for me. And
so my idea of like, what's really warping me over
the last weeks, would say maybe even months, is that
moment of people chasing the trade with no analysis.
Speaker 3 (38:07):
And I actually think.
Speaker 4 (38:08):
That when I look at an organization that, over the
course of twenty four months has a one hundred and
eighty degree turn in their attitude and their behavior and
the resulting filing and the resulting market behavior at least
to a twenty six percent return, it makes me think
I'm actually happy I'm sitting at the World Gold Council
so I can go to the tell these people you
(38:30):
might need to look at gold in that portfolio if
you're chasing a twenty six percent return on the back
of a filing with no real change in what's going
on in the world other than the potential for some
lawsuits and cases to kind of come to light and
maybe some rulings to come down the line. I don't
think anybody has a smoking gun or a silver bullet
(38:52):
or whatever. The expression I should be using is that
I don't think they do. Will they get approval any
of these organizations, I don't know. But does it really
merit a twenty six percent return in an asset simply
because of a filing you mean.
Speaker 2 (39:05):
For a bitcoin or a spot bitcoiny TF, for an
ether future CT. We've had so many of these filings. Yeah.
Speaker 1 (39:14):
Yeah, man, the prices move.
Speaker 4 (39:16):
This goes back to this point we were just talking to.
The prices move pretty substantially just on a filing.
Speaker 1 (39:21):
Yeah, especially, I mean when you can just buy bitcoin,
you know, like a gold ETF. Okay, I don't want
to have to have a gold vault in my house.
I kind of see the selling point more of the
ETF wrapper for that. But well, it's interesting, Joe, So
it's an interesting way to think of it. Let me
give you my my craziest thing. I'm going to the
London real estate market, the very hot real estate market
(39:44):
these days. I own a lot of hostile Oh, I'm
sure you do. I'm sure you do. The New York
Times has a story the headline's great. A stairway to
nowhere sells for blank in London. I'm not going to
give you the dollar figure, obviously, because it's time for
our game show. The price is precise. So let me
(40:05):
tell you about this. It's a four story stairwell, metal
stairwell with like this translucent glass or plastic wrapper around it.
It was the stairwell, the exterior stairwell for story office
building that was converted to residential. Now, in the conversion process,
they cut off the access to the stairwell, so the
(40:27):
developer of the project ended up owning the stairwell just
by itself, just stair A stairway to nowhere?
Speaker 2 (40:35):
Can you like wheel it around stories?
Speaker 1 (40:37):
No, it can't be detached, and it's not it can't
be entered from the actual building. But someone bought it,
so why well, I'll tell you.
Speaker 3 (40:48):
Let me.
Speaker 1 (40:49):
It's a guy who co founded a firm called help Bank,
which is a company that supports budding entrepreneurs. He bought it.
Now The guy quoted in the Time story is his
chief marketing officer, which I think gives you a hint
at why they bought it. Here we are talking about it.
It was any times, I will say the crazy part
(41:09):
is not necessarily the price of the thing. I actually
think the price that he bought it for is personally,
I think is reach. You may think it's crazy. I
just think it's crazy that they sold a stairway to nowhere.
And this guy says, well, you know he backs startups
and entrepreneurs. He said, I'm thinking I'm going to put
(41:30):
a desk on each landing for a budding entrepreneur.
Speaker 2 (41:34):
But is it open? Is it like outdoors?
Speaker 1 (41:37):
No, it's it's enclosed. It's enclosed. I don't know if
there's power or heat or anything like that. I my
guess is not. But maybe they could wire that up
our bathroom.
Speaker 3 (41:45):
And he said the fourth Floyd, do I have to
go through three other?
Speaker 1 (41:51):
You got to pass three other future billionaire? Startup?
Speaker 5 (41:54):
Isn't in a nice location the London neighborhood of Twickenham.
I don't know much about that part of London. It
sounds sounds very nice, Southwest London. It's home to England's
National Rugby Stadium.
Speaker 3 (42:06):
That's where twicking in the stadium is.
Speaker 1 (42:07):
Yeah, yeah, so, and they're saying he might apply, you
know whatever the London equivalent of zoning is wherever they
call it that over there, to allow them to put
beds in there and make it residential.
Speaker 2 (42:20):
So how big is this thing?
Speaker 1 (42:22):
It's not that big. Now you would have like a
single bed on the landing of a stairwell or in
a desk you could turn into an airbnb. Yeah, I have.
Speaker 4 (42:30):
A price in mind, me too, and I think you
could also kind of use it on the out and
the exterior for advertising.
Speaker 1 (42:36):
No they're talking about that. Yep, that was another thing
to imagine they're going to talk to But it's yeah,
that kind of cloudy.
Speaker 2 (42:44):
How can you have a bed?
Speaker 1 (42:46):
I guess you'd get some curtains, But price is precise.
What's your bid filled on at nineteen pounds nineteen thousand pounds?
Remember prices right, rules are in effect.
Speaker 4 (42:56):
I'm going to say it was a lot more expensive
than that. And the reason I think it's a lot
more expensive than that is I think that they marketing
person has probably gotten in and overpaid for it. And
I'm going to say, a million sterling, a million shurty, Oh,
a million sterling.
Speaker 2 (43:09):
It can't be that high because Mike thinks it's reasonable.
Speaker 1 (43:14):
I did think it was reasonably priced. Twenty five thousand pounds, wow,
thirty two thousand dollars. It's only about twelve ounces of gold, right, No,
fifteen ounces of gold.
Speaker 3 (43:24):
Not a lot. See, who would have thought I was
way off the value?
Speaker 1 (43:28):
But I do think it was underpriced. I think they
got a deal. I don't know if i'd go as
a million sterling. Yeah, very good anyway. Joe Caviatoni of
the World Gold Council. Really fascinating conversation, Joe, and it's
great to hear sort of a level headed explanation of
the gold market for those who sort of already in
the weeds of it. And we really appreciate your time.
Speaker 3 (43:51):
Thank you for your time as well.
Speaker 2 (44:00):
What goes up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Waldona Hirich. Mike Reagan is
at Reaganonymous. You can also follow Bloomberg Podcasts at podcasts.
(44:25):
What Goes Up is produced by Stacy Wong and our
head of podcast is Stage Bauman. Thanks for listening, We'll
see you next week.
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