Will Gold Stocks Protect You in a Crisis? (Dirk Baur)

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When I look at the 50 biggest
gold miners in the GDX, there's

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no clear outperformance, right?
We have operating leverage.

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So they move stronger with the
gold price, but they move

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stronger with the gold price in
both directions, right?

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They move stronger up, they move
stronger down.

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There's no clear outperformance
of that portfolio.

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Nervous.
Very.

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Comfortable.
JD We spend a lot of time

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analysing gold miners.
We try and work out how valuable

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a gold miner is.
We try to figure out how

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valuable a resource is and how
economically it could be

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constructed to to get that that
dirt out of a ground process

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turned into gold bars.
All for it to sort of be

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restored and work as this sort
of store of value.

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We spend all this time figuring
this out on the company level,

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but we really actually zoom out
and think, what the hell is it

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all for?
What?

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What are the what are the
dynamics in the gold market?

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What like, like, why?
Why does all this exist?

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What are the correlations?
What does it mean for society?

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And we're going to go very
philosophical today with Doctor

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Dirk Bauer.
We are, mate.

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I'm, I'm incredibly excited.
Some of the the research that

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Dirk has done, the energy he has
put towards trying to understand

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why this gold, you know, this,
this wacky and weird commodity

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that drives so much of what we
talk about, like you say, and a

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good chunk of the economy here,
why it behaves the way it does,

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why it trades the way it does,
why we why we praise it the way

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we do.
And yeah, it's, it's a super

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fascinating point of discussion,
I find, as well as some of the

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other stuff that he is unpacked
from other related metals, PGMS,

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you know, you've got silver, how
they kind of trade, how we

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should think they might behave
in a financial crisis in just a

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period of volatility.
There's there's so much

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interesting information that you
can glean from Dirk here from

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somebody who's studied this for
for 20 odd years.

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And that's just scratching the
surface of of what he's looked

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at.
Dirks, not your usual kind of

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interview for us.
He's yeah, Dirk Dirks and

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academic, but he studies, you
know, a lot of the historic

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relationships when you look at
the the financial gold market

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that exists today and.
And we think that gives us some

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insight about the future.
A. 100% And there's, there's all

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these like misconceptions and
preconceived notions that people

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that I have about how gold or
how gold shares might behave.

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So I was very excited to to
unpack this with him.

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Dirk Bauer Is gold overvalued or
undervalued right now?

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Correctly valued, I think
Correctly.

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Valued.
The target values right?

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The context of course is you,
you co-authored a paper, yeah,

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the relative valuation of gold
in 2019.

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And what do you what do you
uncover when you like compare

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gold's valuation to other asset
classes?

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Yeah, good question.
You know, you can always compare

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gold with stocks and and and
silver and and other commodities

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and oil and and this we know
this the gold copper ratio and

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stuff.
And so I think that paper was

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mostly focused on on ratios,
right.

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So I mean, they give us some
indication that things are that

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one, one asset is maybe higher
value than the other or, or the

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other way around, right?
I mean, the copper gold ratio

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is, I mean, does that tell us
that if it's high, that gold is

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overvalued or that copper is
undervalued?

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And so it was more an
investigation to, to, to see how

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valuable or how informative
these ratios are.

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But I'm in general critical of
these these ratios.

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Why is that?
Yeah.

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Because you know, the gold
copper ratio, I mean, yeah.

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So it's yeah, it's gold
overvalued or or copper

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undervalued.
I don't know.

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I mean, there could be.
So the ratio gives me like a

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starting point to, to look like
a little bit deeper into the

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valuation of gold, the valuation
of copper.

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But the ratio per SE, I think is
is is can be a problem or I

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would just take it and and say
like, OK, just because it's high

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that that that means that gold
is overvalued, for example.

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How on earth do you come up with
a valuation framework for gold

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in the first place?
Yeah, we don't have any, right.

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So, so I mean, even like Ben
Bernanke, the, the, the fetch

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said that no one understands
gold and then he said that he

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doesn't understand it either.
Strong claim that no one

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understands it.
But what he meant is that no one

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really knows how to value it.
And that's because the

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traditional method to value
stocks, for example, or assets,

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it's you have this like you have
cash flows, right?

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And then you discount them and
then you come up with a

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valuation and then you cannot
really do that with gold.

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That will be the same for It's a
problem for many commodities.

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And you've also spent a long
time thinking about it's sort of

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role as a safe haven and also a
hedge.

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I'm curious to to have you start
by just separating the

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differences there between a
hedge and a safe haven.

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Yeah.
So a hedge is something that

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works on average like or at all
times essentially.

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And the safe haven is different
because it only supposed to work

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or has a special function in, in
crisis periods, on periods when

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when we have financial turmoil
or something extreme happens,

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even be a Black Swan event like
like COVID, right?

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That's then when the safe haven
property kicks in.

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The hedge is something that that
should work on average at all

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times, but but not particularly
in in crisis periods or extreme

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periods.
And and how does gold then you

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know pace into that?
Do you do you see it as a hedge

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to safe haven or both?
Yeah, it's both.

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But I mean, the one of the big
things is or, or the main

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property, I think it's the, the
safe haven property is really

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valuable to investors because
when when everything crashes or,

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or falls, like most assets fall
gold dust, right?

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That's the safe haven.
Like people go into the safe

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haven like that safe harbor and
and because they they then move

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from risky assets to gold or
other gold, like, I mean,

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government bonds is the other
safe haven, safe haven asset.

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When they do that, then of
course that that, you know,

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pushes sometimes gold even up.
Yeah, that's the safe haven

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property.
Yeah.

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Now it gets even more
interesting though, because most

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of us, if we are interested in
gold, we don't hold necessarily

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just gold in our portfolio, we
will hold gold stocks and they

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don't behave the same, do they?
No, they don't.

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So how does the relationship
fall apart and how quickly do

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you sort of see that fall apart
in the in these crisis?

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Times so it falls apart because
so gold is not really related to

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the market, not even on average
the correlation of gold bullion

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with the market is essentially 0
in the short run.

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In the long run, they, they move
together, but not in the short

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run.
Gold shares, they, they do not

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have that 0 correlation.
So they are correlated.

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They are like equities.
So they correlate with the

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market and because they are
correlated with gold but also

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with the market, when the market
drops, gold shares also drop,

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right?
And they do not decouple from

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the market.
They they actually almost re

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couple all the, all that
relationship strengthens.

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So the market pulls the the
shares, the gold shares down.

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And that's essentially
explaining why.

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But the the big difference
between gold and gold shares.

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And it's also sometimes
confused.

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I mean, I even remember like a
Wall Street Journal article when

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Warren Buffett bought Barrack,
right?

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And they said, oh, he's doing
that because gold shares are

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safe haven.
And it's I don't think he did it

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because of that, but it's also
not true.

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Anyway, gold shares are not a
safe haven.

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What?
What are the other sort of

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misconceptions?
But the big misconceptions, you

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know, you've studied gold more
than most over the past 15 years

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that you've kind of shattered
along the way.

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Or even, you know,
misconceptions you might have

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had prior that have really
changed once you dug into the

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weeds.
Yeah.

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I mean, I often heard that that
there's no gold, Gold has no

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intrinsic value or I think it
was also highlighted one day

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people talked about Bitcoin.
I said Bitcoin does doesn't have

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any intrinsic value and it's all
based on beliefs.

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And a little bit of that is also
true for, for gold.

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I mean, the big difference, of
course is that gold has been

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around for for millennia or
forever, right?

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And, and and there's there's a
lot of psychological stuff

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embedded in like Lindy effect.
Sorry, have.

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You heard of the Lindy effect?
No, the longer something has

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been around, the more likely it
will continue to be around.

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Yeah.
And so that that's maybe then

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the big difference to to the
other one, right?

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But this, it's because it's so
hard to value.

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So that it is, that was one of
the first things that I think

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noticed or read about.
And, and I think it's, it's true

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that it's hard to value and it's
all based on beliefs, right?

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I mean, if tomorrow people said
like, look, we don't believe in

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gold anymore, which would be
it's a strong assumption.

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I'm not not telling you that or
saying that that they will do

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that.
Also, because central banks hold

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so much, for example, and it's
almost the opposite that the

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beliefs are stronger today.
There's some indication that

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beliefs in gold are stronger
today than maybe 10 years ago,

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not only because the price is
higher, but also because of

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central bank action and that
we've seen recently.

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But going back to your question,
yeah, so there's I don't

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remember any, any kind of
misconception around.

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It's just like the safe haven.
The safe haven in general is

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often people don't really get
it.

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They think that is of also that
people say like when an asset

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falls after an event, after a
safe haven event or after a

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crisis or shock.
And they say like this asset now

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has lost its safe haven
property.

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And that's a big misconception
because like the safe haven

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property means that like an
asset, like gold goes up in a

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crisis, but then after the
crisis, it's natural it's part

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of the safe haven property that
it goes down.

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So then to say, like, look, it
has now lost its safe haven

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property.
That's that's a misconception.

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That's wrong.
Ultimately, people buy gold

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because because of geopolitical
fears, because they're worried

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about inflation and eroding the
purchasing power over time and

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all all of that.
Yeah, I guess like ties into the

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compellingness of of owning
gold.

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But like when you zoom out, you
think we spend so much money

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mining, getting this out of the
ground and it kind of all gets

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locked up in a vault.
What's the economic good of all

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of that?
It's kind of a meta question

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when you think about it.
But.

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But the the the fabric of trust
in society exists because of an

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understanding that this thing
ultimately is the hardest money

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that there is.
And whenever we really put the

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quality or the durability of
that money to test fire, you

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know, inflation or printing too
much for the quantitative

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easing, that's the thing that
kind of holds up over time.

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Is that right?
Is that the?

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Is that the conclusion you've
come to?

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Yeah, I, I agree.
And, and it's that that recent

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central bank buying gold, buying
that the, the fact that they

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increased their reserves
significantly since 2022 is, is

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evidence of that, right?
That I mean, you, you could

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argue that, well, like now that
everything becomes more virtual

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or, or like AI and more digital,
right?

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Like, like who would buy gold?
But even central banks buy,

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right?
I mean, there's another reason

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that that they, they perhaps
want to diversify their U.S.

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dollar holdings and, and maybe
get away from that dominance of

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the US dollar.
But anyway, then again, right,

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so, so gold then competes with
the US dollar in, in, in today's

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world.
The because you mentioned

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inflation, that's maybe a
misconception.

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I mean when I look at the data.
There's.

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There's no strong.
I mean gold has so clearly

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outperformed inflation that you
could hold an inflation hedge

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00:11:42,680 --> 00:11:44,600
maybe.
I mean, people call it that, but

227
00:11:45,400 --> 00:11:47,800
I think when you think of an
inflation hedge, you would more

228
00:11:48,280 --> 00:11:51,240
intuitively, you may think more
like inflation goes up by 3%,

229
00:11:51,240 --> 00:11:53,680
gold goes up by 3%, right.
But when we look at it

230
00:11:53,680 --> 00:11:56,400
historically, it's more like
inflation went up by 3%, gold

231
00:11:56,400 --> 00:12:00,040
went up by 10%.
So it's not, I mean, yes, it,

232
00:12:00,160 --> 00:12:04,960
it, it's, it preserved your
purchasing power, but it, it did

233
00:12:05,000 --> 00:12:07,040
so much more.
So I think it's a little bit

234
00:12:07,040 --> 00:12:09,960
misleading to to call it an
inflation hedge because it's.

235
00:12:10,520 --> 00:12:14,120
It tracks more M2 money supply
than it does CPI.

236
00:12:14,120 --> 00:12:14,800
Right.
Much more.

237
00:12:14,800 --> 00:12:15,560
Yeah, you're right.
Yeah.

238
00:12:15,600 --> 00:12:17,760
Also had recently looked at that
much more.

239
00:12:17,760 --> 00:12:20,640
But then there's still much more
than like there's still this

240
00:12:20,640 --> 00:12:23,560
excess thing above M2, but it's
much closer to M2.

241
00:12:23,560 --> 00:12:24,360
Yeah, you're right.
Yeah.

242
00:12:25,240 --> 00:12:29,360
There's some further sort of
nuances as well with how gold

243
00:12:29,360 --> 00:12:32,280
equities and gold performs in
these crisis times and in safe

244
00:12:32,280 --> 00:12:35,360
haven times because foreign
exchange comes comes into the

245
00:12:35,360 --> 00:12:37,200
mix.
What have you sort of learned in

246
00:12:37,200 --> 00:12:40,120
amongst that with people perhaps
flocking into the US dollar when

247
00:12:40,120 --> 00:12:42,880
things get nasty or other such
trends?

248
00:12:43,040 --> 00:12:45,760
Yeah.
So gold is also called a

249
00:12:45,760 --> 00:12:48,640
currency hedge.
And I think that's, that's like,

250
00:12:48,640 --> 00:12:50,680
I don't see any misconception
there when I look at the data

251
00:12:50,680 --> 00:12:53,800
compared to the inflation hedge.
And what that means is that when

252
00:12:53,800 --> 00:12:57,120
and it's particularly relevant
for Australia and for the

253
00:12:57,120 --> 00:13:00,920
Australian dollar because when
usually in a crisis, global

254
00:13:00,920 --> 00:13:04,640
financial crisis, COVID, the,
the US dollar tends to

255
00:13:04,640 --> 00:13:10,280
appreciate, which is then not as
good for US investors and, and

256
00:13:10,280 --> 00:13:12,640
their gold holdings.
Because there's this, I mean,

257
00:13:12,640 --> 00:13:16,080
even if when gold goes up, but
then because the, if the US

258
00:13:16,080 --> 00:13:20,600
dollar goes up, then that would
kind of push, push go a little

259
00:13:20,600 --> 00:13:25,320
bit down in U.S. dollars.
But it's easier to explain maybe

260
00:13:25,440 --> 00:13:29,560
in in the Australian dollar
context, because when because in

261
00:13:29,560 --> 00:13:33,080
a crisis, usually Australian
dollar falls because money

262
00:13:33,080 --> 00:13:39,600
leaves Australia and then then
gold in Australian dollar goes

263
00:13:39,600 --> 00:13:42,680
up a lot, right.
So in an Australian context,

264
00:13:42,680 --> 00:13:45,640
gold is, is a currency hedge
like in all other currencies.

265
00:13:45,640 --> 00:13:48,120
But in the Australian context,
it's much more important because

266
00:13:48,120 --> 00:13:50,680
the Australian dollar is so much
more volatile than other

267
00:13:50,680 --> 00:13:53,840
currencies and and because the
Australian dollar is not a safe

268
00:13:53,840 --> 00:13:56,400
haven currency as the the US
dollar.

269
00:13:56,680 --> 00:14:00,840
And we saw this quite well in in
the Liberation Day chaos in in

270
00:14:00,840 --> 00:14:06,000
early April where Aussie gold
just held up remarkably well.

271
00:14:08,000 --> 00:14:11,760
Is it, is it curious at the
moment like you talked about

272
00:14:11,760 --> 00:14:16,080
those, those times of of crisis
where the equities that they pop

273
00:14:16,080 --> 00:14:17,560
correlate with the rest of the
equity market.

274
00:14:18,200 --> 00:14:21,840
They, they look at this year and
even though there hasn't been an

275
00:14:21,840 --> 00:14:25,280
event of like extreme volatility
absent calibration day, the

276
00:14:25,280 --> 00:14:28,480
gold, the gold equities have
been like super resilient.

277
00:14:28,480 --> 00:14:31,200
Other parts of the commodities
market or market in general have

278
00:14:31,200 --> 00:14:34,640
been like really volatile.
Does that kind of match up to

279
00:14:34,640 --> 00:14:38,800
your historic like work on, on,
on understanding, you know, the

280
00:14:38,800 --> 00:14:40,480
correlation of these or do you
just think there hasn't been a

281
00:14:40,480 --> 00:14:43,920
volatility event to to test it
in the same way that there was

282
00:14:43,920 --> 00:14:45,720
like in COVID-19?
Yeah.

283
00:14:47,640 --> 00:14:49,800
So when?
When when we look at the, for

284
00:14:49,800 --> 00:14:52,640
example, the last 20 years, the,
the gold shares and gold

285
00:14:52,640 --> 00:14:57,240
relationship, so the the 1st 10
years between 2005 and 2015,

286
00:14:57,240 --> 00:14:58,720
they looked really bad for gold
shares.

287
00:14:58,720 --> 00:15:00,400
I mean, they're, they're like, I
don't know.

288
00:15:00,400 --> 00:15:02,520
I mean, there are many, many
reasons why gold shares clearly

289
00:15:02,520 --> 00:15:05,320
under form performed gold
bullion recently.

290
00:15:05,320 --> 00:15:07,160
The last 10 years.
They didn't really clearly.

291
00:15:07,880 --> 00:15:09,880
Well, there's, there's no clear
underperformance.

292
00:15:10,440 --> 00:15:14,360
And, and, and for those that are
Barrack, there's always

293
00:15:14,360 --> 00:15:15,360
exceptions, right?
You're right.

294
00:15:16,120 --> 00:15:20,400
And, and then there has been
because we look at long data,

295
00:15:20,480 --> 00:15:22,880
right?
But more recently, as we know

296
00:15:22,880 --> 00:15:27,320
2022, the, the Russian invasion
into Ukraine has, has like

297
00:15:27,520 --> 00:15:32,600
changed a lot in terms for gold
also this decoupling of the, the

298
00:15:32,600 --> 00:15:34,640
interest rate gold relationship,
right?

299
00:15:34,640 --> 00:15:37,120
That, that is also something
that we have only seen recently.

300
00:15:37,680 --> 00:15:41,040
And then this, this resilience
could be another one that I

301
00:15:41,040 --> 00:15:45,160
mean, things may change, right?
And there's the, the gold market

302
00:15:45,160 --> 00:15:49,240
is quite in a, we have to, I
don't want to rush to

303
00:15:49,240 --> 00:15:53,040
conclusions, but clearly there
has been like different things

304
00:15:53,040 --> 00:15:56,320
like we've seen then then in the
last 20 years, just in the last

305
00:15:56,320 --> 00:15:57,800
two or three years things have
changed.

306
00:15:58,840 --> 00:16:00,640
What is what is silver do from
here?

307
00:16:01,040 --> 00:16:04,240
It's it's in a quite an
interesting point in time and

308
00:16:04,240 --> 00:16:06,680
and you've often clumped it in
together with gold.

309
00:16:07,080 --> 00:16:13,360
Yeah, there was an article in,
in an, in the AVR about silver a

310
00:16:13,360 --> 00:16:16,360
couple of months ago.
And then I had to, there was an

311
00:16:16,360 --> 00:16:19,440
interview on it where they asked
me like, is silver the new gold?

312
00:16:19,440 --> 00:16:21,040
Right.
And then I had another look at

313
00:16:21,760 --> 00:16:24,680
silver and silver and the gold
relationship and, and there I

314
00:16:24,680 --> 00:16:27,880
couldn't see any, any big
changes to the historical

315
00:16:27,880 --> 00:16:30,800
patterns.
So silver is still so much more

316
00:16:30,800 --> 00:16:34,800
volatile than gold.
Silver has, has doesn't really

317
00:16:34,800 --> 00:16:39,400
perform as a safe haven, hasn't
outperformed gold in any way.

318
00:16:39,400 --> 00:16:43,080
So it's, yeah, last time I
checked, it was just two or

319
00:16:43,080 --> 00:16:46,720
three months ago that there was
nothing like what I just said

320
00:16:46,720 --> 00:16:49,760
about gold, that there seems to
be things a little bit

321
00:16:49,760 --> 00:16:53,160
different, potentially
different, but silver seem to be

322
00:16:53,160 --> 00:16:55,800
very similar.
Would you call yourself a gold

323
00:16:55,800 --> 00:16:57,960
bull?
No.

324
00:16:58,360 --> 00:17:01,640
Why?
Because as an academic, you

325
00:17:01,640 --> 00:17:03,640
know, I'm just, I'm interested
in gold.

326
00:17:03,840 --> 00:17:06,319
You know, I'm, I'm, I'm more and
more fascinated by gold because

327
00:17:06,319 --> 00:17:07,960
that's the usual thing.
Like the more you do research,

328
00:17:07,960 --> 00:17:09,359
the more things get interesting,
right?

329
00:17:09,359 --> 00:17:11,040
You dig deeper and then you find
more stuff.

330
00:17:11,800 --> 00:17:16,839
But that isn't like I think it
has in terms of bull.

331
00:17:16,839 --> 00:17:19,520
I mean, bull is like, what is it
like, do I predict the price to

332
00:17:19,520 --> 00:17:21,599
be 4000?
Like, like whatever, right?

333
00:17:21,599 --> 00:17:24,800
So I, I don't like to make
predictions, but I, I see the

334
00:17:24,800 --> 00:17:26,760
value in gold.
And I mean, what I said about

335
00:17:26,760 --> 00:17:29,840
central banks, for example, is a
very strong indication that that

336
00:17:29,840 --> 00:17:33,200
I wouldn't be, or that they're
like big institutions that

337
00:17:33,200 --> 00:17:35,920
believe in gold.
I've also done a study on

338
00:17:36,400 --> 00:17:40,440
institutional investors, big
funds in the US and their gold

339
00:17:40,440 --> 00:17:45,600
holdings and like 1/4 of them
hold gold and potentially then

340
00:17:45,600 --> 00:17:51,640
they they have even increased or
I mean 1/4 held like around 2%.

341
00:17:52,320 --> 00:17:54,280
Wouldn't be surprised if they
have like increased a little

342
00:17:54,280 --> 00:17:54,720
bit.
Right.

343
00:17:54,720 --> 00:17:56,920
And they're they're doing that
because like you said, the

344
00:17:56,920 --> 00:18:01,440
historic correlation IS0 with
with equities and they believe

345
00:18:01,600 --> 00:18:06,520
that you get diversification
benefits, the benefits of

346
00:18:06,520 --> 00:18:09,360
diversification you've explored.
It's not a free lunch though.

347
00:18:10,760 --> 00:18:14,560
Why?
So you read all my papers.

348
00:18:14,560 --> 00:18:19,080
That's amazing.
It's not a free lunch.

349
00:18:21,200 --> 00:18:27,240
That's a very recent paper.
I mean, this goes back to Warren

350
00:18:27,240 --> 00:18:30,960
Buffett essentially, right?
I mean, the, when you Warren

351
00:18:30,960 --> 00:18:34,400
Buffett always says that you
have to diversify if you don't

352
00:18:34,400 --> 00:18:36,320
understand the businesses.
So he always talks about

353
00:18:36,320 --> 00:18:39,400
businesses, right?
And clearly if you, if you have

354
00:18:39,400 --> 00:18:43,840
a full understanding of your,
your assets you're investing in

355
00:18:44,080 --> 00:18:48,160
and it could be just one 2-3,
then then why, why the why, why

356
00:18:48,160 --> 00:18:50,520
hold the portfolio of 30 assets,
right?

357
00:18:50,520 --> 00:18:53,440
Because that comes at a cost.
If you, if you think about it,

358
00:18:53,440 --> 00:18:58,240
you could, if you just you, you
look at the like everything that

359
00:18:58,240 --> 00:19:01,280
is investable and then you look
at the, the one that you're sure

360
00:19:01,280 --> 00:19:04,000
that this, this will give you
the highest return over the next

361
00:19:04,000 --> 00:19:08,040
couple of years.
If you're sure about it, Well,

362
00:19:08,080 --> 00:19:10,720
you just want to invest in that
one and not and not diversify

363
00:19:10,720 --> 00:19:13,360
away all that upside, right?
You know, and that that's,

364
00:19:13,360 --> 00:19:15,160
that's essentially why I said
it's not a free lunch.

365
00:19:15,160 --> 00:19:19,120
I mean, there's this that's a
misconception that you get when

366
00:19:19,120 --> 00:19:21,040
you diversify, you get something
for free.

367
00:19:22,720 --> 00:19:25,040
And I like this.
I was interested in that because

368
00:19:25,040 --> 00:19:27,280
there's this favorite like
famous saying like there's no

369
00:19:27,280 --> 00:19:29,680
such thing as a free lunch.
So then it seems like there's a

370
00:19:30,080 --> 00:19:32,320
contradiction here, right?
I mean, the diversification is

371
00:19:32,320 --> 00:19:34,440
the and they also said that
diversification is the only free

372
00:19:34,440 --> 00:19:36,200
lunch.
So in that paper, I'm saying

373
00:19:36,200 --> 00:19:38,960
it's not the only free lunch.
There is no such thing as a free

374
00:19:38,960 --> 00:19:41,320
lunch.
So risk goes down, but returns

375
00:19:41,920 --> 00:19:43,720
quite likely.
Returns go down right down as

376
00:19:43,840 --> 00:19:45,400
well, yeah.
You could have always made more

377
00:19:45,400 --> 00:19:48,720
for the concentrated bet in the
the best performing thing, like

378
00:19:49,080 --> 00:19:50,200
when you look back.
Yeah, yeah.

379
00:19:51,040 --> 00:19:54,960
Something I'm really curious
about in the, in the world of

380
00:19:54,960 --> 00:19:59,120
what you've kind of studied,
Derk, is as you mentioned, gold

381
00:19:59,120 --> 00:20:00,560
has been around for for
millennia.

382
00:20:00,560 --> 00:20:03,600
But a lot of these studies say
when we focus in on the safe

383
00:20:03,600 --> 00:20:08,480
haven nature and you compare how
gold has performed to equity

384
00:20:08,480 --> 00:20:11,360
markets across the world.
A lot of these studies and the

385
00:20:11,360 --> 00:20:16,160
ones you reference were done
over A30A40A50 year period.

386
00:20:16,760 --> 00:20:20,160
But if we take into context a
lot of the recent chatter about

387
00:20:20,160 --> 00:20:22,680
maybe we're at the, you know,
coming to the end of the US

388
00:20:22,680 --> 00:20:25,280
dollar being being the reserve
currency.

389
00:20:26,000 --> 00:20:29,200
Do you think there's potential
shortcomings in the study given

390
00:20:29,200 --> 00:20:32,720
this could be perhaps A1 in a
200 year type event?

391
00:20:34,880 --> 00:20:38,520
Well, longer, you know, we, I
think we would look at longer

392
00:20:38,520 --> 00:20:39,880
periods if that would make
sense.

393
00:20:39,880 --> 00:20:43,640
But because the the gold price
was fixed to the US dollar up

394
00:20:43,640 --> 00:20:47,480
until 1971, it doesn't make too
much sense to go back, right.

395
00:20:47,520 --> 00:20:51,000
I mean, I for example, I could
probably see some safe haven

396
00:20:51,000 --> 00:20:56,800
effects also before 71, maybe
shadow like like market gold

397
00:20:56,800 --> 00:20:59,040
prices or something.
But the official gold price was,

398
00:20:59,040 --> 00:21:00,440
was fixed.
So then there's there's no

399
00:21:00,440 --> 00:21:02,400
movement, right?
And then it doesn't make sense

400
00:21:02,400 --> 00:21:05,400
to go back further, right?
And pray the dollar peg.

401
00:21:05,600 --> 00:21:07,560
Yeah, the data is just too hard
to come by.

402
00:21:08,120 --> 00:21:09,600
Well, there is data, but then
it's opaque.

403
00:21:09,680 --> 00:21:10,200
What?
What?

404
00:21:10,200 --> 00:21:11,160
What?
What can I do then?

405
00:21:11,160 --> 00:21:11,760
Right.
Yeah.

406
00:21:12,320 --> 00:21:15,680
So that that was the end of
Bretton Woods 1971, right?

407
00:21:15,800 --> 00:21:19,120
Yeah.
How's the how has that changed

408
00:21:19,640 --> 00:21:22,480
like the monetary environment
and the the perception, the

409
00:21:22,480 --> 00:21:25,800
value and everything relating to
gold since when you look at the

410
00:21:25,800 --> 00:21:28,840
data?
Well, I mean, when we look at

411
00:21:28,840 --> 00:21:31,920
the data, we see that, you know,
the price was I think around 40

412
00:21:31,920 --> 00:21:34,200
and then suddenly, you know, it
factorized.

413
00:21:34,320 --> 00:21:38,720
And then pretty soon after that,
there's this, this like big jump

414
00:21:38,720 --> 00:21:42,720
in or like, I mean, that was the
late 70s when coincides also

415
00:21:42,720 --> 00:21:45,040
with this, the cornering of the
silver market.

416
00:21:45,040 --> 00:21:46,960
And then gold goes, goes up a
lot, right?

417
00:21:46,960 --> 00:21:51,720
And then so that's what we see.
And that's not surprising.

418
00:21:51,920 --> 00:21:55,880
You fix something and then you
you let it free and then it

419
00:21:56,520 --> 00:22:01,720
moves a lot, right?
Yeah, yeah, you let the Mr.

420
00:22:01,720 --> 00:22:03,760
Market do its thing.
Yeah.

421
00:22:04,400 --> 00:22:06,120
Yeah.
Is there, is there anything we

422
00:22:06,120 --> 00:22:09,080
could glean from going back
hundreds of years though, before

423
00:22:09,080 --> 00:22:11,880
the US dollar was even the the
reserve currency?

424
00:22:11,880 --> 00:22:14,480
I know this, this sort of data
must be extremely hard to to

425
00:22:14,480 --> 00:22:16,280
come by and pretty, pretty
patchy.

426
00:22:16,560 --> 00:22:18,960
But is is there things we can
learn about how investors

427
00:22:18,960 --> 00:22:21,680
behaved back then?
Investors not too sure, but I

428
00:22:21,680 --> 00:22:26,360
mean this inflation hedge or the
fact that it it, it preserves

429
00:22:26,360 --> 00:22:29,120
your purchasing power.
I mean that there are studies

430
00:22:29,120 --> 00:22:32,120
that went back 2000 years, you
may have seen that, that, that,

431
00:22:32,720 --> 00:22:35,440
you know, 2000 years ago
apparently could buy a nice suit

432
00:22:35,440 --> 00:22:39,720
for like 1 ounce of of gold and,
and you could still do that.

433
00:22:39,720 --> 00:22:41,800
I mean, then was there's always
a problem, like what kind of

434
00:22:41,800 --> 00:22:44,040
what kind of suit can you buy
with one, one ounce of gold

435
00:22:44,040 --> 00:22:47,000
today, blah, blah, blah.
But so that in that context,

436
00:22:47,000 --> 00:22:50,040
there's studies, but I've never
seen any financial study on on

437
00:22:50,040 --> 00:22:53,400
how gold then was used in a, in
a financial context, you know,

438
00:22:54,720 --> 00:22:58,920
but as well as clearly as money.
We have some some study, right?

439
00:22:59,480 --> 00:23:02,480
When?
When people get excited about

440
00:23:02,480 --> 00:23:05,320
any, any commodity, it's usually
when it's going up and the

441
00:23:05,320 --> 00:23:10,200
animal spirits kick in.
Is there any like when you look

442
00:23:10,200 --> 00:23:12,240
at the data, there's any benefit
to be had of trying to time you,

443
00:23:12,240 --> 00:23:14,720
you're buying and selling
strategies as it relates to gold

444
00:23:14,720 --> 00:23:17,280
or is it kind of ultimately
pretty difficult to just beat

445
00:23:17,280 --> 00:23:20,520
the buy and hold?
Yeah, it's, I mean difficult to

446
00:23:20,520 --> 00:23:23,960
buy to beat it.
I've also done a study where in

447
00:23:24,840 --> 00:23:27,800
terms of that safe haven, like
we looked at it can, could you

448
00:23:27,800 --> 00:23:30,880
just not hold gold?
And then whenever there's a

449
00:23:30,880 --> 00:23:33,960
crisis, then you buy gold.
And when you do that, you, you,

450
00:23:33,960 --> 00:23:38,400
you usually lose the, so it's
better to, to buy and hold,

451
00:23:38,560 --> 00:23:40,160
right?
Because the, the, the problem is

452
00:23:40,160 --> 00:23:43,640
that no one really can.
There may be people that think

453
00:23:43,640 --> 00:23:46,840
they can, but I don't think that
anyone can predict a crisis.

454
00:23:47,400 --> 00:23:51,320
And then once we see the crisis,
then then it's too late to buy.

455
00:23:51,320 --> 00:23:54,800
We can still buy gold.
But if you do, then you do worse

456
00:23:54,800 --> 00:23:56,520
than someone who holds it at all
times.

457
00:23:57,240 --> 00:24:02,520
What do you think of gold miners
in general as a way to to play a

458
00:24:02,520 --> 00:24:05,440
gold thematic?
To play, aye.

459
00:24:05,600 --> 00:24:09,040
Like to have exposure to a, you
know, a rising a gold bull

460
00:24:09,040 --> 00:24:12,680
market?
Yeah, so the the current I'm

461
00:24:12,720 --> 00:24:15,400
currently working on a paper and
and it seems that in a in a

462
00:24:15,400 --> 00:24:18,040
rising gold market, gold shares
do pretty well Yeah, you know

463
00:24:18,240 --> 00:24:20,080
it's the problem is more when
when the.

464
00:24:20,080 --> 00:24:22,040
Window the price.
The window, right?

465
00:24:22,040 --> 00:24:24,120
Yeah.
And the price falls then they

466
00:24:24,400 --> 00:24:26,200
they clearly underperform,
right?

467
00:24:26,640 --> 00:24:29,160
And you've dug quite a bit into
explorers, developers,

468
00:24:29,160 --> 00:24:30,920
producers.
Can you can you break out the

469
00:24:31,240 --> 00:24:32,680
the findings there more?
Yeah.

470
00:24:32,680 --> 00:24:36,560
So, so we looked at for example,
the effects of COVID and and

471
00:24:36,920 --> 00:24:42,280
when COVID hit gold was did its,
its, its thing gold bullion.

472
00:24:42,280 --> 00:24:45,320
So it remains pretty stable.
So it was a safe haven for

473
00:24:45,320 --> 00:24:47,240
investors.
But the gold shares then

474
00:24:47,240 --> 00:24:49,120
decoupled from from gold they
got.

475
00:24:49,160 --> 00:24:51,680
Smashed.
They got smashed and when we

476
00:24:51,680 --> 00:24:54,680
look at it then the producers,
they got smashed.

477
00:24:54,680 --> 00:24:58,680
They also got smashed, but they
they performed best among the

478
00:24:58,680 --> 00:25:01,200
three producers, developers and
explorers.

479
00:25:02,080 --> 00:25:04,720
Developers like were the second
worst.

480
00:25:04,720 --> 00:25:08,480
And then, you know, explorers,
not surprisingly, they they got

481
00:25:08,480 --> 00:25:11,000
smashed the most.
And they're the ones with

482
00:25:11,000 --> 00:25:13,240
relatively little capital.
So it gets more into that

483
00:25:13,240 --> 00:25:15,520
company side of things as
opposed to safe haven.

484
00:25:15,920 --> 00:25:18,600
And I find it hard to access
capital and these sorts of

485
00:25:18,600 --> 00:25:20,680
things.
Yeah, yeah.

486
00:25:20,920 --> 00:25:23,240
Can you?
Can you tell me a little bit

487
00:25:23,240 --> 00:25:28,800
about when you, when you look
at, well, I guess first what I

488
00:25:28,800 --> 00:25:32,680
said the same, tell me a little
bit about the, the, the negative

489
00:25:32,920 --> 00:25:37,280
return asymmetry volatility in
commodities.

490
00:25:39,160 --> 00:25:44,760
So what what we see
traditionally or in, in, in for

491
00:25:44,760 --> 00:25:49,280
stocks, we we see that negative
shocks have a increased

492
00:25:49,280 --> 00:25:51,120
relatively more than positive
shocks.

493
00:25:51,720 --> 00:25:55,120
Yeah, that's there's a word for
it like the leverage effect.

494
00:25:55,120 --> 00:25:58,600
They say like when of course
when stocks fall, then your,

495
00:25:58,600 --> 00:26:01,800
your debt equity ratio
deteriorates and then the stock

496
00:26:01,800 --> 00:26:04,480
becomes more risky.
So then when it falls, the the

497
00:26:04,480 --> 00:26:06,440
whole stock becomes much more
risky and then what's it

498
00:26:06,520 --> 00:26:08,680
increases by much more?
There's more volatility than the

499
00:26:08,680 --> 00:26:11,240
downside, than the upside.
Yeah, it feels like an

500
00:26:11,240 --> 00:26:13,120
exaggeration of the saying you
take the stairs up and the

501
00:26:13,120 --> 00:26:15,600
elevator down, you know?
Like that, yeah.

502
00:26:15,680 --> 00:26:18,680
And but then I found that for
gold it's it's inverted.

503
00:26:19,200 --> 00:26:22,960
So for gold and negative shocks
do not increase what's it by

504
00:26:22,960 --> 00:26:25,800
more, but positive shocks
increase quality by more.

505
00:26:26,480 --> 00:26:30,120
And that just highlights we
could say that look, gold

506
00:26:30,120 --> 00:26:31,920
doesn't have gold bullion
doesn't have any debt.

507
00:26:31,920 --> 00:26:34,120
So then of course, why should
there be such a leverage effect

508
00:26:34,120 --> 00:26:38,200
or the same effect as we see in
stocks, but then also in a safe

509
00:26:38,200 --> 00:26:41,680
haven event, that's usually the
event when when the negative

510
00:26:41,680 --> 00:26:43,720
shocks are the biggest for
stocks.

511
00:26:44,200 --> 00:26:48,040
Gold does the opposite, right?
So, so then the positive shocks

512
00:26:48,040 --> 00:26:52,040
for gold are on the the the
other side of the coin of the

513
00:26:52,120 --> 00:26:55,200
negative shocks for for stocks.
And then that explains why then

514
00:26:55,200 --> 00:26:57,400
positive shocks increase by more
for gold.

515
00:26:57,560 --> 00:27:00,360
To reallocation of capital.
Than than the negative shocks.

516
00:27:00,640 --> 00:27:02,360
But there was there was
something that happened like

517
00:27:02,360 --> 00:27:05,800
when you can see a difference
when gold, the gold market

518
00:27:05,800 --> 00:27:08,720
became financialized in the in
the mid, mid 2000s.

519
00:27:08,720 --> 00:27:11,240
Like how does how does the
market behave differently post

520
00:27:11,240 --> 00:27:12,680
being financialized?
Yeah.

521
00:27:12,680 --> 00:27:16,240
So that, that, that leverage
effect or this, this kind of

522
00:27:16,240 --> 00:27:20,440
inverted asymmetry that that you
were asking about that kind of

523
00:27:21,000 --> 00:27:23,200
weakened a lot and it, it almost
disappeared.

524
00:27:23,200 --> 00:27:24,400
It seems like now it
disappeared.

525
00:27:24,400 --> 00:27:27,120
So it's, but there's no effect
for gold, right?

526
00:27:27,880 --> 00:27:30,720
Which is, but it's still
different to stocks that still

527
00:27:30,720 --> 00:27:33,720
the stocks still have that
negative like negative shocks

528
00:27:33,720 --> 00:27:35,320
increase by more than positive
shocks.

529
00:27:35,680 --> 00:27:38,880
Gold is now more like negative
shocks, positive shocks like the

530
00:27:39,200 --> 00:27:41,800
same, right?
But that could, it could be

531
00:27:41,800 --> 00:27:46,440
financialization or just that we
are in a very long like upward

532
00:27:46,440 --> 00:27:49,600
market now, right?
Or like bull, bull market.

533
00:27:50,200 --> 00:27:53,520
And then of course in a strong
bull market you have we haven't

534
00:27:53,520 --> 00:27:55,520
had like a big crisis.
I mean the COVID crisis was

535
00:27:55,520 --> 00:27:59,000
relatively short, right, much
shorter than the global

536
00:27:59,000 --> 00:28:02,000
financial crisis.
So that could be reasons why it

537
00:28:02,000 --> 00:28:06,440
looks as if it has weakened.
We have to see like if there is

538
00:28:06,440 --> 00:28:09,240
a next safe haven event, so that
will will it went then

539
00:28:09,240 --> 00:28:11,720
strengthen again that effect.
I think this is a really

540
00:28:11,720 --> 00:28:13,960
interesting point.
Can you just explain in in

541
00:28:13,960 --> 00:28:17,120
simple terms what you mean by
the financialization of of gold

542
00:28:17,120 --> 00:28:18,600
over the past decades?
Yeah.

543
00:28:19,000 --> 00:28:22,520
So there's a whole literature on
the financialization of of

544
00:28:22,520 --> 00:28:26,040
commodities that just means that
investors play a bigger role in

545
00:28:26,040 --> 00:28:29,320
in trading, for example, oil in
the oil futures markets.

546
00:28:29,320 --> 00:28:33,320
I mean, there, there was studies
that say like, or agricultural

547
00:28:33,320 --> 00:28:37,840
commodities that they, they used
to be, that investors didn't

548
00:28:37,840 --> 00:28:40,040
play a big role like 30-40 years
ago.

549
00:28:40,240 --> 00:28:43,840
And then in, in the 2000s that
investors kind of realized that,

550
00:28:44,480 --> 00:28:46,640
oh, there's some duplication
benefits.

551
00:28:46,640 --> 00:28:51,160
We can, we can, you know, to, to
also invest in commodities will,

552
00:28:51,720 --> 00:28:54,000
will help us like improve our
returns, lower the risk.

553
00:28:54,680 --> 00:28:58,800
And that that has like led to
this financialization in terms

554
00:28:58,800 --> 00:29:01,120
of gold could be the same thing,
right?

555
00:29:01,120 --> 00:29:04,480
I mean, the more people seems
that, that there has also been a

556
00:29:04,480 --> 00:29:06,800
safe haven has been highlighted
more often the desiccation

557
00:29:06,800 --> 00:29:09,600
benefits of, of gold, the, the
currency hedge benefits.

558
00:29:09,840 --> 00:29:12,760
Then of course investors like,
look, I, I need, I should have

559
00:29:12,760 --> 00:29:15,520
maybe 234 percent of gold in My
Portfolio.

560
00:29:15,520 --> 00:29:17,920
And that's also kind of a
financialization that, that now

561
00:29:17,920 --> 00:29:23,480
gold is in many more portfolios.
And so that's financialization.

562
00:29:23,480 --> 00:29:25,960
And then there's also risk
associated with that, of course,

563
00:29:25,960 --> 00:29:27,680
right?
Because the more people held it

564
00:29:27,680 --> 00:29:31,840
then then it's it could also at
some stage be part of that the

565
00:29:31,840 --> 00:29:35,560
usual like a bunch of assets
that that then you may even sell

566
00:29:35,560 --> 00:29:36,440
if you have to.
Right.

567
00:29:36,440 --> 00:29:38,680
Yeah.
And and all of this I guess

568
00:29:38,800 --> 00:29:41,400
assumes as well that like the
financialization is what you get

569
00:29:41,400 --> 00:29:44,440
exposure I guess, you know, in a
different kind of format, you

570
00:29:44,440 --> 00:29:46,880
actually have to buy physical
gold, store it yourself.

571
00:29:46,880 --> 00:29:49,400
Just think of speculators
descending on the market and

572
00:29:49,400 --> 00:29:51,600
finding something else to bet.
On you can bet on futures, all

573
00:29:51,600 --> 00:29:54,840
that sort of stuff becomes more
liquid and the gold bulls would

574
00:29:55,000 --> 00:29:58,560
would certainly argue that not
all of this paper gold is backed

575
00:29:58,560 --> 00:30:03,440
and that's also a big risk.
Is there any, any evidence to to

576
00:30:03,440 --> 00:30:06,920
some of that, you know, those,
those theories that there's a

577
00:30:06,920 --> 00:30:10,840
lot of a lot of, you know,
claims to gold out there as a

578
00:30:10,840 --> 00:30:13,520
result of the financialization
that, that that probably don't

579
00:30:13,560 --> 00:30:17,040
manifest in reality?
Yeah, possibly I might have seen

580
00:30:17,040 --> 00:30:19,400
that.
I think I read about that like

581
00:30:19,400 --> 00:30:21,520
15 years ago.
And then I said, oh, there's,

582
00:30:21,520 --> 00:30:24,520
there's a big risk.
And that, you know, so far we

583
00:30:24,520 --> 00:30:27,400
haven't seen like it hasn't
real, like there's, there's no

584
00:30:27,400 --> 00:30:32,320
problem so far, right?
It could be the, the European

585
00:30:32,320 --> 00:30:34,640
Central Bank has recently
written like a small piece in

586
00:30:34,640 --> 00:30:37,600
their financial stability report
where they, there could be some

587
00:30:37,600 --> 00:30:41,320
problem for some banks when
they, when they have these, when

588
00:30:41,320 --> 00:30:46,520
they cannot deliver the gold,
maybe.

589
00:30:46,520 --> 00:30:51,520
I mean, it's, it's, it's to me
it seemed that the risk is not

590
00:30:51,520 --> 00:30:54,280
too big.
Well, the, the financial system

591
00:30:54,280 --> 00:30:56,880
maybe, maybe, maybe it's, it's
big for one bank, but I don't

592
00:30:56,880 --> 00:31:01,200
think it's, it has a like
systemic or systematic relevance

593
00:31:01,200 --> 00:31:03,320
or impact.
You can start talking about

594
00:31:03,320 --> 00:31:05,880
whether Fort Knox even has the
gold as well next.

595
00:31:06,560 --> 00:31:08,160
But don't get me started on the
refiners.

596
00:31:09,920 --> 00:31:13,200
Derrick, I'm curious on the, on
the theme of financialization.

597
00:31:13,960 --> 00:31:16,360
I, I didn't come across a paper
on this specifically, but I'm

598
00:31:16,360 --> 00:31:21,200
curious if you've thought about
the role of ETFs and ETFs that

599
00:31:21,200 --> 00:31:24,640
hold gold equities as well and
what kind of impact they've had

600
00:31:25,040 --> 00:31:28,120
given their dramatic rise in, in
the past decade kind of plus.

601
00:31:28,440 --> 00:31:33,760
Yeah.
So the the gold ETFI mean that

602
00:31:33,760 --> 00:31:36,440
that's either like the GLD,
right, for example.

603
00:31:36,640 --> 00:31:41,360
I mean, if you think about it or
we're still thinking about it

604
00:31:41,520 --> 00:31:45,560
and we hypothesized.
And I think that you know, if,

605
00:31:45,600 --> 00:31:49,840
if investor has an option or the
choice, you can say I invest in

606
00:31:50,360 --> 00:31:55,560
the ETF and the gold ETF or I
invest in a mining company or I

607
00:31:55,680 --> 00:31:58,680
invest in a portfolio of mining
companies with the GDX, for

608
00:31:58,680 --> 00:32:05,680
example, what should I do?
And if you think that gold

609
00:32:05,680 --> 00:32:09,160
mining companies that some of
them will do very well and will

610
00:32:09,160 --> 00:32:12,680
outperform the gold price,
others will not do so well.

611
00:32:12,680 --> 00:32:15,080
So maybe an average then they
kind of closely track the gold

612
00:32:15,080 --> 00:32:19,040
price.
If that's the case, why, why not

613
00:32:19,040 --> 00:32:22,440
invest in the gold ETF, the
bullion ETF?

614
00:32:23,800 --> 00:32:31,520
And that's maybe a puzzle that,
that the, the gold mining ETFs

615
00:32:31,520 --> 00:32:35,000
are, you know, I mean, why, why
do you invest in those?

616
00:32:35,000 --> 00:32:37,000
I don't, I'm not sure.
I mean, clearly you can get then

617
00:32:37,000 --> 00:32:39,120
get access to a whole portfolio
of gold mining companies.

618
00:32:39,120 --> 00:32:43,400
But if you're, if you're, if you
believe in the upside of gold

619
00:32:43,400 --> 00:32:45,760
mining, like some, that some
gold mining companies will, will

620
00:32:45,760 --> 00:32:48,880
do really well relative to gold,
I mean, then you should maybe

621
00:32:48,880 --> 00:32:50,880
pick, right?
And I'm, I'm generally not

622
00:32:50,880 --> 00:32:52,800
telling anyone that, that they
should pick stocks.

623
00:32:52,800 --> 00:32:55,560
But, but in this case, it's a
special case because you have an

624
00:32:55,560 --> 00:32:58,920
alternative, right?
If I want to get exposure to the

625
00:32:58,920 --> 00:33:02,840
S&P 500, I can buy all these
stocks, which is super expensive

626
00:33:02,840 --> 00:33:06,040
or just buy the ETF, right?
But then there's in the, in the

627
00:33:06,800 --> 00:33:08,800
equity space, there's nothing
like that.

628
00:33:08,840 --> 00:33:12,400
There's, there's no other
product which is like an

629
00:33:12,400 --> 00:33:17,000
underlying S&P 500 bullion kind
of thing, right?

630
00:33:17,000 --> 00:33:22,400
So then, then it makes sense to
buy the, the S&P 500 ETF in the

631
00:33:22,400 --> 00:33:24,760
gold context.
It's, it's different and that's

632
00:33:24,760 --> 00:33:26,480
very interesting, I think,
right.

633
00:33:27,520 --> 00:33:31,320
Yeah, people argue they want
operating leverage and they

634
00:33:31,440 --> 00:33:33,080
haven't done the stock specific
research.

635
00:33:33,080 --> 00:33:37,560
So they buy the the ETF of
diversified basket of of miners.

636
00:33:38,160 --> 00:33:39,880
Perhaps even financial leverage
as well.

637
00:33:39,960 --> 00:33:41,920
Yeah, it's your argument that
you could.

638
00:33:42,080 --> 00:33:45,720
You could maybe use financial
leverage on the bullion product

639
00:33:45,720 --> 00:33:50,320
to to you know, approximate the
the desired amount of like, you

640
00:33:50,320 --> 00:33:52,160
know, net leverage that
someone's looking for.

641
00:33:52,560 --> 00:33:54,800
Yeah, but I mean, you're right.
You could do that.

642
00:33:54,880 --> 00:33:57,600
You could do that, you're right.
Or, but I mean, when I look at

643
00:33:57,600 --> 00:34:03,120
the performance of the, you
know, gold miners like on

644
00:34:03,120 --> 00:34:07,240
average or like a bunch of them,
like 5050 fifty biggest gold

645
00:34:07,240 --> 00:34:10,480
miners, like in the GDX or like
77 or 60 or like whatever that

646
00:34:10,480 --> 00:34:12,920
is, right?
There's no clear outperformance,

647
00:34:13,000 --> 00:34:14,520
right?
I mean, they have, when we, when

648
00:34:14,520 --> 00:34:16,000
we look at the we have operating
leverage.

649
00:34:16,000 --> 00:34:19,520
So they, they are more, they
move stronger with the gold

650
00:34:19,520 --> 00:34:21,719
price, but they move stronger
with the gold price in both

651
00:34:21,719 --> 00:34:23,679
directions, right?
They move stronger up, they move

652
00:34:23,679 --> 00:34:25,920
stronger down.
And then there's also this

653
00:34:25,920 --> 00:34:31,120
market exposure, right?
And but rest to gold, there's no

654
00:34:31,280 --> 00:34:33,120
clear outperformance of that
portfolio.

655
00:34:33,520 --> 00:34:37,520
And because there's none, what's
the difference to like, why not

656
00:34:37,520 --> 00:34:40,679
invest then in the in the
bullion ETF, right.

657
00:34:40,840 --> 00:34:43,960
And I'm, but just to be clear,
I'm not saying that there's

658
00:34:43,960 --> 00:34:48,639
clearly some like great picks,
like within that index where

659
00:34:48,639 --> 00:34:51,880
it's like maybe I should invest
that that or like I just pick

660
00:34:51,880 --> 00:34:55,199
three or four or five because I
believe in the app side and I, I

661
00:34:55,239 --> 00:34:57,360
strongly believe in their out
performance of the gold price.

662
00:34:57,840 --> 00:35:00,280
But then again, going back to
your question with the the free

663
00:35:00,280 --> 00:35:05,000
lunch when you have 50, you
know, like will all 50

664
00:35:05,000 --> 00:35:07,520
outperform the gold price?
Probably not, right.

665
00:35:08,520 --> 00:35:11,040
And so you're then diversifying
away that outside, right?

666
00:35:11,160 --> 00:35:13,800
Yeah.
This ties in with another

667
00:35:13,800 --> 00:35:16,640
feature which has been super
prominent in the last year and

668
00:35:16,640 --> 00:35:20,960
that's that's hedging and a lot
of companies now try and promote

669
00:35:20,960 --> 00:35:24,400
themselves and say we are an
unhedged producer.

670
00:35:24,760 --> 00:35:27,720
I'm not sure how how date you've
sort of dug into into the world

671
00:35:27,720 --> 00:35:30,000
of hedged versus unhedged
performance.

672
00:35:30,000 --> 00:35:34,280
But do you have numbers you can
wrap around and sort of thinking

673
00:35:34,280 --> 00:35:38,760
in a rallying environment, do
the unhedged producers actually

674
00:35:38,760 --> 00:35:41,200
perform better or is it mixed
results?

675
00:35:42,000 --> 00:35:44,920
I mean, the this goes back to, I
think a fundamental question in,

676
00:35:44,920 --> 00:35:47,200
in, in finance or what do you
want as an as investor?

677
00:35:47,200 --> 00:35:49,720
And that's also why they now
advertise themselves as unhedged

678
00:35:49,760 --> 00:35:54,600
because like you, you don't
want, like you, you have a lot

679
00:35:54,600 --> 00:35:56,320
of products you can choose from,
right?

680
00:35:56,320 --> 00:35:59,160
You can buy the gold bullion,
the ETF, you can, you can do all

681
00:35:59,160 --> 00:36:03,960
kinds of things yourself.
So, and it's not surprising that

682
00:36:04,280 --> 00:36:09,240
like the investor wants an
unhedged exposure to the upside,

683
00:36:09,520 --> 00:36:11,240
right?
You don't want to, well, I don't

684
00:36:11,240 --> 00:36:14,040
see why you would invest in a
gold miner and, and say, look,

685
00:36:14,520 --> 00:36:16,960
we have hedged everything and,
and we're now very similar to

686
00:36:16,960 --> 00:36:18,600
gold bullion.
And then it's like, OK, then I

687
00:36:18,600 --> 00:36:21,400
buy gold bullion, right?
So I want something that that is

688
00:36:21,400 --> 00:36:23,480
special.
And and that's why I'm not

689
00:36:23,480 --> 00:36:26,640
surprised that they they're now
more they like, look, we're

690
00:36:26,640 --> 00:36:30,880
unhedged on.
The topic of hedging, Sean,

691
00:36:30,880 --> 00:36:32,920
Sean, really sorry.
He would argue that there was

692
00:36:32,920 --> 00:36:36,720
this period where a lot of gold
pages had these big hedge books

693
00:36:36,720 --> 00:36:38,000
that were increasingly out of
the money.

694
00:36:38,000 --> 00:36:40,920
It's gold price was, was rising.
They raised a bunch of equity

695
00:36:41,200 --> 00:36:42,960
all at the same time to close
out the hedge books.

696
00:36:42,960 --> 00:36:46,440
And that that the straight
window of time where all these

697
00:36:46,440 --> 00:36:53,080
gold majors were were doing that
explained a huge amount of golds

698
00:36:53,480 --> 00:36:55,280
outperformance in that period.
Like, you know, they're actually

699
00:36:55,600 --> 00:36:57,040
they're closing out the hedge
book, they're buying the

700
00:36:57,040 --> 00:37:00,000
physical gold to to close out
that hedge book, which pushes

701
00:37:00,200 --> 00:37:01,840
the gold bullion price even
higher.

702
00:37:01,920 --> 00:37:04,120
Yeah.
Can you see that in in the data

703
00:37:04,120 --> 00:37:06,600
when you like try and explain
some of gold price movement.

704
00:37:06,600 --> 00:37:08,440
I could see it.
I haven't looked at it but but

705
00:37:08,640 --> 00:37:13,120
clearly we could test that that
observation or, or I mean maybe

706
00:37:13,120 --> 00:37:15,160
he looked at it anyway, but.
An idea of your next paper?

707
00:37:15,440 --> 00:37:18,520
Yeah.
Do do you find it interesting

708
00:37:18,600 --> 00:37:24,760
over the last year we have seen
no great ETF inflows and I think

709
00:37:24,760 --> 00:37:27,040
for a large, you know,
quarterback quarter

710
00:37:27,040 --> 00:37:30,480
breakthrough, a lot have seen
outflows of these ETFs despite

711
00:37:30,480 --> 00:37:32,400
the gold price running really
strongly.

712
00:37:34,400 --> 00:37:36,800
So, yeah, central banks
explained that I think.

713
00:37:36,800 --> 00:37:38,840
Yeah.
So I mean the it's a little bit

714
00:37:38,840 --> 00:37:43,120
surprising, you're right that
despite this kind of strong

715
00:37:43,120 --> 00:37:47,200
performance of gold that that
the ETF flows don't don't get a

716
00:37:47,520 --> 00:37:51,240
flat or even outflows.
But I'm not it's fascinating,

717
00:37:51,240 --> 00:37:53,680
you're right.
And that's why.

718
00:37:53,800 --> 00:37:54,720
Why, right?
Yeah.

719
00:37:55,360 --> 00:37:58,360
Do you think Bitcoin, an area
you've studied quite as quite

720
00:37:58,360 --> 00:38:01,360
deeply as well, has sort of
eaten gold's lunch a bit here?

721
00:38:01,600 --> 00:38:03,200
Could could be the case, yeah.
Yeah.

722
00:38:03,280 --> 00:38:07,960
I mean, it's clearly that all
this like Bitcoin is kind of

723
00:38:08,280 --> 00:38:10,680
potentially catching up a little
bit, you know, and then there

724
00:38:10,680 --> 00:38:13,040
could be that could be an
explanation.

725
00:38:13,040 --> 00:38:16,680
You're right, yeah.
Do you foresee a world and I

726
00:38:16,680 --> 00:38:20,920
know you don't do predictions,
but just given the, the the

727
00:38:20,920 --> 00:38:24,360
depth in which you've studied
the Bitcoin market where that

728
00:38:24,360 --> 00:38:28,960
becomes kind of comparable in in
size and nature or are they sort

729
00:38:29,480 --> 00:38:32,680
of fundamental characteristics
that mean that that won't

730
00:38:32,680 --> 00:38:35,160
happen?
Yeah, I'm not.

731
00:38:35,920 --> 00:38:39,320
Yeah, as, yeah, you said that I
don't make predictions, it's

732
00:38:39,320 --> 00:38:42,400
true.
But I, I can, I, but I can make

733
00:38:42,440 --> 00:38:44,440
and I like to make conditional
predictions.

734
00:38:45,160 --> 00:38:50,480
So it depends a little bit how,
how people value tangible assets

735
00:38:50,480 --> 00:39:00,560
or the tangibility of, of gold.
So if in if in 10 years, people

736
00:39:00,560 --> 00:39:05,240
say, look, I mean, everything is
virtual digital AI.

737
00:39:05,240 --> 00:39:11,400
Like I don't I'm happy if I can
just, you know, touch some

738
00:39:11,400 --> 00:39:14,000
stuff, but but I don't have to
touch any of my assets like like

739
00:39:14,000 --> 00:39:16,200
gold.
Fine, right?

740
00:39:16,240 --> 00:39:20,840
I mean, then maybe Bitcoin will
catch up and and become equal or

741
00:39:20,840 --> 00:39:24,760
even even overtake gold will
take I guess much more time than

742
00:39:24,760 --> 00:39:28,080
10 years.
Like if that happens, but I'm

743
00:39:28,080 --> 00:39:31,320
not sure because currently even
with the apparently younger

744
00:39:31,320 --> 00:39:34,400
generations that they, they even
younger generations or younger

745
00:39:34,400 --> 00:39:37,600
people buy gold.
So it seems that OK, they are on

746
00:39:37,600 --> 00:39:40,080
social media, they do everything
digital, but then they still

747
00:39:40,080 --> 00:39:41,600
value something that is
tangible.

748
00:39:42,280 --> 00:39:45,640
And now going forward, if that
hasn't changed, then then

749
00:39:45,920 --> 00:39:50,080
Bitcoin may catch up but take
very long time to overtake or or

750
00:39:50,080 --> 00:39:53,080
even even level with gold.
Yeah, yeah, You could see

751
00:39:53,080 --> 00:39:55,840
Walmart selling out of all the
little coins they're, they're

752
00:39:55,840 --> 00:39:58,120
selling and, you know, all
sorts.

753
00:39:59,280 --> 00:40:04,320
Thinking forward, perhaps in in
decades again.

754
00:40:05,200 --> 00:40:08,600
Do you, Can you imagine a world
in which we have a gold standard

755
00:40:08,680 --> 00:40:12,400
again, given how much you sort
of studied the history of gold?

756
00:40:15,040 --> 00:40:19,240
Not really I, I, you know, when
we look at how like the current,

757
00:40:19,640 --> 00:40:23,880
you know, environment where it's
really hard to to get consensus

758
00:40:23,880 --> 00:40:26,640
across countries like trade war
and all these things, right.

759
00:40:26,640 --> 00:40:29,360
I don't, I don't really see them
coming together.

760
00:40:29,360 --> 00:40:33,040
Like, look, let's let's do a
gold standard again, right,

761
00:40:33,040 --> 00:40:35,720
Because it failed also because
of coordination issues.

762
00:40:37,160 --> 00:40:41,200
Yeah.
So I don't see that happening.

763
00:40:41,200 --> 00:40:46,400
Yeah.
It's more that I see that the US

764
00:40:46,400 --> 00:40:48,880
dollar, that the dominance of
the US dollar, I think it's more

765
00:40:48,880 --> 00:40:52,920
like that that that dominance
will kind of weaken that, that

766
00:40:52,920 --> 00:40:54,960
other currencies will become
stronger.

767
00:40:55,480 --> 00:40:56,840
Yeah.
And that's something that I see.

768
00:40:56,840 --> 00:40:59,560
And that that gold could then
also play a role in, in that

769
00:40:59,560 --> 00:41:01,880
mix.
And that's that's supported by

770
00:41:01,880 --> 00:41:04,840
by that gold buying of central
banks.

771
00:41:05,040 --> 00:41:10,240
The recent the recent supposed
bill to be passed to lift the

772
00:41:10,880 --> 00:41:14,440
the debt cap by another 5
trillion I saw recently in the

773
00:41:14,440 --> 00:41:17,960
USI mean that's going to be a
pretty a pretty damning outlook

774
00:41:17,960 --> 00:41:19,600
on.
Small number these days.

775
00:41:19,680 --> 00:41:21,480
Yeah.
It's, it's there's, it's almost

776
00:41:21,480 --> 00:41:26,640
an admission that there, there's
there's no desire to get out of

777
00:41:26,920 --> 00:41:30,960
the the that, that, you know,
debt trap in a sensible way.

778
00:41:31,080 --> 00:41:34,040
Yeah, at this point in time.
And that's, I think supporting

779
00:41:34,080 --> 00:41:35,400
gold, right?
If you think about it, I mean

780
00:41:35,400 --> 00:41:38,800
this all this money and then
like, what does that mean?

781
00:41:38,800 --> 00:41:42,440
5 trillion, right?
Or, or you know, and then gold

782
00:41:42,440 --> 00:41:45,720
is, is, is tangible.
That can explain a lot of that I

783
00:41:45,720 --> 00:41:47,000
think.
Yeah.

784
00:41:47,560 --> 00:41:50,560
You've written papers on green
gold.

785
00:41:50,720 --> 00:41:54,840
This this was a concept that was
creating much more headlines a

786
00:41:54,840 --> 00:41:58,240
few years ago than it might be
today, but it's it's still a

787
00:41:58,240 --> 00:42:01,520
really interesting concept.
And of course, in the market you

788
00:42:01,520 --> 00:42:06,800
had Bellevue being the Champions
of this by trying to run a lot

789
00:42:06,800 --> 00:42:09,680
of, you know, getting all their
power needs from solar and wind

790
00:42:10,160 --> 00:42:12,960
in these sorts.
But you, you came up with your

791
00:42:12,960 --> 00:42:16,440
co-authors with a few novel ways
of thinking about this, leaving

792
00:42:16,440 --> 00:42:18,680
the gold in the ground and such.
Can you, can you sort of run us

793
00:42:18,680 --> 00:42:20,080
through your thinking on this?
Yeah.

794
00:42:20,080 --> 00:42:24,320
So the the starting point was
again, I think right at least

795
00:42:24,320 --> 00:42:27,280
the starting point of the paper.
But also, I think they're like

796
00:42:27,400 --> 00:42:30,360
our sign when was Warren
Buffett's statement that it's

797
00:42:30,360 --> 00:42:34,400
pretty stupid when what we do
that we dig gold out of the

798
00:42:34,400 --> 00:42:37,480
ground and then like do a lot of
stuff and it's rather expensive

799
00:42:37,480 --> 00:42:39,120
than the we put it down in the
ground.

800
00:42:39,120 --> 00:42:40,720
Again, like involves
essentially.

801
00:42:41,680 --> 00:42:44,120
And people like you said that
people would be scratching their

802
00:42:44,120 --> 00:42:48,040
heads if they they observed as
like, like, is that stupid or

803
00:42:48,040 --> 00:42:51,720
inefficient or whatever.
So then the idea was to say,

804
00:42:51,720 --> 00:42:54,800
look, there's a lot of people
out there that invest in gold,

805
00:42:54,800 --> 00:42:56,880
but they never look at look at
gold.

806
00:42:56,880 --> 00:42:59,720
I mean that not like the like a
lot of Indians that that wear

807
00:42:59,720 --> 00:43:01,560
their gold and that, that have
jewelry.

808
00:43:01,560 --> 00:43:03,840
And so they just invest in gold.
They never look at it.

809
00:43:03,840 --> 00:43:05,560
They never want to touch it.
They don't want to, they don't

810
00:43:05,560 --> 00:43:08,640
have it at home, right.
And for those investors, it

811
00:43:08,640 --> 00:43:11,920
could be like an option say,
look, I mean, we, we don't dig

812
00:43:11,920 --> 00:43:13,400
it out.
We leave it in the ground.

813
00:43:13,880 --> 00:43:16,160
It's pretty safe.
We don't have, we have clearly

814
00:43:16,160 --> 00:43:18,480
uncertainty about the amount of
gold that is into the ground,

815
00:43:18,480 --> 00:43:23,600
but that is kind of priced in.
And then we showed that because

816
00:43:23,600 --> 00:43:27,880
the, the in ground gold is like
the market value is like between

817
00:43:28,240 --> 00:43:31,240
like 1 and 10%, right, Maybe
let's say 5.

818
00:43:32,480 --> 00:43:35,920
So does it matter that it that
it trades at a if you trade at a

819
00:43:35,920 --> 00:43:39,200
discount, would that matter if
an investor wants exposure to

820
00:43:39,200 --> 00:43:40,240
gold?
No, right.

821
00:43:40,240 --> 00:43:42,080
So we show we've exploration
companies.

822
00:43:42,080 --> 00:43:45,920
It was like this is the like the
closest proxy to in ground gold,

823
00:43:46,720 --> 00:43:48,680
but they don't really have the
they're not producing right.

824
00:43:48,680 --> 00:43:53,080
They just have kind of access to
it that then a portfolio of

825
00:43:53,080 --> 00:43:56,440
exploration companies could like
tracks the the gold price

826
00:43:56,440 --> 00:43:59,320
closely one almost one to one,
like if you pick it like if you

827
00:43:59,320 --> 00:44:01,920
do it good, right, And then
that's that.

828
00:44:01,920 --> 00:44:03,720
That was one idea.
Select look, I mean if you want

829
00:44:03,720 --> 00:44:09,320
exposure to gold, you could also
have in ground gold exposure or

830
00:44:09,320 --> 00:44:12,960
if there was an in ground gold
like a securitized in ground

831
00:44:12,960 --> 00:44:18,920
gold vehicle that could give you
a 1 to 1 exposure and it would

832
00:44:18,920 --> 00:44:21,760
trade as a discount to the
official world market gold

833
00:44:21,760 --> 00:44:22,760
price.
But it doesn't matter because

834
00:44:22,760 --> 00:44:25,240
you want exposure to it, right?
You could just then buy more.

835
00:44:26,200 --> 00:44:29,360
That was the idea.
You think it gets any traction?

836
00:44:29,680 --> 00:44:34,480
Well, we, whenever we presented
it, for example, the, the like

837
00:44:34,680 --> 00:44:40,200
front of MBAs at UWI mining from
many from the mining industry,

838
00:44:41,080 --> 00:44:42,280
they, they don't like it very
much.

839
00:44:42,680 --> 00:44:45,920
You know, some of, some of some
of them reacted really like

840
00:44:46,120 --> 00:44:50,200
aggressively towards that
concept, which is I, I think

841
00:44:50,200 --> 00:44:52,880
that's encouraging, right?
When someone reacts in a really,

842
00:44:52,880 --> 00:44:55,600
really aggressive way and like,
OK, like, wow, why?

843
00:44:55,680 --> 00:44:57,080
You know, what's your problem,
right?

844
00:44:57,360 --> 00:44:59,760
And clearly when you're in the
mining business, you don't like

845
00:44:59,760 --> 00:45:01,440
to hear that.
Well, we leave it in the ground,

846
00:45:01,440 --> 00:45:03,280
right?
But I highlighted then over the

847
00:45:03,280 --> 00:45:07,480
years that this could just be
it's not about we, you stop

848
00:45:07,480 --> 00:45:10,440
mining, it's more like, you
know, you, you keep doing what

849
00:45:10,440 --> 00:45:13,360
you're doing anyway.
But there, there may be areas

850
00:45:13,360 --> 00:45:14,920
where it's really hard to mine
anyway.

851
00:45:15,080 --> 00:45:18,520
And maybe then you could try
that trial that in ground gold

852
00:45:18,520 --> 00:45:21,400
securitization, right, that you
sell the, you don't dig it out

853
00:45:21,680 --> 00:45:24,520
and and you, you just offer more
to investors, right?

854
00:45:25,080 --> 00:45:27,200
That.
And I mean, now that, that ESG,

855
00:45:27,440 --> 00:45:30,680
there's this love push like
Italy from from the US, like

856
00:45:31,120 --> 00:45:34,520
against ESD and all that
environmental stuff in the US,

857
00:45:34,520 --> 00:45:38,400
right?
But when we abstract from that,

858
00:45:38,400 --> 00:45:42,640
I mean, if you value the nature
and if you say like there's, it

859
00:45:42,640 --> 00:45:46,040
makes sense to care about the
environment, then then it could

860
00:45:46,040 --> 00:45:47,680
be an option.
It's like, look, I mean, you

861
00:45:47,680 --> 00:45:50,560
have, you know, you can, you can
buy the traditional gold and

862
00:45:51,000 --> 00:45:53,760
that's clear disruptive to the
environment little bit at least

863
00:45:54,400 --> 00:45:59,000
all you buy that in ground gold.
So you have a choice and to have

864
00:45:59,000 --> 00:46:01,560
choices is a good thing, right?
And the market could could value

865
00:46:01,560 --> 00:46:03,040
that.
And then like, will that trade

866
00:46:03,040 --> 00:46:06,800
then at a premium or not, right.
You know, when I hear that

867
00:46:06,800 --> 00:46:09,920
investors care about the
environment I have, I think

868
00:46:09,920 --> 00:46:13,440
it's, it's a beautiful concept,
but I don't see too much

869
00:46:13,440 --> 00:46:15,400
evidence for it, right?
So if they did, then they would,

870
00:46:15,400 --> 00:46:18,000
there would be a lot of would be
a lot of stocks that that no one

871
00:46:18,000 --> 00:46:22,640
would invest in, right?
So, but then here that the, I

872
00:46:22,640 --> 00:46:23,920
think there's an opportunity
there, right?

873
00:46:24,520 --> 00:46:27,720
What the like we have written a
follow up paper.

874
00:46:28,920 --> 00:46:33,640
It doesn't happen pretty much
nowhere on the planet because

875
00:46:33,640 --> 00:46:35,440
governments like don't allow it,
right.

876
00:46:35,680 --> 00:46:39,960
In the Australian context, you
can get a mining lease, but you

877
00:46:39,960 --> 00:46:43,360
cannot get a lease to to leave
something in the ground, right.

878
00:46:43,360 --> 00:46:46,520
So that's a barrier.
But we in that follow up piece,

879
00:46:46,520 --> 00:46:50,040
we also tried to highlight what
why governments may not like it

880
00:46:50,080 --> 00:46:52,520
because clearly then you have
less jobs.

881
00:46:52,880 --> 00:46:56,240
Royalty revenue, yeah.
But the royalty, like if you if

882
00:46:56,240 --> 00:46:58,600
you securitize that in ground
goal, then you could also like

883
00:46:58,840 --> 00:47:00,480
have to pay royalties.
I mean, there could be something

884
00:47:00,480 --> 00:47:02,440
where the government says like,
OK, we still get some money,

885
00:47:02,800 --> 00:47:05,120
right?
But then again, it's not a 01

886
00:47:05,120 --> 00:47:09,440
thing because like we still do
mining, but we just do more so.

887
00:47:09,440 --> 00:47:11,920
So one could even argue, look,
government, you could even get

888
00:47:11,920 --> 00:47:20,240
more if you allowed that too.
The I know, I know you're you're

889
00:47:20,240 --> 00:47:25,000
like expiration of Bitcoin as a
potential gold transcended into

890
00:47:25,000 --> 00:47:28,000
exploring like stable coins as
well and stable coins.

891
00:47:28,000 --> 00:47:32,000
Is it the potential new money
market mutual funds?

892
00:47:32,960 --> 00:47:35,720
What's your what's your view on
after after looking into this

893
00:47:35,720 --> 00:47:40,960
question?
Stable coins.

894
00:47:42,080 --> 00:47:44,600
I mean, you mentioned that
recently that, that Tether now

895
00:47:44,600 --> 00:47:48,280
goes into gold, right?
And the, the, the business, the

896
00:47:48,280 --> 00:47:54,280
amazing business model of
something like like Tether, not

897
00:47:54,280 --> 00:47:59,440
sure that I mean, gold and
stablecoins is, is hard to

898
00:47:59,440 --> 00:48:02,160
compare that, you know, I mean,
I, I looked into stablecoins

899
00:48:02,160 --> 00:48:05,360
just because I also have this
like, like I have an interest in

900
00:48:05,360 --> 00:48:06,760
cryptocurrency in general,
right?

901
00:48:06,760 --> 00:48:10,320
And, and the Bitcoin, because
Bitcoin was introduced as a

902
00:48:10,320 --> 00:48:13,320
payment system or like a payment
vehicle, right?

903
00:48:13,320 --> 00:48:16,120
And people said, look up at this
like how, how can like you will

904
00:48:16,120 --> 00:48:18,400
never use that as money because
it's too volatile, right?

905
00:48:18,400 --> 00:48:20,840
But then of course, stable coins
you could use as money and then

906
00:48:20,840 --> 00:48:23,080
you could then even use it to
transfer money across borders

907
00:48:23,080 --> 00:48:27,080
and all that.
In the gold context, I don't, I

908
00:48:27,080 --> 00:48:34,800
don't see a similar vehicle or
or evolution that that we have

909
00:48:34,800 --> 00:48:37,400
something like a stable coin
become, but that's maybe not

910
00:48:37,400 --> 00:48:39,240
your question.
Anyway, yeah, I'm more curious

911
00:48:39,240 --> 00:48:46,080
about like the fact that Teva's
balance sheet has $5 billion of

912
00:48:46,080 --> 00:48:50,400
gold on it and they're now
buying, Yeah, majority stakes,

913
00:48:50,400 --> 00:48:53,720
you know, substantial stake in a
royalty business.

914
00:48:55,560 --> 00:48:59,880
Yeah, it's a pretty new but very
substantial like market force,

915
00:49:00,800 --> 00:49:05,480
which is kind of, you know,
apparently attracted to to hard

916
00:49:05,680 --> 00:49:08,760
money as they define it
primarily being gold, but also.

917
00:49:09,760 --> 00:49:12,720
I think it's a great question
because it's it's it highlights

918
00:49:12,720 --> 00:49:16,880
the, you know, Tether is almost
doing something like what

919
00:49:16,880 --> 00:49:20,080
central banks do, right?
Because Tether issues like money

920
00:49:21,600 --> 00:49:24,400
somehow, right?
And now they also go into gold.

921
00:49:24,400 --> 00:49:26,400
So then they do something
similar as central bank because

922
00:49:26,400 --> 00:49:30,760
also the major central banks all
hold gold as backing right now.

923
00:49:30,760 --> 00:49:33,680
They also go into that and it
could be just something that

924
00:49:34,000 --> 00:49:36,880
they want to diversify their
like again, from, from U.S.

925
00:49:36,880 --> 00:49:39,000
government bonds or from, from
government bonds in general,

926
00:49:39,000 --> 00:49:43,640
like, like just diversify that
those, those backing backings.

927
00:49:43,640 --> 00:49:46,520
But it's, it's also, if you
think about it, if you think

928
00:49:47,000 --> 00:49:50,640
like that, Tether is kind of a
issuing money.

929
00:49:51,080 --> 00:49:54,480
And then they, they, they, you
know, do some things as similar

930
00:49:54,480 --> 00:49:56,240
as central banks.
Like a euro dollar?

931
00:49:56,240 --> 00:49:58,560
Really.
Yeah, Yeah.

932
00:49:59,800 --> 00:50:06,480
What do you think our audience
should like maybe maybe any

933
00:50:06,480 --> 00:50:08,160
assumptions they should
challenge or any takeaways they

934
00:50:08,160 --> 00:50:12,040
should have about the gold
market or about gold in general

935
00:50:12,040 --> 00:50:14,880
that might not be, you know,
front of their mind?

936
00:50:15,120 --> 00:50:20,440
Or gold chairs as well.
Yeah.

937
00:50:22,040 --> 00:50:25,560
I mean, in general, I'm just
always surprised that when I

938
00:50:25,560 --> 00:50:28,640
read about predictions, you
know, I mean like big, big

939
00:50:28,720 --> 00:50:31,280
investment banks, I say like the
gold price will do.

940
00:50:31,720 --> 00:50:34,400
You know, they like the gold
price goes up and then they

941
00:50:34,400 --> 00:50:37,600
raise their predictions, right?
The gold price falls and they

942
00:50:37,600 --> 00:50:40,360
lower their like it's all like.
It's not exclusive to gold

943
00:50:40,400 --> 00:50:43,360
either as well every commodity.
Yeah, yeah, it's always, but

944
00:50:43,400 --> 00:50:45,040
it's all kinds of predictions.
The same with the housing

945
00:50:45,040 --> 00:50:47,560
market.
And like, to me, it's always

946
00:50:47,560 --> 00:50:49,000
like, why don't you listen to
these predictions?

947
00:50:49,000 --> 00:50:50,600
Because they're never true
anyway, right?

948
00:50:50,600 --> 00:50:54,320
So as a warning, but I don't
know what warning, you know,

949
00:50:54,360 --> 00:50:59,400
it's just that I don't make
predictions for good reason,

950
00:50:59,680 --> 00:51:01,200
right?
Not because I don't want to be

951
00:51:01,200 --> 00:51:04,360
wrong, but just because most
predictions are wrong, right?

952
00:51:04,360 --> 00:51:07,640
So I think if you do your own
analysis, and then again, Warren

953
00:51:07,640 --> 00:51:10,320
Buffett, like most successful
investor maybe ever.

954
00:51:10,840 --> 00:51:15,040
I mean, if you, if you dig deep
and, and like analyze a company

955
00:51:16,000 --> 00:51:19,400
or any asset, spend a lot of
time, I mean, then, then you can

956
00:51:19,400 --> 00:51:21,760
make good decisions and a much
better decision than just like,

957
00:51:21,760 --> 00:51:25,000
like, look, I, I, I read that
report and said like the gold

958
00:51:25,000 --> 00:51:28,040
price will go, we'll do this by
2026.

959
00:51:28,400 --> 00:51:30,840
The housing market will do that.
I mean mostly wrong.

960
00:51:32,840 --> 00:51:34,280
Derek, I've got one final
question.

961
00:51:34,280 --> 00:51:37,120
You wrote a paper a long time
ago on whether football clubs

962
00:51:37,120 --> 00:51:40,280
would do well from doing an
initial public offering.

963
00:51:41,000 --> 00:51:44,080
If in future I can get my hands
on on a football club and buy a

964
00:51:44,080 --> 00:51:46,560
Premier League team, should I
take it public or not?

965
00:51:46,560 --> 00:51:53,280
What we found I think was that
they they do there's no clear

966
00:51:53,360 --> 00:51:55,520
better performance on the pitch.
I think right there, there were

967
00:51:55,520 --> 00:51:58,720
other issues that they maybe had
then ended up with less debt

968
00:51:58,720 --> 00:52:01,400
because the because of that
going public.

969
00:52:01,400 --> 00:52:04,040
But but on the pitch there was
it wasn't clearly like a better

970
00:52:04,040 --> 00:52:07,040
performance, right.
So then that answers your

971
00:52:07,040 --> 00:52:09,520
question I guess.
Well, we want to win trophies,

972
00:52:09,520 --> 00:52:11,520
so we'll we'll stick best
performance on the pitch.

973
00:52:11,520 --> 00:52:13,600
Yeah, Yeah, yeah.
Good.

974
00:52:14,200 --> 00:52:17,000
When we, I mean, I, I, it's just
like Qantas comes to mind here,

975
00:52:17,000 --> 00:52:20,880
you know, that, I mean, I like
public markets.

976
00:52:21,720 --> 00:52:25,640
They, they have, they're so
important, right?

977
00:52:25,640 --> 00:52:27,920
And, and, and they have so many
benefits, right?

978
00:52:28,560 --> 00:52:31,880
But I mean, there's always these
cases where of course the the

979
00:52:31,880 --> 00:52:35,680
stock market or share prices can
also lead to an investment and

980
00:52:35,680 --> 00:52:38,320
and to to issues item that that
could then also apply to

981
00:52:39,760 --> 00:52:40,840
football clubs.
Yeah.

982
00:52:40,840 --> 00:52:42,720
Well, Qantas, Qantas is an
interesting one because I mean

983
00:52:42,720 --> 00:52:45,360
you've got like a, a
nationalized like monopoly that

984
00:52:45,520 --> 00:52:50,240
becomes a publicly investable
entity versus a football club

985
00:52:50,240 --> 00:52:52,680
where it may be it going public
is actually just a liquidity

986
00:52:52,680 --> 00:52:56,760
event for the private investors
and the return profiles could be

987
00:52:56,840 --> 00:53:00,200
pretty, pretty different.
But you buy it to win the

988
00:53:00,200 --> 00:53:03,880
Champions League, that's all
that matters, which team.

989
00:53:04,640 --> 00:53:06,440
It's got to be Liverpool,
although it might be out of my

990
00:53:06,440 --> 00:53:10,000
price range by then.
Perfect deck.

991
00:53:10,000 --> 00:53:13,640
I've I've learned a lot about
how how gold performs and how

992
00:53:13,640 --> 00:53:16,720
gold stocks perform in in times
of crisis.

993
00:53:16,720 --> 00:53:18,440
This has been really
interesting, so thank you for

994
00:53:18,440 --> 00:53:19,520
joining us.
Thank you.

995
00:53:19,960 --> 00:53:23,080
Peter Ray.
But that was that was awesome

996
00:53:23,120 --> 00:53:26,440
and it is all put together by
our fantastic partners.

997
00:53:26,440 --> 00:53:29,600
A massive thank you to Mineral
Mining Services, Grounded Sandy

998
00:53:29,600 --> 00:53:32,560
Ground Support and Cross
Boundary Energy Peter Roo now.

999
00:53:34,200 --> 00:53:36,960
Remember, I'm an idiot.
JD is an idiot.

1000
00:53:37,520 --> 00:53:39,920
Thought any of this was anything
other than entertainment.

1001
00:53:40,400 --> 00:53:42,560
You're an idiot and you need to
read out a disclaimer.