Dana Samuelson: Gold Shaking Off Headwinds

Dana Samuelson of AmerGold joins the podcast to talk about the factors affecting gold. Samuelson discusses the resilience of gold in the face of financial headwinds and highlights the potential for gold to climb higher. Samuelson also delves into the dynamics of silver, crypto, the commercial real estate market, Fed policies, and more!

Additional Resources

AmerGold

Passive Income in Gold

Earn a yield on gold, paid in gold

The Case for Gold Yield in Investment Portfolios

Podcast Chapters

[00:00:00]: Coming up…

[00:00:26]: Dana Samuelson

[00:01:40]: Gold

[00:04:43]: Silver

[00:06:24]: Crypto

[00:07:41]: Commercial Real Estate

[00:09:01]: The Federal Reserve

[00:11:24]: Interest Rates

[00:12:15]: Inflation

[00:13:57]: Powell

[00:14:46]: Indicators

[00:15:53]: Gold Culture

[00:16:45]: American Privilege

[00:17:43]: AmerGold

[00:18:25]: Earn a Yield on Gold, Paid in Gold

Transcript:

Ben Nadelstein:

Welcome back to the Gold Exchange Podcast. My name is I’m in Ben Nadelstein. I am joined today by Dana Samuelson. Dana, how are you doing?

Dana Samuelson:

I’m doing great! Thank you.

Ben Nadelstein:

Dana, for anyone who doesn’t know who you are, give us a little bit about your background.

Dana Samuelson:

I’ve been in the precious metals business since 1980, about 43 years. I spent 10 of those early years working with Jim Blanchard, who was the man most responsible for the private re-legalisation of gold ownership. When I went to work for Jim in 1983, after working for my first two years in a vault, counting and shipping and weighing because I could be trusted, Jim hired me to be a coin appraiser and I was taught how to appraise vintage US gold and silver coins. I did well there, but they needed some more help in their buying desk. So I moved up to the buying desk. In the mid to late ’80s, I spent 40, 50, 60 million dollars of Jim’s money with the industry every year and I got to know all the major players, some of who are still my good friends today. I started American Gold Exchange in 1998. We’re in our 25th year. We’re a national physical precious metals dealer and I’m just following what Jim taught me how to do.

Ben Nadelstein:

Let’s start with the precious metals. A lot of people said gold is going to face headwinds with higher interest rates. Why would someone want to own a shiny pet rock? It has no yield other than the monetary metals, and you’re going to have to give up the opportunity cost of a treasury bill or a money market fund or a CD. Are you surprised at how well gold has held up here?

Dana Samuelson:

Yes and no. Gold tends to trade inversely to the dollar, the value of the dollar. But we’re debasing Fiat currencies, including the dollar, at the fastest rate we ever have. So when the dollar gets relatively stronger than other currencies, it pressures gold lower in dollars, but not in other currencies because gold is priced in dollars. Gold got a little cheap over August and September after holding in a 1900 and 1980 trading range for about a year when the dollar moved over 101-105 trading range on the dollar index and fell to about 18 and a quarter. But then, of course, the war in Israel broke out when Hamas attacked Israel on October seventh, and gold is up $180 since. So gold climbs a real wall of worry. It did as well last spring after SVB Bank failed, it jumped up about $160. Right now, we’ve got a triple top at 2070, 2025, 2045, and a rising bottom, which is a pincer formation which will eventually lead to a breakout higher. Our debt is just exploding. It’s just exploding. And gold likes that. Gold particularly likes it when interest rates go down. By that, I mean, if the economy goes into a period of weakness, which I think we’re entering now mildly for right now, more so I think will come next year.

Dana Samuelson:

If the Fed lowers their Fed funds rate or they’re forced to stimulate, to really stimulate the economy, like stimulate, I mean, radically drop interest rates again. I don’t think we’ll get to zero, but we could get to 2%. Or especially if they have to go back to QE and they’re printing more money, gold has explosive potential. There’s a lot of reasons why gold should go higher and not many why it should go lower. You’ve got central banks are buying gold at a record rate. You’ve got the dollarization movement. You’ve got interest rates that I think are topping out now. I think the feds at the end of the rate hike cycle and treasury yields are probably peaking about now. The headwinds that gold should have felt more fully by a higher dollar and especially higher interest rates, it shook most of those off, which is a good sign.

Ben Nadelstein:

Let’s talk a little bit about silver as well. There’s a lot of investors who say, I understand how gold works. It moves on its own. But is silver moving differently? Do you see a different story, a different narrative here for silver versus gold?

Dana Samuelson:

Yes. I’m going to add one more comment to the gold section, which is no counterparty risk. Gold is the only asset that isn’t simultaneously one of the only assets that isn’t simultaneously someone else’s liability, which is why central banks are buying it at a record pace. Now, silver tends to oscillate in price at a wider range than gold does. If I do this on camera, if gold goes like this, silver goes like this, and it tends to lag when gold makes a run. But then when it plays catch-up, it can play catch-up with Aventis. What happened when the COVID economic closures came and the government did in a few days what they took a couple of years to do with printing money back in 2020, gold ran from 1,600 all the way to 2070, and silver couldn’t get up above 1875 for about six months. But when it did, it ran to 29 on a bullet. On a bullet. Now it’s settled into a pretty much a 21-25 range since then. Right now, it’s a little disappointing. The gold-to-silver ratio is about 85 and a half to one, which means silver is cheap. If you’re worried about having true portable transferable wealth, that’s what gold is for.

Dana Samuelson:

I do think silver has a higher profit opportunity, but you have to be patient.

Ben Nadelstein:

Do you think that in terms of the competition between alternative currency options, clearly, most people are not looking at a Yen or rubel or rupee. They’re either looking at the dollar, they’re looking at gold or silver, and then there was this cryptocurrency craze. Do you think that craze is over and people are moving to the metals, or do you think that crypto craze has more air in that bubble?

Dana Samuelson:

Well, Bitcoin is the poster child for cryptos. It’s run from 10,000 to 65,000. Really got a lot of young people very excited. But it’s crashed down to 17.5, showed them how volatile it can be. Now, Bitcoin is what, about 36,000 today? I’m not quite sure the exact number. But what’s happened since the Bitcoin fell hard? Some of the people, mostly younger people that were in cryptos have come into the metals markets because it’s a safer alternative currency. There’s no doubt that Bitcoin took some market share from precious metals. But the way all governments are printing money and growing their debt, I wouldn’t want to be in anything other than commodities, land, real estate. Bitcoin is more correlated to mainstream assets now than it has ever been before. So it’s not going to have the volatility that it’s had. But whether it’s going to have real volatility still, who knows?

Ben Nadelstein:

Let’s talk about some of those other options. We’ve got commodities, real estate. A lot of people are saying, I’m looking at commercial real estate. There’s a tsunami of debt coming. Do you think the picture is dire or do you think it actually might be a little bit more rosy than we’ve seen?

Dana Samuelson:

Well, I actually talked to someone who’s more intelligent than I am on this past summer who’s well placed. There is 1.5 trillion of commercial real estate loans that are going to reset in the next two years from about two and a half, three and a half % interest rate to what, seven, eight, nine? It’s going to break the ability of some of these companies to hold that real estate. We’ve already seen Marquee properties go for sale for 20, 30 cents on the dollar in San Francisco, which has its own unique set of problems, but other places too. There’ll be more of that. Some of that could ripple into the banking sector because who’s originating the loans? The banks. But my colleague who is very knowledgeable said, because I was asked the same question that you just did, what do you think? He said he thinks that there’s nobody really holding a big bag. A lot of players are holding one or two of these, so it’s more diffuse. It may not be as big a problem as it could be, but dominoes are weird these days. You never know when one’s going to fall and topple something else. The banks do have liability.

Ben Nadelstein:

Let’s talk a little bit about the banking crisis. It seems like the Fed has done magic. There was a banking crisis, SVB, Republic, and they just put their finger in the hole and the damn has been stopped. Do you see the banking crisis is over or is there actually still more to come?

Dana Samuelson:

Well, the Fed can take these treasuries that are upside down on banks’ balance sheets and give them full credit for the maturation value of the bond and hold them to maturity. They have that ability, which is what prevented a true full-on banking crisis like we had with the real estate market back in 2008. That’s really the only thing that prevented it from happening. They did literally put their finger in the dike and stop it. The problem I see with the Fed is they may be starting to lose control over bond yields now because investors who are investing with the full faith and credit of the US Treasury may want higher returns to actually tie that money up for two years, five years, 10 years, or 20 years. I do think that the bigger problem could be the Fed losing control of the market, and it feels like that’s starting to happen now.

Ben Nadelstein:

Let’s take the counterargument to that, which is that, okay, there’s these other countries, they also issue bonds, Argentina, Russia, India, nobody wants their bonds. So could there be a flight to safety to something like a T-bill? Even though the dirtiest shirt in the argument still applies, but maybe the flight to quality, the flight to safety is to a T-bill. What do you think about that?

Dana Samuelson:

Definitely. If you can get 5% yield with low risk, perceived risk on a shorter-term treasury, that really makes a lot of sense. I think the strategy there, if you want to try and do that is to invest in 30-day treasuries and stack them. You’re never fully committed to more than about 90 days or maybe 120 days, depending. You’re not tying up your money when other opportunities come. I do think we’ll have real estate values that are lower. There’ll be a buying opportunity in real estate in the next year or so, and perhaps some real sales and commercial real estate. We’ll just have to see.

Ben Nadelstein:

Then quick question here. We talked a bit about the Fed pivoting, lowering rates. Do you think that the 2% interest rate is the new zero? Or do you think that we’re going to break through zero and maybe even beyond into a negative interest rate environment?

Dana Samuelson:

No, I think the Fed is convinced that they would never go to negative yields, period. If they were going to do it, they would have done it already. I do think instead of zero, 2% is the basal value at the bottom. I don’t think they can ever really go much lower than that. I do think inflation is going to come off a bit more, but it’s going to continue to be sticky. It’ll probably hold in the 3-4% range unless the economy really tanks and then inflation could fall lower and then we might see slightly lower than 2% interest rates, but not much. But that would be explosive for gold.

Ben Nadelstein:

Let’s talk about that inflation question. A lot of people said it’s inflation is for good, we’re going to hit stagflation, and structural inflation is here to stay. Do you buy that argument? Do you think that the Fed has done the work to put away inflation? Or do you think that we’re in a new inflationary environment?

Dana Samuelson:

We’re definitely in a new inflationary environment. That’s anybody’s guess. In the ’60s and ’70s, we had three waves of inflation that were starting about ’66 to ’71, then ’71 to ’74, then ’76 to ’80. And each wave was bigger than the previous one. And it primarily happened because Richard Nixon talked Arthur Burns into lowering rates so he could get re-elected in ’72 ahead of that election, so the economy was better before inflation was snuffed out. And Powell knows this, which is why he keeps repeating over and over, hire for longer mantra. And I believe they’ve made two policy errors in the last five years. They overstimulated for COVID because he said, We thought the whole global economy was coming apart of the seams. And he finally gave his me a culp in the December ’21 press conference following their meeting then. They literally created so much simulative money. They threw the kitchen sink at the problem and then they under-responded to inflation. It’s transitory. Well, no, it’s not. But now it’s legacy for Powell. And he’s really concerned about trying to do the right thing before he retires. So I really think that they want to make sure that they get inflation contained.

Dana Samuelson:

But whether it’s structurally or not, it’s too soon to say. The verdict is still out there.

Ben Nadelstein:

Let’s talk about Powell for a second. A lot of people have said there is a chance that depending on how the next 6-12 months go, Powell will be replaced. Do you see that as a possibility or do you think Powell is here to stay?

Dana Samuelson:

I don’t know. Very possibly. I don’t know the length of his term. If Donald Trump becomes the President, I think he’ll replace him. If Joe Biden wins the election, he may not.

Ben Nadelstein:

And do you think that the people waiting in the wings are even more dangerous than Powell himself? Mmt advocates, people who want to fix climate change with Fed policy. Do you think that Powell is, although a problem, better than some of the other options?

Dana Samuelson:

Well, it’s really disappointing to say and to see that the Fed has become much more political over the last five or 10 years. They’re supposed to be independent and they are responding to political pressure now. I think worse could come rather than better. I truly do.

Ben Nadelstein:

Let’s talk about some of the indicators you’re watching. What are some things? Not unknown unknowns because no one knows what those are, but some maybe known unknowns. We know that this is a problem, we don’t know how bad. Something that you’re watching, some indicators, some articles, some stories or even books that you’re reading to keep you abreast of the situation?

Dana Samuelson:

Well, I’m a news junkie. I follow the daily news and anything that affects gold like a Hawk because it affects my day-to-day market. I want to try and give my clients as much forward information as I can that’s accurate. I’m not really looking at more than about six months or a year because things change. I like to say, the world’s round and you can’t look too far over the horizon. But I follow the value of the dollar against other currencies. I follow Fed policy, although I think Fed policy is becoming less impactful, and we’re seeing that right now. The de-dollarization movement and the rise of the bricks is certainly something we all should be watching. That’s going to grow. Now we have a global conflict and interest rates. Interest rates are very meaningful to gold.

Ben Nadelstein:

Coming up on our final question here, what’s a question I should be asking all future guests of the Gold Exchange Podcast?

Dana Samuelson:

Why don’t you own more gold?

Ben Nadelstein:

It’s a great question.

Dana Samuelson:

The reason is we don’t have a gold culture in this country. That’s true. Every other country in the world that’s had a failed currency understands why gold is important. We’ve never had a failed dollar, but we’re headed towards one. If we keep going down the road we’re going, it’s a bad situation. It’s going to get worse. Our debt’s going to continue to go a lot higher. If gold has tracked the debt increase pretty directly over the last 20 years. Our debt’s up sixfold and gold’s up sixfold. It’s lumpy because it tends to climb a wall of worry and it’ll back down when things settle. But gold has really set higher highs and higher lows as our debt has climbed materially over the last 20 years.

Ben Nadelstein:

Yeah, and I do think part of that education is difficult because of the privilege of being an American. You have a strong currency, you have a strong economy. There’s no reason to look for alternatives versus other countries, Turkey, Argentina. You have to look at alternatives because the currency is not able to be trusted. That’s why those countries have a culture of gold.

Dana Samuelson:

The real insulator for the US citizens is the fact that the dollar is the world’s reserve currency and things are priced in dollars. When commodity prices go up and down, yeah, we get those price fluctuations, but we don’t also get currency fluctuations as well, which is a double whammy. Because if a commodity prices go up and your currency price loses value, the value of your currency loses value, then instead of oil going up 20%, in your currency, it could go up 40%. Now, if the bricks’s ever replaced the dollar as the world’s reserve currency, we’ll feel that too. Americans will be slapped in the face by that because most people don’t get it.

Ben Nadelstein:

Where can people find more of your work and read, understand your point of view.

Dana Samuelson:

Our company is American Gold Exchange, we’re in Austin, Texas. Our website is www. A. M. E. R. Gold@gold. Com. We have an information-rich website. There’s live, transparent pricing. We focus on competitively priced, widely traded, immediately liquid items that if you buy something from us, you can sell it anywhere easily or you can store it with money, metals easily. We also try and educate our clients as much as possible to help them. So emmergold. Com is our website, and that’s where people should go.

Ben Nadelstein:

Dana, I want to thank you so much for joining the Gold Exchange Podcast.

Dana Samuelson:

Thank you very much. It’s been my pleasure. Absolutely.

Additional Resources for Earning Interest in Gold

If you’d like to learn more about how to earn interest on gold with Monetary Metals, check out the following resources:

The New Way to Hold Gold

In this paper, we look at how conventional gold holdings stack up to Monetary Metals Investments, which offer a Yield on Gold, Paid in Gold®. We compare retail coins, vault storage, the popular ETF – GLD, and mining stocks against Monetary Metals’ True Gold Leases.

 

 

 

 

 

The Case for Gold Yield in Investment Portfolios

Adding gold to a diversified portfolio of assets reduces volatility and increases returns. But how much and what about the ongoing costs? What changes when gold pays a yield? This paper answers those questions using data going back to 1972.