Ronnie Stoeferle: A New Gold Playbook

Ronald-Peter Stöferle joins the podcast to discuss why he invested in Monetary Metals, what the new playbook means for gold, and the case for owning gold in 2024 and beyond.

Additional Resources

Earn 12% in our Silver Bond offering

Earn Interest on Gold and Silver

Earn Passive Income in Gold and Silver

In Gold we Trust 2024 – Full version

In Gold we Trust 2024 – Compact version

Video with all highlights of the report

Monthly Gold Compass

IGWT-Report

Incrementum

Podcast Chapters

00:00:00 – Gold’s Future as a Monetary Asset

00:00:38 – Welcome to the Gold Exchange Podcast

00:01:07 – Ronnie Stoeferle

00:03:05 – The In Gold We Trust Report Origins

00:04:33 – Gold’s Fascination and Stability

00:05:21 – Global Attitudes Towards Gold

00:11:56 – Impact of Local Currency Strength on Gold Demand

00:17:49 – Yield on Gold: Monetary Metals’ Innovation

00:21:39 – Meeting Keith in Dubai and Investing in Monetary Metals

00:25:30 – Will Dubai Overtake in London?

00:29:20 – The New Gold Buyer

00:31:15 – Real Time Monetary Experiments

00:36:40 – New Gold Research

00:41:27 – Central Banks and Future Gold Purchases

00:48:24 – The Current Environment for Gold

00:53:50 – Future of Global Gold Demand

00:58:12 – Ronnie and Incrementum

00:59:53 – Earn a Yield on Gold

Transcript

Benjamin Nadelstein:

Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein of Monetary Metals. I am joined by the one and only Ronnie Stoeferle, fund manager at Lichtenstein-based Incrementum and the author of the In Gold We Trust report. Ronnie, how are you doing today?

Ronald-Peter Stöferle:

Hi, Ben. Thanks for having me. Yeah, it’s been a quite volatile week so far in markets.

Benjamin Nadelstein:

It’s been a very interesting week. Good time to interview you. Absolutely. Before we start, can you maybe tell people, for those who don’t know you, just a bit about yourself, how you first became involved in the gold space? Why gold? How did you end up here?

Ronald-Peter Stöferle:

Well, it’s a long story. I did study economics and finance in Vienna, and people would think, Okay, there’s primarily, probably being Austrian, the Austrian School of Economics being taught here in Austria, but that’s not true at all. However, after working as an analyst in a bank for a couple of years, I discovered the Austrian School of Economics, and that was an aha moment for me from a professional point of view, but also from a personal point of view. Basically, at the same time when I discovered the works of Ludwig von Mises, Hayek, Mary Rothbard, especially, Karl Menger, I also invested in a mining stock that did tremendously well. And back then I was analyzing Asian equities, and I went to my boss and said, Hey, could I… I’ve got this gold mining stock that does so well. I don’t have any clue about gold. Can I dig into the topic of gold and write a small 15-pages special report on gold. I’ll do it over the weekends. And he said, Yeah, go ahead. And that was the first In Gold, We Trust report in 2007. And now, so many years later, I’m still publishing the In Gold, We Trust report.

Ronald-Peter Stöferle:

So this is this breakover report, 400 pages, published in German, in English, in Mandarin, in Spanish. It’s probably the most widely followed publication on gold these days. And in 2012, I said, Well, I don’t want to work in a bank anymore and write about gold. It’s like being the the vegetarian in the big butchery. I quit my and did set up Incrementum together with some really good guys. And yeah, now we’re a boutique asset manager based in Liechtenstein, running roughly 400 million Swiss banks, managing funds, I would say, primarily in the real asset space, gold, silver, commodities, value strategies. We also have two funds that actually combine gold with Bitcoin. It’s been a long, long journey. And the topic of gold, even though I’ve written a couple of thousand pages of research about it, it still fascinates me. I think that in 20 years, I will probably, hopefully, still be writing the In Gold, the Trust report. I understand I’ll still be fascinated because actually, it’s not about gold. Gold is just there. It doesn’t change at all. But everything around gold constantly moves and moves with bigger momentum and in a more and more dynamic or chaotic way.

And gold is just this solid, simple, antifragile thing that is basically in the center of our monetary world. That’s super fascinating for me, and therefore, I really love what I’m doing.

Benjamin Nadelstein:

Well, we can feel the passion for sure. Let’s start with unraveling why gold. It’s a monetary constant, which is something you mentioned. Investors have trusted gold in different forms as money, as an investment, just have been allured with the idea of gold for thousands and thousands of years. Do you think that’s going to be the case going forward, that people will have this endearing desire to discuss, to demand, and be interested in gold as an asset?

Ronald-Peter Stöferle:

Well, I think so. And part of my job is traveling quite a lot. In This year’s In Gold, We Trust report, the new gold playbook. We basically analyzed how important the gold demand from Asia, from emerging markets in general currently is, and they’ve got a completely different attitude when it comes to gold. They regard gold as money and not as a commodity. They regard it as a monetary or financial insurance. They don’t stare at the prices all the time. They tend to be, especially the Indian buyers, not so pro-cyclical. While compared to that in the Western world, I think gold is clearly from the mainstream financial investor. I have to say that if I’m having meetings at a big bank or institutional investor and I talk about monetary history, I think people couldn’t care less about it. It’s not taught on universities at all. I don’t want to criticize CFA, but financial market history is only a very small part of the curriculum. I think that’s really what counts these days, understanding the big picture, understanding the root cause of all the problems that we’re currently in. I think the main reasons can probably be found on 15th of August 1971, for example.

I would say to answer your question, I think there’s a big divergence between Western and Eastern gold buyers. I hope that we can really try, that we can educate and inform in a sober and serious way, Western financial investors, because I can tell you the number of lunatics that I’ve met in this industry is enormous. I think that all this gloom and doom research, this everything will go to hell buy gold type of research is not something that I really enjoy and then that I advocate. I think this is one the reasons why gold as an investment has some, let’s say, an image or a marketing problem in the Western world. We try to change it just to make a solid case for gold, what it does to your portfolio, the correlations, how gold works in stress scenarios, when does gold not work, how does gold perform in different environments like stagflation, recessions, falling yield curve, all those things. I think that’s crucial, and that’s our niche that we found.

Benjamin Nadelstein:

Absolutely. We’ve had Bob Elliott on the podcast, and one thing he mentioned was if you stripped the names of the asset classes. It didn’t say gold, it didn’t say bonds, it didn’t say stocks. It just had investment A, investment B, investment C. You have these different asset classes, and you just looked at, for example, the portfolio diversification benefits of class A asset, which you don’t know what it is, and you looked at the returns in an area of stagflation or returns in recessions or how it went with the other asset classes. Investors would be looking at gold in a different way than if it didn’t have the name gold. Gold, and a lot of that has to do with this marketing problem where there is not the discussion of the portfolio benefits, the income opportunities, as well as why sober-minded rational investors who think maybe the dollar will get stronger, they like investing in US companies, why adding Gold to their portfolio is not something crazy.

Ronald-Peter Stöferle:

Yes, absolutely. And I have to tell you, Ben, and I think there’s also a big difference when it comes to investors or savers course. In the German-speaking world, where we live through the hyperinflation, first in Austria and then in Germany, and we all know what it basically did to society. So it is in our monetary DNA to buy gold, to have gold as a monetary insurance. I think that the inflation still is one of the biggest concerns over here in the German-speaking part of Europe. While I think in the United States, I think the Great Depression and deflation are still a major concern. I think that also explains the attitude when it to gold, although gold performs pretty well in deflation as well. Over here, for example, you can walk into a normal branch of a bank and buy physical gold. You can buy Philharmonic coins, you can buy a small gold bar. If I go to London or to New York and say, I want to buy some gold, it’s not going to work. Perhaps I can buy a gold ETF, but not physically gold. I think those Also those differences in terms of attitude in combination with monetary history, I think that’s also one thing that really fascinates me.

Benjamin Nadelstein:

What percentage in terms of the correlation with different attitudes towards gold do you think has to do with the strength of the local currency? So a lot of investors in China or India might be buying gold because of the weakness of their local currency, whereas Americans, for example, or German-speaking people in Europe have the Euro, they might think, well, the Euro is generally stronger than the other currencies. The dollar is generally stronger than the other currencies. I’m not that pressed to look for an alternative as in places like Turkey, where the currency is not very strong. There’s gold demand like crazy. Do you see that as being a major correlation? Do you think that will begin to happen in the West as well, where people say, Well, let’s take another look at our local currency and think about adding gold to our portfolio?

Ronald-Peter Stöferle:

Yeah, that’s just anecdotal evidence. I did a couple of presentations in Turkey and Istanbul, and those Turkish investors, they asked the smartest questions ever about gold. They really knew everything about it. Why? Because Turkish Lira has always been a rubbish currency. In inflation has always been, or let’s say understanding inflation has always been crucial for portfolio construction for Turkish investors. While we in the Western world, of course, we’ve had the great moderation and 40 years basically of falling inflation rates, where and falling bond yields, where in that environment, actually, the necessity to understand the momentum and the direction of inflation was falling constantly. Now, starting a couple of quarters ago, inflation is a topic again, although I think that most investors that have never really lived or during their professional careers have never really invested in an inflationary environment. I think they still think we’re going back to the old playbook. They still think, well, inflation is now being under control. I disagree. I think the inflation volatility will be enormous going forward. At the moment, we’re seeing strong disinflationary or even deflationary pressure in financial markets, especially. I think that this understanding of what inflation does for your portfolio construction, I think this will be becoming much more important in the Western world as well.

And just a couple of numbers. For example, since the year 2009, gold on average is up 7.6 % in dollar terms. It’s up 9.2 % on average in Euro terms. And in a currency like the Japanese Yen, it’s up 10.4%, while the last three years, gold in Japanese Yen terms was up 15 %, then 21 %, and then We can see that also in big developed market currencies, the momentum is clearly increasing, and If you have a look at the price of gold in Japanese Yen terms, that’s the perfect chart. Therefore, I think that not asking about the price the price of gold, but rather the price in gold. This is something that will become more important because our take has always been that gold doesn’t make you rich overnight. Gold just protects your purchasing power. You might know our ratio spend. We did the gold iPhone ratio, we did the gold gasoline ratio, we did the gold beer ratio, and we do the gold ski ticket ratio, for example. When we just have long term price series and then have a look how those different items, be it iPhone or beer at the Munich Oktoberfest, how it is measured in fiat currency and how it develops in gold terms.

And the message is crystal clear. Gold protects your purchasing power on the Oktoberfest, measured in iPhone when you’re driving a car, and also on the ski slopes. I think this is really crucial to understand. But still, most people don’t really get that change of perspective.

Benjamin Nadelstein:

And it’s a very important perspective. I think one way to help investors think about that is, let’s say you lived in a country on the periphery of strong currencies, something like the Venezuelan Boulevard. Everyone agrees that currency became very low in value relative to other currencies very quickly. So rapid deflation or inflation or worthlessness of their currency, however you would like to call it, for many different reasons. And people now would say, well, if your house was 1,000 boulevards before and now it’s a million boulevards, No one in their right mind says, Oh, wow, your house must have become much more valuable. They would very honestly say, your house is the same values before. The currency is now much, much weaker. So when you look at something like gold, that is a more objective way to look at prices to say, Has the value of this asset or the value of my portfolio or just the value of my life and my work, has that increased or decreased? When you value it in a local currency, a paper currency, you have a lot of issues trying to disentangle what is actual appreciation of my assets and what is depreciation of the currency which you don’t have with gold.

Ronald-Peter Stöferle:

Yeah, I couldn’t agree more.

Benjamin Nadelstein:

Monetary metals, what we’re offering, we’re trying to disrupt the gold industry by offering a yield on gold, paid in gold. This is a way to have current income on your ounces, paid in ounces. So could you tell our listeners, A, how you first heard about Monetary Metals, the company, and what made you decide to become an investor in the company alongside your partner, Mark Velyk.

Ronald-Peter Stöferle:

Yeah, well, I know Keith for centuries, it feels. He was also a student of Professor Antal Fekete. Fekete is not really well known these days, unfortunately, but he was a very, very bright mind. I remember wonderful conversations with him because he was not only extremely smart, but he had a great sense of humor. Fekete, he was a Hungarian-born economist, but also a mathematician. And he was very well known for, I would say, his monetary economics, for his criticism of Keynesian economics, for his advocacy for return to the gold standard. I think in the sound money camp, he was definitely one of the most important economists of the last couple of decades, I would even say. I think his theories on the relationship between interest rates and discount rates, they were super important and really made a difference. His so-called New Austrian School of Economics that incorporated the principles of the Austrian School, but also adding his unique insights on interest rates and discount rates and also things like the basis that Keith knows so much about. Also, his historical knowledge of the gold standard. That was really something that always fascinated me. I know Keith for many, many years.

He once held a great presentation about the gold standard at our… We’ve got some a gold roundtable in Vienna. We were always in touch and I knew that he’s a great businessman. He made a very, very profit or successful exit, I think, right before the great financial crisis. I’ve read his thesis afterwards, and then we’ve always been in touch. I was very, very excited when I heard about monetary metals. I think at some point, I realized that innovating something like gold, that’s actually not easy. It reminded me a little bit of Pierre Lassonde, who basically had the idea of the royalty and streaming business. So that was his vision. And as we know, Pierre Lassonde, he’s one of the really the most influential guys on the financing side and on the investment side in the gold space. And that he really made a difference with royalty and streaming companies now becoming the, let’s say, the the blue chips when it comes to investing in gold mining equities. So this reminded me a little bit of Pierre Lassonde. And then I actually, I bumped into Keith in Dubai last year at a conference, and we saw each other at the gym in the morning.

We saw each other at breakfast, where we talked about the market, we talked about business ideas. And I had pretty busy days. And when I came back to the hotel, he was still there in the hotel lobby at 11 doing client meetings. And I really saw the excitement and the vision and the hard work that Keith put in. At some point, I said, Let’s do something together. That was basically the catalyst or the trigger for that. Now it really feels right. I think that Keith, as I’ve said, he’s really one of the very few visionaries in this space. I really look forward to working with him and the team. There’s about $15 trillion worth of physical gold in the world sitting there costing money rather than being used is just absolutely insane. Monetary metals is bringing gold back into the financial world, putting gold in productive use right now.

Benjamin Nadelstein:

The problem with gold, of course, in physical form is that it’s heavy, it’s cumbersome, it’s not particularly easy to ship, and it costs money to store in a protected manner.

Ronald-Peter Stöferle:

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Benjamin Nadelstein:

And one thing we’re trying to do in terms of the marketing issue, we discussed with gold is that very famous investors, smart investors, like cash flow, they like yield, they like being able to earn a current income. And passive income is obviously blown up in recent years as well. A place where people can park their money, earn returns, It’s paid without having to add extra time, putting lots of effort on the asset. They own it. And one thing I’d like to share is Michael Munger, he’s an economist. He coined this term called the sharing economy, which is basically saying, Hey, how do we monetize underutilized resources. And he said this is where he sees the next revolution in economics being where, let’s say, you have a car, 90% of the time it’s parked in your garage. Well, Uber said, Hey, what if we connected people who had cars, had had them just lying around and wanted to offer rides as a marketplace. That blew up. Airbnb offered the same thing. They said, Hey, you have an underutilized asset here. You have a room or a house or a guest bedroom, whatever that may be. Let’s make a marketplace and see if we can connect people who need rooms and people who have rooms to spare.

Other huge revolutions have been cloud computing. People have extra space on their computer, on their phone. We’ve said, Hey, what if we can put our cloud computing not in some magical place in the sky, but actually on other people’s computers, monetizing and utilizing that underused resource? Monetary Metals is doing a very similar thing, saying, Hey, you have gold. It’s collecting dust somewhere in a storage vault or under the ground somewhere. Being hidden, really just collecting dust. Or in the case of something like a GLD ETF, you’re collecting fees every single year. What if we could put that resource to work the same way that real estate investors, for example, well, they could pay a mortgage, that’s a cost, it’s a liability on them, or they could rent out that real estate as commercial real estate or as a multifamily property and earn rental income. So the idea there is just adding this monetization aspect for investors who are interested in cash flow who are interested in growing their ounces over time. And that is absolutely a revolution in the gold space where most people think of gold as, Hey, price, is it going up and down in my local currency terms?

Now there’s a yield component for people to think about as well. So I want to pivot here. You did mention Dubai. Where do you see this London-Dubaï gold trade? So London was the hub for where gold trading happened. Do you see Dubai trying to push its way in there as well and say, Hey, we’d like to push our way into the gold space. We’d like to be a leader in this front and embracing things like a yield on gold, the new revolutions happening in the tokenization space as well. Do you see Dubai gaining ground, London losing ground in a Eastern-west? Hey, the East gets more interested in gold. Dubai takes that central spot, and the West continues to buy gold in a similar fashion as they have before with London losing ground.

Ronald-Peter Stöferle:

Yes. I was only once in Dubai, and that was last year in November, where I bumped into Keith and I was invited to speak at the Dubai Precious Metals Conference organized by the DMCC. I held a seminar for the the Dubai Gold Exchange, where I met traders from Dubai, from China, from India, from Turkey. And it was like a really interesting set of people. And I was really fascinated, first of all, of this let’s do it attitude. Everybody was super excited about the future. Everybody just wanted to be successful. Everybody wants to start new businesses, explore ideas, get financing stance done. While in the Western world, I sometimes feel if you’re coming up with a new idea, first thing would be, Okay, but it’s not going to work, and too much bureaucracy, and just so many hurdles and problems. I would see, let’s say, the general attitude that you have in in many emerging market countries. I think this is really something that fascinates me and that makes me, on the other hand, quite concerned when it comes to, let’s say, the Western world. Although I have to say on a relative basis, the US is probably will be just fine compared to Europe.

I was really fascinated about Dubai in general. I was completely blown away by the size and sophistication of the Dubai gold market. So just one number, good Dubai is now responsible for roughly 25% of the whole global gold trade. So if you would have said five years ago that Dubai will be the new London, I would have said no way. Now, I think it’s pretty realistic. And gold always goes where the money is and where the prosperity is and where where capital is being appreciated and where capital is being well treated. This is not only financial capital, this is also capital here, like brain powers. It’s really smart people moving to cities like Dubai. On the other hand, you’ve got this brain drain in many Western countries. There Therefore, I would say Dubai, but also the whole Indian market, and obviously China, will continue to gain market share. This has actually been one of the key takeaways of our In Gold, We Trust report. The marginal buyer is not in the Western world anymore. We are now seeing that with, for example, real rates being up big time. On the other hand, everybody I would have said in the old gold playbook, Well, real rates have risen significantly.

That’s the worst environment for gold. No, actually, we’ve made new all-time highs. We don’t see any ETF inflows. Still, gold is trading at new all-time highs because the Western financial investor isn’t decisive for the gold price anymore. I think that’s really important. We already said a couple of years ago, the price of gold is increasingly being made in Dubai, in Shanghai, and in Mumbai, and less so in New York, in London, and in Zurich. And I think that’s really playing out.

Benjamin Nadelstein:

It’s such an incredible and fascinating market because many markets are local. For example, commercial real estate in the United States, you basically have to understand how it works in the United States. Now, of course, there are some intric. Some people, Okay, well, what about the Yen carry trade? That could hurt real estate in the United States. It’s true. There are some other factors that you do have to take into consideration when investing in a local market. Some people say all real estate is regional or all real estate is local. Gold is not that way. Gold is a global market. It is incredibly easy because of the value and weight ratio gold has to put gold on a plane, get it to a different country and arbitrage either price differences, regulation differences, or just attitude differences, where people in certain parts of the globe understand your trade better, your business better, and have a desire or demand to see you succeed. I think That is why a lot of people will start businesses in Dubai, will push to begin, Hey, if we’re going to do an experiment here with something like a hard asset like gold, it can be real estate, it could be crypto.

People will say, I’m going to go where my capital is treated best, and they will vote with their feet. Let’s talk about the crypto aspect as well. A lot of investors like the idea. It’s something to test. It’s a new asset class we haven’t seen before. Do you think this cryptocurrency technology and gold and silver will have some marriage in the future. There will be a combination of the hard asset, but the blockchain technology as well, the cryptocurrency technology. Do you think that’s going to merge going forward, or do you think they’ll continue to remain separate asset classes?

Ronald-Peter Stöferle:

Just two different views, Ben. First of all, we discovered Bitcoin through, let’s say, the libertarian It’s seen very early on. We were always fascinated because it’s a real-time monetary experiment that we are all part of, and it did tremendously well, obviously. We started writing about Bitcoin in 2016 in the Goldbitrust report for the first time, and we launched two funds that actually combined gold with Bitcoin. I would say we’re in the Bitcoin maxi camp. Why? Because I saw that most of the cryptocurrencies were outread scams or just useless. And we shouldn’t forget gold now has a 15 trillion market cap, while Bitcoin is at roughly 1 trillion at the moment. So it’s still tiny, but it went pretty quickly. I think that Bitcoin has grown up. I can tell you, Ben, we’re getting We are getting lots of hate from the gold camp, but we are also getting lots of hate from the Bitcoin camp because we’re combining those two assets, those monetary assets from our point of view. I think at the end, it’s all about the stock-to-flow ratio. This is really something that we have written about very early on, and it then became very popular in the Bitcoin community with Saifadeen Ammous writing about it, and then you’ve got the Plan B model and so on.

I always thought that for something to have a monetary characteristics, the stock to flow ratio is actually decisive. I think that Satoshi Nakamoto, whoever it was, he clearly understood monetary history. He understood the flaws of our monetary system. He understood the Austrian School of Economics, and he clearly understood gold and the importance of the stock to flow ratio. So it’s still an experiment. It’s still fairly small. It’s still a teenager. And teenager make stupid things sometimes. But teenagers grow up and we’ve seen it with the Bitcoin ETFs. This is really a milestone because Now the US and basically the whole world has said, Okay, Bitcoin is for real. It’s legal. So there are no legal threats anymore. And when it When it comes to the… This is our take on Bitcoin and crypto in general. When it comes to the combination of blockchain technology and gold, well, we wrote We talked about it in the gold, the trust report a couple of times, and we have analyzed all those companies and all those crypto gold coins, and we came to the conclusion that the teams behind were sometimes a bit shady. The business models were flawed.

The fees were too high. The liquidity wasn’t there. Therefore, we’ve always been somewhat skeptical. We’re seeing some successful gold-backed cryptocurrencies like Tether Gold and PAX Gold, for example. But it’s always important that there will always be a third party involved in such projects. It’s really super crucial to choose institutions with a stronger reputation to invest or to deal with, because I think there will continue it to be many, many, many rock pulls in the future. So long story short, of course, blockchain technology can enhance transparency, traceability, efficiency in trading and ownership of precious metals. But so far, I haven’t really seen something that made me really excited. Sometimes I think those are solutions for problems that don’t really exist.

Benjamin Nadelstein:

Yeah, and this is a good thing to keep an eye on the space and say, Hey, here’s where I think it is now. We have the teenager inality, maybe has some growing up to do. Okay, so what was something in the In Gold, We Trust report that did surprise you? Obviously, you’ve been analyzing and thinking about gold for an incredibly long time. Very nuanced. But was there anything in the report this year that made you go, wow, I did not see gold from that perspective and has added to your understanding of the asset?

Ronald-Peter Stöferle:

Well, I think price-wise, it was really this decoupling of the gold price from gold ETF flows and gold making new all-time highs now also in dollar terms. Gold has made new all-time highs in basically every currency except for the dollar until recently. I think that was really something that was interesting. And then we had We had lots of interesting chapters, for example, about deep sea mining and esterite mining of gold. Really interesting. We wrote about the image or the marketing problem of gold, that it is often being regarded in the Western world as something that has some a right wing atmosphere around. Only those, I don’t know, armed Trump supporters. They like gold. And while in Germany, for example, there was a national TV, a guy saying, If you buy gold, you’re a Nazi, which is a pretty big thing in Germany. Then, of course, gold is being regarded as useless, and it’s just destroying the environment. Those are those clichés we’ve been writing about then, and I think it’s important to address them and not say that this is BS, but say, Okay, well, there is still gold mines that are not properly being operated.

But most of the companies are doing a tremendous job in really taking care of the environment, but also the social impact around creating high paying jobs, building hospitals, building roads, access to clean water and so on. I think this is really something being very underreported. Then what else did we have in the gold we trust to part. We’ve had a long chapter about the Dubai gold market. We will be writing about the Saudi Arabia, the developments in Saudi Arabia for the next year’s in Goldberg Trust report. We’ve got a large chapter about CPD ECCs about this financial plumbing, Embridge, for example, and obviously also de-dollarization. This is something, Ben, that, for example, having conversations in Dubai, talking to market participants there, if you talk about the dollar, it was like, Okay, well, the Saudi Riyal, but also the Dirham in the United Arab Emirates, they’re still packed to the US dollar. They are basically running the monetary policy of the Federal Reserve. They said, Well, why? It’s just a tradition We should question that. We should discuss that. So this whole de-dollarization thing is clearly picking up momentum. We’ve got the BRICS meeting in Russia in fall, where they will discuss this this idea of the units that was proposed by a Russian economist and a Chinese economist.

Very interesting stuff. And it is obvious that starting in 2022, central banks have really become a very important driver in the gold market. And that obviously goes hand in hand with the sanctions against Russia Russia, where many countries woke up and said, okay, perhaps we should hedge our dollar and Euro exposure. Perhaps we need more gold in our board. Those are some of the most important things. But again, it’s 120 pages. But there’s also a compact version. But it is always interesting thinking and writing about gold because this big 3D puzzle that is constantly moving. I think if you have an understanding of our monetary system, of our monetary history, then I think you’ve got a big edge as an investor.

Benjamin Nadelstein:

Let’s talk about central banks quickly as we come near our close. Central banks in foreign countries outside the United States have been buying gold at quite a pace, Chinese Central Bank, a notable buyer. Do you suspect central banks are going to continue buying gold? And how do you think pushing interest rates back down or interest rate volatility might affect that? Do you see that these purchases are basically a hedge against dollar exposure, hedges against market exposure? Do you see there’s some correlation here where even in a high interest rate environment, central banks are buying gold but will continue to do so in a low interest rate environment? Where do you see the central bank and gold buying play in the future?

Ronald-Peter Stöferle:

I think that emerging markets, central banks will probably continue buying gold. Why? First of all, they still have a fairly small allocation to gold still. For example, I had a look at the World Golds Council survey, and since 2019, so from 2019 to 2024, There was a big change because back then, only 15% of central banks have considered their gold reserves as a strategic asset. Now in the World Gold Council survey of 2024, this number has risen to 71 %. So we’re seeing that those reserve managers in emerging markets, countries especially, they are seeing the geopolitical uncertainty, financial stability, default risk, the long term store of value story, and also the hedging, the hedge against US dollar exposure and especially duration. So that was a great report coming out from the World Bank, actually, in February. And we quoted that in the In Gold, We Trust report where they said, okay, if the higher the duration you have as a central bank in your portfolio, the more gold you obviously want to Gold. And they were recommending, I think, up to 22 % gold holdings for central banks, which is quite enormous. So that’s definitely a big thing going forward.

On the other hand, I think when it comes to interest rates, if we have a look at what’s going on in macro markets, in the macro world at the moment, it’s the unwinding of a huge carry trade. We’ve seen the max seven only going up and the Yen only going down. This is completely reversed. It’s brutal what’s going on in financial markets at the moment. It’s a recession being priced in. We are moving from no landing, from Goldilocks or soft landing or whatever to hard landing. We’ve seen the ISM really coming in very, very weak. We’re seeing the so-called Sam rule that I’m following for quite a while, a screaming recession. We’re seeing that the yield curve is currently moving into positive territory. We’ve had the longest yield curve inversion in history. I think from a macro point of view, it’s really getting interesting. We all know that at current interest rates, I think just interest expenses for the United States next year would be, I think 1.5 or 1.6 trillion at a GDP of, what is it in the US? 25 trillion, something like that. So it’s big, and it can overtake defense expenses, where Neil Ferguson said that’s like the end game.

If you’re paying more on interest than for your military. So all those things basically tell me that interest rates will go down. We’re already hearing regarding an emergency rate cut because the next Fed meeting, I think, is September 18th. But I’m not sure how markets will really handle an emergency rate cut. Perhaps Perhaps it’s going to create even more stress and even more panic in the market. I’m not sure if the markets will react in the way that they did in the old playbook, for example. But this, on the other hand, and there’s no doubt for me, Ben, that what hits the fan, interest rates will be cut. This will be a very good excuse to bring interest rates down, and I’m sure that there will be new rounds of QE, of fiscal stimulus as well. There’s no doubt about it, but we all know that there is declining marginal utility, so we will need more. And I think this could really unleash the next inflation wave. So that’s my mid to long term scenario that I’m seeing.

Benjamin Nadelstein:

Well, it’s a very interesting case and a very interesting case for gold ownership in this type of environment. It seems like the central bank playbook remains the same, which is that, hey, we got to keep extending and pretending. If we got to do QE, if we got to lower rates, if we got to go to zero rates, we’ll do it. Whatever we have to do to keep the music playing, we’ll do it. And so that’s the one playbook, which central banks seem to continue to do. But then there’s the new gold playbook, which is that gold has not declined in price against high interest rates. Again, most people say gold has no yield. So on the margin, I want something like a T-bill or a high yield savings account. Obviously, gold now does have a yield, so there’s some competition there. But then the other factors like, okay, softer inflation over time. Some people say, okay, that’ll be good or bad for gold. But gold has remained resilient Brilliant, like you mentioned, across all currencies, broken at all time highs in the US dollar. So do you see, as we wrap here, the new gold playbook becoming even stronger as we move into the future?

Do you think there is a correlation that gold investors should be watching, or is this such a new playbook that we’re going to have to hold on to our pants and see?

Ronald-Peter Stöferle:

Well, I think this unwinding of the carry trade is definitely something to watch. And I would be a liar if I would tell you that I completely understand, not the first order, but the second or third order consequences of that. Nobody basically knows. Will it bring down a large bank, for example, in Japan. Having a look at the share prices of Japanese banks, well, looks interesting. Big banks being down 20% in one day, real panic in the market. I don’t know how many Sigma moves in the Japanese Yen against currencies like also the Aussie dollar, for example, which was a very popular carry trade. Also the US dollar being pretty weak in that environment, I think that’s super interesting. It all adds to super, let’s say, equity There are three markets that are priced for perfection, basically. It was like nothing could harm this uptrend in tech stocks. It It is coming at a time when geopolitical risks are definitely high. I don’t know how this situation in the Middle East will develop, but I fear that it’s going to escalate sooner or later. This is all a pretty, let’s say, challenging, demanding and concerning environment that we see.

Now, gold being extremely liquid, 140 billion traded per day, could, like perhaps in 2008, have some issues when there’s forced selling. Many people said, Okay, this goal is being manipulated. My take is there’s just so much distressed selling. And of course, you want to sell what’s most liquid and what you can sell, actually. And this is the reason why gold always or often tends to trade lower in those super volatile and stressful periods. But then we all know what the reaction function of central banks is. If you’ve got a printer, you will use it. And therefore, I think… And this is why we also saw that gold in 2009, for example, I think it made now, it was a before 2008, it made its lows much earlier than other asset classes. I think this will be quite similar this time around. Now with the big difference that actually we are already trading at new all time highs. If we compare it, for example, to 2008, 2009, where we also had this psychological barrier at $1,000, It took the price of gold, I think roughly 19 months. It was testing this $1,000 US barrier, then was trading lower than higher again.

Then we’ve seen this impulsive breakout. And now we have seen that gold was actually consolidating for almost four years at this very important psychological $2,000 US level. And in 2008, 2009, if you remember, within two years, the price of gold almost doubled. We went up to 1900 bucks. So can the price of gold double in the next couple of years? Hell, yes. We’re still being ridiculed for our long-term target of $4,800 that we put out in the Gold Re Trust report, 2020. People said, Okay, what are those guys smoking? What are they drinking? What are they doing? How do they run their models? They’re still saying that, although some people say, Okay, $4,800. Sounds very optimistic. Perhaps it can. From my point of view, it’s super realistic. And with the current setup that we’re seeing, not only on the monetary side, but also on the fiscal side and on the geopolitical side. I think that at some point, there will be… Gold will really come back as as a monetary asset also in the traditional space. So this remonetization will probably happen at some point. And I think those will be the price levels that make 2,400 or 2,500 bucks really look pretty ridiculous.

Benjamin Nadelstein:

Well, as we end here, I do think there’s really one basic question, which is that, will Eastern demand from Dubai, Mumbai, Shanghai, Shanghai, Shanghai, Shanghai, by all these other places that are buying gold like crazy, going crazy for gold, will that substantially weaken, meaning the currency has become incredible, the real estate markets become incredible, the stock markets become incredible, the rule of law, the government bonds, everything looks so peachy, keen, and rosy that investors say, You know what? I don’t want to buy gold. I’d rather stick with government bonds in my country. Or is the other part of this he saw more likely, which is that Western demand will pick up to a more reasonable level where people say, I would like to have 5% of my portfolio in gold, 10% of my portfolio in gold, or as central banks even say, 22% of the central bank’s portfolio in gold. If that happens, absolutely the price of gold can go much higher, and for irrational reason, which is that there aren’t better asset classes that still provide income, that have a long empirical history of price appreciation. A lot of investors look around and say, You know what, this is now the time for me.

Ronald-Peter Stöferle:

I think we can have both ways here. Really, Asian demand still being quite strong, perhaps leveling off a bit, especially as we’re seeing that India is really, really price sensitive. So they’re substituting gold with silver, for example. But then having a really constant and stable level. And this It was all obviously hand in hand, and this is something that we also analyzed in this year’s report, the correlation between GDP growth and the growth of disposable income in emerging markets and the demand for gold. If we say, Okay, those countries will continue to do well economically, they should buy more gold, actually. It sounds It’s really simplistic, but it’s actually happening. This in combination with Western financial demand really kicking in, I think this could be the perfect storm. We’re not super early in this game. This is not like the first inning. I would say it’s like the… I’m not good with baseball analogies. So the fourth or fifth inning, or it’s like half-time. But we know that the fun part really begins at the end of this trend. It’s like the euphoria phase, this trend acceleration phase.

We haven’t seen that yet. I think so far, it’s still a fairly muted price rise. Or let’s see it from a different perspective, a fairly stable decrease of purchasing power of fiat currencies. But that can change. Therefore, It makes me pretty relaxed going forward. I don’t want to sound too pessimistic or to bearish But I think with the current setup that we’re seeing, it is definitely a pretty worrisome setup that we’re seeing. At the moment, what we’re this this polarization that we’re seeing in the political spheres, we’re also seeing it in the investing world, where if you’ve got a view on sound money, you’re sometimes regarded as somebody I got crazy. And I think the only way you can deal with those things and those very emotional discussions is really come up with a proper reasoning, a concept, that’s numbers and good examples, and also good analogies to make a solid and sober case. And this is actually what we’re doing in e Gold We Trust Report.

Benjamin Nadelstein:

Ronnie, it has been fascinating talking to you. One of the best minds in the gold space. For those interested in getting more, Ronnie, where can they find you?

Ronald-Peter Stöferle:

Well, we are asset managers based in Liechtenstein. And the web page for our funds and everything around us. Our publications, the book that we’ve written is incrementum. Li, which stands for Liechtenstein. Liechtenstein, probably the most interesting, the most Austrian jurisdiction in Europe. If you want to learn more about the In Gold, We Trust report, it’s In Gold, We Trust. Report. All our publications are free of charge. You don’t have to register. You can download the report in a compact version, which is still 40, 42 pages, and also the big version, 420 pages. You can download it on our web page. You can download previous reports. You can register for our monthly gold compass, which is the best gold charts around that we publish once a month. That’s incrementum. Li and in gold, we trust. Report. Then I’m also pretty on Twitter, posting charts about the macro world, but also some stuff about sports and running, especially, and soccer. So I always try to keep it fun as well.

Benjamin Nadelstein:

Ronnie, fascinating discussion. We’ll look forward to seeing you soon.

Ronald-Peter Stöferle:

Thank you very much, Ben. It’s been a pleasure. All the best. Take care.

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.