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Welcome to Merin Talks Money, the podcast in which people who know the markets explain the markets. I am merin Somerset Web. Now in this episode, we are going to focus on gold because of favorite metal keeps hitting new highs. We are recording this conversation on Wednesday, October. The gold has now been rallying for five days on the up to day because the US government has just begun its latest government shut down. But it's not just the last five days. Gold is up more than forty eight percent
this year. It's on track for its biggest annual gain since nineteen seventy nine. It's been supported by central bank buying by rising holdings across the board gold back exchange traded funds as a federal reserve has resumed cutting interest rates. On Bloomberg data, monthly flows into gold etf so I should be clear in September we're the largest in three years. So what is going on here? Will it last? Should you be buying it? Should you be selling it? How
does it fit into your portfolio? We have got today the perfect guest for all this, Dominic Frisbee. He's a friend of the show. Lots of you will have heard me talking to him before. Is the author of the investment newsletter The Flying Frisbee and also author of the book we are going to talk about today, The Secret History of Gold, which tells the epic and fascinating tale of the world's oldest and most treasured currency. Dominic, welcome back.
Thank you very much for having me, Maren. It's always a pleasure to talk to you.
It is always a pleasure for me as well. Now, Liisen, I have been reading your book. I love it. I strongly recommend it to all our listeners. That's full full of while everything you need to know about gold, honestly, but lots of stories, great toy storytelling about the history of gold, the way in which gold is embedded in
our economies, our culture, and pretty much everything else. So I don't want to dwell too much on gold history through our civilizations today because we know everyone is feeling fairly here and now about gold. But I did want to start by talking about some of the things that you say in your introduction about the nature of gold. It's physical nature, the thing that makes it what it is to us.
Well, it is the most incredible metal when you think about it, that it never loses it shine and depending on your narrative, whichever way you look at it, gold was here before the Solar System, and when these stars exploded and all the dust was sent out into outer space, that was how heavy metals were created. And then you think about the fact that you cannot destroy gold. It's incredibly malleable, but as I say, you can't destroy it. And then you think about the fact that it was
invented before the Earth. Well, that means that that little bit of gold around your finger, around your neck is older not just than the Earth, but than the Solar System and shining all that time, and it will be shining long after humankind has shuffled off its mortal coil. And so one of the lines I say in the book is to touch gold as the closest you will ever come to touching eternity.
I love that line. I love that line now is just before we started recording Dominic for You or I'd I was reading that line to Moses, our producer, and we were both feeling slightly awestruck by the idea.
It's a lovely thought. And if you sort of type in eternity into your ai app as we all do every day, and it designs a picture of eternity. Eternity would be clouds and ethereal and celestial and all these kind of things. It wouldn't be a dull, inert, lifeless metal, but that's exactly what it is.
Yeah, there is. There's another line in the introduction, or a couple of lines that is also just sums the whole thing up. In the Egyptian Museum in Kaira, there's a golden toothbridge, a gold wire used to bind teeth and dental implants, made of a four thousand years ago that is still in such good shape you could pop it in your mouth today. Yeah, genuinely and destruct.
It really is, as Spandau Ballet so famously sang.
And also crucially pretty.
Yes, well, I think that's the lure of it. And you know, there's three functions of money. One is to be medium exchange, one has to be store of wealth. The other is to be a unit of account. And of course we all here in the UK we use pounds as our unit of account, but it's actually a rotten unit of account because the pound changes. The pound has lost forty percent of its purchasing power just since twenty twenty. I find that incredible. But it has you
need a constant unit of account. But of course we use pounds and dollars of our unit of account because we have to declare our taxes in pounds and dollars. But really gold is a much better unit of account because it never changes. It really is constant, has some industrial use and teeth, but it's minimal in the grand scheme of things. It's useless, and yet it's pure wealth. And so Peter Bernstein's line is great line. Nothing is
as useful and as useless at the same time. It was the first metal we ever use used, but we used it for the same reason we use it now as jewelry to adorn ourselves.
I mean, it's relatively abundant, but if it was easy to get hold of, an easy to find and a mine, etc. Then it wouldn't necessarily be as valuable it is. So part of it's allure is not all the things that you've already described, but scarcity.
Right, yeah, absolutely, and quite interesting stat for you. If you look at world gold supply and you plot a chant of population growth on the same chart, the two have grown at exactly the same rate throughout history, which is all the natural law advocates say, you know, it's natural money. The only time when that correlation got out of sink was in the gold rushes and in the second half of the nineteenth century, so when gold supply per capita increased by a little bit, went from about
a third to two thirds of announce per capita. But apart from that, the two have grown, and they still grow at the same rate today, world mining supply and world population growth, so there's as much gold per person as there always has been.
Okay, Dominic, I hope that we live long enough, you and I to see what happens when the global population starts falling.
Well, the declines in Europe are being offset by the growth in Africa and Asia.
Yeah, but that won't last forever. There will come a point when global fertility, not just European and developed world fertility, is such that the global population declines. And if that happens and the goals apply continues to go up bout three percent a year, then the whole thing might change. But that's maybe another part.
I think it's it's not a concern of ours. It's still going to be shiny and lovely.
Okay, good, let's skip through quite a few thousand years then and we can accept and you can go and read in the book about how gold is always money, always has been money, accepted as money by everybody. And then you have incidents where the idea of gold itself and currency become separated, right, and that's where things get tricky, and the most well known an example of that would be the Roman Empire.
Well, yeah, by currency, I think we mean medium of exchange. The Romans, I use the word currency. Gold was never so much currency as in medium of exchange in the way that silver and copper and nickel and other metals were. For the simple reason is there's just so much wealth. Like if you imagine a two p coin today, if that was gold, it'd be about a quarter of an ounce, it'd be about seven hundred quid, you know, in a two p piece, And so it's just unrealistic to use
that for day to day transactions. You might use it if you were buying a you know, a race horse or a house or something, you know, a nice suit or something, you wouldn't.
Use say that, but at this rate of flat right it Pratt is going to cost seven hundred quick quite soon.
And while the Romans famously debased their coinage and by the way, quite an interesting thing about the decline in the fall of Roman Empire is that, like most business models sort of prior to the twentieth century, war was a very effective business model because you conquered, you plundered, and then you taxed, so you know, it was very lucrative for kings and that's why they did it. But what's interesting is that the Roman Empire actually stopped expanding
around about the time of Trajan and Hadrian. That was the point of the maximum of the Roman Empire, but the sort of decline of its money didn't really get going until about two or three hundred years later under Diocletian. So how was the Roman Empire able to expand itself over those two or three hundred years if it wasn't
conquering and plundering. And the answer is it kept its money supply going through incredible mining operations in the north of Spain, and it was only when the mines depleted that suddenly the acceleration in the debasement of Roman coinage took place. So, you know, I think there's been something like two hundred different reasons offered for the decline and fall of the Roman Empire, ranging from alien invasion to
climate change to too many hot baths. But the depletion of its mind supply is not a reason that's commonly offered, but it was actually a huge factor.
Okay, just explain that a little further. Explain the connection how the currency was debased and how the separation of means of exchange from the value of gold came about.
Funnily enough, the gold coins didn't get depleted in the way that the silver coins did.
The silver coins were the ones that were consistently clipped.
So the silver coins went from being completely pure to under Nero, they got mixed. I think they were like ninety percent pure something like that, and it was under Diocletian and then that they went from like fifty percent to twenty five percent to no silver at all and that and that was when they had sort of very
strong inflation. What they did with the gold coins is the gold coins actually maintained their purity, but they just made them smaller, So they just got increased inly small So by the time of Diocletion, the gold coin had been the allus, and he replaced it with the solidus, which was about half the size of the aureus, as
your aureus had originally been in the first century. And then the solidus became the gold coiner of the Byzantine Empire, and the Byzantines thought that they were Romans, even though we don't deem them as such, and the solidus became the sort of the go to, the equivalent of the sovereign, the sort of the go to gold coin of the Mediterranean. Interestingly, the Italian word soldi for money comes from the soliders.
And of course if you were to dig one of those up today, it would look exactly as it did then it does.
I've got one on my desk. I'll see if I can hold it up to the camera, shall I?
Okay, hold it up, let.
Me just see it.
And those of you who have video can now see this. I'm fraid we haven't got full video. We will have coming soon listeners, by the way, coming soon, but we will but this clip up on YouTube. Assuming he eventually finds that those of you who can't see Dominic he's rummaging around in his desk because he's got so much extremely valuable stuff and his does that he currently can't find the five thousand quid coin.
It's actually beautiful, this gold coin. This is so This is a Justinian solidus from six hundred AD. And you can buy these for not much more than their gold content they wear. This would be about four or five grams. It's a lovely little coin.
Yeah, you'd pay capital gains tax on that though, wouldn't you?
You do, but you don't on beautiful gold sovereigns. I've got one of those up here as well. The sovereigns aren't is a nice though, because the sovereigns so the sovereigns have been mixed with a little bit of copper, so they've got a slightly redishue. This is a Queen Elizabeth sovereign. I've got one of Victoria as well, and you could see the solidest. They're kind of similar size.
The sovereign's a bit heavier. But you know, whoever's in charge makes the gold coin that becomes the coin of the world, whether it's the Romans or the British or the Americans or doesn't really matter.
So if you would about a sovereign like that today, as I just said, they're technically legal tendency. You don't have to pay capital gains tax on them. How much of a premium would you pay over their.
Not that many? Five percent something like that, maybe a bit.
Okay, So anyone who's been holding a good number of those and has made preciable capital gains will be extremely peace of themselves.
They will. And I mean I remember writing for Money Week back in two thousand and six, and we were telling people to buy sovereigns back then. So they've done incredibly well.
Yeah, I'm sure lots of people listened.
Right, I've got a question for you, actually, Marin, if I.
May, i'll have his works Dominic.
So you remember the incredible bull marketing gold from two thousand and one to twenty eleven, and it ended with gold at nineteen hundred an ounce and the Greek debt crisis, and everyone at that time was thinking gold is going to be some kind of official money once again. It really looked like and then I remember you sold or you wrote that you'd sold some of your gold at sixteen or seventeen hundred dollars an ounce. So you did what everyone did dreams of doing. You were very good.
You got out within ten percent of the top. Yeah, and that's that's the secret. Can you get out within ten percent of the top? What made you do that? And how close to the top are we in this bullmarket? Now?
This is literally not the way this works. Stuff.
Yeah, well I'll add to what you say.
Okay, I cannot remember I cannot actually talking to a group of finance people the other night about exactly this and why it is that as a journalist or someone like you and me who covers markets endlessly, how it is that you finally come to the point where you say, well, this is going to change or this is going to change. And the answer and for it is instinct. That's all it.
Did.
You know, you're taking in so much information all the time, and as you know, your brain works in so many subconscious ways. I can't tell you what made me say then I think we're done here. But that must have been just the constant inflow of information creating some conclusion. How do I feel now? I mean, you know, like you like, it's really toppy, like things gone very far,
very fast, all those kinds of things. But then I also look around and I see now this debt crisis that will inevitably catch up with the developed world being closer than I've ever felt it as before.
Yeah, I mean at the moment, the narratives that are driving this bull market is central bank buying. That's been the big narrative that's been going on since twenty fourteen. But it really accelerated when America confiscated Russian US dollar assets and basically every pullback to the fifty day moving average has been bought and it's just been a relentless climb.
And retail has only really got involved in the last six months maybe, And in fact Germans Germany big second biggest retail market in the world I believe, actually can't be, it must be the third biggest, must be China, US then Germany anyway, big retail market. What about India oka fourth? But German retail investors have been next sellers, which is
just unusual until this year. And it's retail that usually drives mining, and gold mining has not really got going until about a year ago, and so it's lagged gold and as I say, but the narrative has been central bank buying.
Right, Well, we need to go back a bit, We need to go back, Okay, we need to go back and talk about this turn in central bank buying. I mean, obviously, the big central banks have always had lots of gold, and it's one of the things that we've talked about over the years is everyone goes, wow, gold, no one needs gold anymore. Gold is over, et cetera, et cetera. Gold is nothing, it'll never have value, etc. And we've
still gone, well, hang on a tick. If gold is nothing, how come the central banks still holds so much of it? You know, how come they keep these reserves in gold If gold is an absolute nothing. Of course it's not nothing, it's real, and you should watch what central banks hold. And then the amount that central banks hold started to rise and rise and rise. So let's talk about that.
What happened there? What made the central banks, Chinese Central Bank in particular, start saying, do you know what, we don't have enough gold. We're going to really add to our reserves in massive volume.
Well, I think one of the reasons that central banks held on through the eighties and nineties is they probably just didn't know what else to do with it and just leave it. And of course one of the reasons that Gordon.
Got adminertia, are you honestly suggesting that central bank policy is a function of admin inertia.
Well, I think one of the reasons they didn't sell is they didn't know what else to do with it, and there was no one of the reasons. There was all sorts of reasons why Gordon Brown sold, but one key reason is he thought Switzerland was about to sell, because Switzerland was about to come off the gold standard in nineteen ninety nine, and he was one of the
front run Switzerland. And of course Switzerland never sold, but in any case, it was only I'm going to say twenty thirteen, twenty fourteen, twenty fifteen, that kind of period. Then gold reached ten percent of central bank holdings and that's when the turn came. So in the bear market, you know, twenty fourteen twenty fifteen, gold was in a bear market. And if you go back and you look at China in particular, China was became a net seller
of US treasuries. It's been reducing its holdings of US treasuries, not of US dollars, but of US treasuries ever since twenty fourteen. Just at the point that it began growing, its central banks became net buyers of gold. And by the way, China does not declare its real goal, that it's understated its reserves by a factor of at least five for reasons that we can come to in a moment. But by earlier this year gold had gone over ten years from ten percent of central bank holdings to twenty percent,
so it had doubled. Meanwhile, it overtook the Euro as a percentage of central bank holdings, and it overtook US treasuries, and the US dollar meanwhile fell below fifty percent. It's now and I think forty eight, forty nine percent something like that, maybe even a little bit less. And so you know, goal's at twenty percent now, a little bit
more than twenty percent. There's no reason why it'll fact it'll be more because of the rising gold price increases the amount effectively, even if they don't actually buy more. But there's no reason why that shouldn't be forty percent in another ten years.
Why is any reason it shouldn't be forty percent.
There's two reasons, this process of de dollarization. So there are lots of countries they might not necessarily be enemies of the US, although in some cases they are, but and they might be you know, big trading partners of the US, like China is a big trading partner at the US. But they must be looking at their portfolios and seeing what happened with Russia and thinking America could just confiscate our dollars at any time if we do
the wrong thing. So we're just in America's power. So we need another asset that doesn't put us in America's power. And of course that asset is gold, because it's nobody else's liability, it's wealth in and of itself. And that's the attraction of gold. And the big accumulators of gold have all been countries along the Silk Road in the Shanghai Cooperation Organization, so China, India, Russia at one point, although they've stopped buying, and then all the various Stans
to Jikistan and kyrgyz Stan and all these stans. They've been the net buyers Iran as well. And some of those are actual enemies of the US, but some of them are not exactly strong allies of the US. And so it's all part of this process of de dollarization, and there.
Isn't something else they could use instead. This is GOLDI what I.
Mean they could use the Euro potentially, then you've got to deal with the EU. The yuan isn't internationally tradeable in a way that the dollar is. It's just not really possible with the yuan. So what else do you use?
And you wouldn't necessarily want Yeah, and you don't want to use a currency that you expect to be and floated away as a direct result of the high levels of debt. Did GDP rats across Europe?
And well, well that too. And now we've got this new thing, which is a really interesting development part of the same story, which is this idea of Triffin's dilemma, which is this notion that the country that issues the reserve currency of the world will inevitably run trade deficits with the rest of the world. And the Biden administration did not get this, but the Trump administration very much
seems to. And we all know how Donald Trump wants to reshure US industry, you know, the russ belt and revive American production and all of that, and he talks about it, and we know that the weaker US dollar and tariffs are all part of that. But the reserve currency status that other countries have to work to earn their dollars, whereas America can just print them, means that
America will inevitably become an exporter of US dollars. And this has led to the mass financialization of America and also its radical decrease in production because other countries are way more competitive. And if America genuinely wants to get producing again, and you know, it is much more than just rhetoric. In the case of Trump, he genuinely believes it. But Vance has actually called the US dollar reserve status attacks on American producers, and Bessant obviously gets this as well,
the Treasury Secretary. So if America is to get producing again, it has to sort of sacrifice or have a managed decline of the US dollar as global reserve currency. And there seems to be and this is the Luke Groman argument, there seems to be a genuine acceptance that this is going to happen. So if the US dollar is no longer going to be the reserve currency it once was, what can replace it? Well, there isn't an alternative, As we discussed the Euro, the U are and they're just
not viable alternatives. And so gold is the most obvious alternative because it's neutral. And meanwhile, America has lots of gold. Let's just assume that the eight thousand tons it says it has a there, and it can probably get more if it needs to. And China has imported and produced something like forty thousand tons over the course of this century. It's an extraordinary number. America has eight thousand tons. Forty thousand tons of gold has made its way to China
this century, either through imports or through production. China's been the world's largest producer since two thousand and seven. It's also the world's largest importer. Now it has encouraged citizens to buy gold. But you can also assume that a lot of US gold has made its way into the
People's Bank of China and other state bodies. And so when China says it has two thousand tons and or two and a half thousand, but you know that forty thousand tons has made its way to China over the course of this century, you know that that's just an understatement.
Now established that gold is still extremely significant in the global economy, and at this point it underpins everything. Is there any sense that we might end up with a new gold backed currency.
I don't think so I think it's unlikely. The gold standard of the nineteenth century we used gold sovereigns, we used American gold, American gold dollars and so on, and so gold actually circulated and people held gold. But in the gold standards of the twentieth century, when we went back onto gold in nineteen twenty five, in the UK, gold had been pretty much withdrawn from circulation, so there
was we weren't handling gold. And similarly, Americans, it was made illegal for Americans to own gold in nineteen thirty two, so there was no gold in circulation even though the country was nominally on a gold standard. It's like going, oh, it's a library, but you can't use the books. It's just not a real gold standard if ordinary citizens aren't holding gold, and that's one of the reasons those gold standards failed. It was bogus. But in any case, today
we just don't use cash anymore. We don't use physical cash, so we're not going to be handling gold or silver or any other metal on a day to day basis. Money is digital, but that.
Doesn't that doesn't mean we can't hold bits of paper or digital money that represents the actual gold. Yes, you can same effect as a gold standard.
Yeah, but that would be a payment system built on top of gold as a store of wealth.
Exactly.
Yes, you could have it, and it would take quite a lot of designing, and it would involve a lot of trusted third parties, at which point you know gold isn't value in and of itself. You're relying on the third party thing. We would probably work for a bit and then it would stop working because of the trusted
third party issue. But in any case, I just don't see governments doing it, because our governments today were at fifty percent give or take of GDP as government, and it would involve relinquishing so much power and breaking so many promises. If governments were to limit the amount of money they create by the amount of gold they have, and it would involve such an upward revaluation of gold short of a major, major crisis, I can't see it happening.
Will you explain why it is that it is not possible for governments to run massive deficits while having a sound money system like that. I know a lot of our listeners will know this, but some will not quite understand how this works. If you have a system where you have a gold bag money. It's not really possible for the state to run at fifty percent of GDP forty percent of GDP well.
Because you can only issue as much money as you've got gold to back it, plus what you can loan against it, and so that just limits the amount of money that can be created. And so over the course of the nineteenth century, even though the Britain was on a gold standard, it was probably we only had gold backing for maybe thirty thirty percent of the money we printed. At times of crisis it went down to about fifteen and just coming out of the crisis it would go
to about fifty. So the paper pan was never fully backed by gold. But if the US had to fully back every US dollar on issuance with gold, with its gold reserves of eight thousand tons, the gold price would be I can't remember the exact number, but it's like ninety thousand dollars something stupid, and.
The deflationary collapse would be appalling.
Governments would go bust. All the economies that's built around governments that relies on government would just cause so much upheaval. No politician would voluntarily do it unless their hand was forced by a crisis.
Okay, well let's talk about now and how as we women And we started this conversation back at the beginning, but let's go back to it. The gold prices we said in our introduction. As you know, it's been massive and anyone who's had some gold on their portfolio, I hope all listeners have had will find that they're feeling quite rich at the moment. But how does this look to you? I mean, obviously, we still have the central bank demand. I think that's going to carry on for
a while. We have rising retail demand, we have these flows into ETFs, and a growing recognition across the board that maybe you should have some gold in your portfolio. I sat on the train between Edinburgh and London the day before yesterday. I sat for four and a half hours on a train next to two men who discussed their gold portfolios for the entire Oh my god, I mean and really loudly, by the way, really loudly. I've tried to change seats, but there wasn't anywhere to go to.
I haven't sat next to people talking about their gold portfolios quite so eagerly for well a good long time.
That is a topic indicator.
But still we have the retail buiers, the mining socks have started to follow, silver has started to follow. You know, all the signs that you're getting towards the end of the cycle are there. But at the same time, there are way more reasons to hold gold now than perhaps there have been at any point in our careers, in these levels of debt, This knowledge that it is inevitable that this debt across the rest and world has to be differently inflated away because there is no other way.
All these things that we've talked about a lot on this podcast, And everyone who hasn't listened to last week's podcast, please do go back and do that. Becaill give you more of a sense of quite how close we might be to full blown crisis. With that kind of thing in mind, it still doesn't feel like it's quite time to be selling your gold.
I agree to use the baseball analogy. I'm going to say about three different things, and I might sound like I'm contradicting myself, but I am. In the end, we'll get there.
My patience is endless with you, dumblic It is absolutely fine.
Thank you.
Carry on.
Charlie Morris and I both put a target seven thousand dollars gold by the end of the decade, and given what's going on with central banks, and given what's going on with d dollarization, and given what's going on with Triffin's dilemma. As I explained, I just don't think that's an unrealistic target. And we just shy of four thousand. It's not even double where we are now. But you know, mining shares, leading silver, leading retail getting involved. That is
a sign that this bullmarket has evolved. The bullmarket if you think of bullmarket in nineteen eighty that ended, you know, for most of the time it went from like thirty dollars to around about four hundred, and then on that last spike it went from four hundred to eight hundred and fifty. And there's about three things going on at the Russia had invaded Afghanistan, there was the Iranian hostage crisis,
there was the crisis in the bond markets. And it went to eight fifty the day after Ronald Reagan was inaugurated, and it was a real proper blowoff top at the end of a bull market only went to eight fifty for one day, But at that point America had only left the gold standard for nine years. It was only nineteen seventy one, and so gold was still strong in people's minds. And in nineteen seventy one, leaving the gold
standard was temporary, remember they said it was temporary. So it felt like America had to go back to gold. And then in twenty eleven we talked about it already, the Greek debt crisis, it felt like gold was coming back again. So, for reasons I've already explained, unless there's a full bone crisis, I don't see us going back to a gold standard because we don't use gold in that way anymore. No politician would volunteer it because they'd
all bankrupt themselves. But if that narrative gets really strong, stronger than it is now, then that's another topic indicator. But I think that narrative has got a way to go. One narrative that you've talked about two or three times. You've mentioned the debt crisis, the inevitable debt crisis. That narrative, I mean, it's always around lurking, but it hasn't really got going in the goal bullmarket this time. So to summarize, I would say to use the American investors always like
to do this. Which baseball innings are we in? I think as for physical gold, I would say maybe six of nine, maybe even seven.
Thank you for adding of nine there. I appreciate it. I don't know what you're talking about.
But for mining and silver, and I want to talk about silver in just a sect, but for mining and silver only three or four. Then the bullmarkets aren't as mature yet. I'm getting letters from my broker, emails from my broker every day. Such and such a company is raising money. Such and such a subscription is oversubscribed. These companies could not raise money a year ago. So that's a topic indicator in itself. In silver's forty six, it could quite easily all end. And with silver at fifty dollars,
that's what i'm in. Twenty eleven, silver went to fifty three months later gold was exhausted. It could quite easily do that again. But if sil you know, fifty is the old high nineteen eighty, twenty eleven. But if silver goes through fifty, it could get silly.
All right, let me ask you about seven thousand dollars. You and Charlie both having a target around there, and I know that the big investment banks are sort of slightly moving their targets up, you know, four thousand, little bit, et cetera, et cetera, as they do. How do you
get there? How do you value gold? I mean, I know that people are always coming up with new ways to say, well, it's too low, it's too high, based on it relative to stock market capitalizations, relative to house prices, relative if there's relative to that, relative to how many suits you can buy, et cetera, et cetera. But how do you get to seven thousand? What is the valuation calculation there? Or are you simply putting your finger in the air.
I'm pretty much putting my finger in the air. Charlie will be able to give you a metric. But I just I look at all those ratios, Like the gold to oil ratio is already done. Like gold is way over value competitive. It's like the most expensive relative to oil it's ever been. If you look at gold relative to the DOO, you know, the S and P to gold radio or the DOW to gold radio, it's got
a bit further to go, you know. Still within this, like if you look at the long term ratio, there's like a confidence band around the ratio, and it's still within the confidence band, and at points of extremity at the ends of bull and bear markets, it goes beyond that band, so that that's still got a way to go. Gold to US and UK houses. It's expensive, but it's not nineteen eighty expensive, so that could still go. That's got a bit further to go.
Now, listen, there's something else that you write about in the book when it comes to gold, about a possible change, because one of the things that we always say, in fact, you said the very beginning of the podcast, we're going to come back to silver. By the way I know
you want to, we will come back silver. One of the things you said at the very beginning is that it's both really very useful for us a sort of wealth acceptable also absolutely useless because it's not in much a tiny bit of gold and every phone and that kind of thing. But we're really talking time, tiny quantities. And then the end of the book you have a chapter headlined will industrial demand change the future for gold?
And you talk about that. So, just to set you up for this, at the moment, around fifty percent of annual gold demand comes from the jewelry industry and that, by the way, is also the store of wealth industry. Right, we bote lots of cultures and us as too. We buy gold jewelry for a resenter show off our wealth, but also to store our wealth crucial. So that's that another twenty three percent of investment demand, which is just
a different kind of store of wealth demand. Right, it's investment demand and jury demand a kind of the same thing. Twenty one percent last year from central banks, and then just six percent industrial. But you begin to make the case here that that may change.
Well, yes and no, I mean I pretty much industrial demand in the costry.
I'm going to set you up for I'm not going to set you up for this stuff so beautifully. If you then say well, yes and no.
The exciting story where the big growth in gold use comes, and it's quite nice and symmetrical and ironic if you're a store retailer is in outer space, and as we go further and further into outer space, we're going to need a lot more gold. They use gold to coat spacecraft, for the equipment, to coat astronauts' visors for the very reason we talked about, you can't destroy it, and when you're in out of space, you need something that you can't destroy. And so there is a huge potential industrial
demand for gold as the outer space industry grows. But it's got to grow a lot bigger than it is today to have a meaningful impact.
Okay, but it's fair, all right. You know, you talk about a little nanotechnology, and then there's rather interesting one a Canadian company you talk about here, totten Pass is called a permanent digital storage drive constructed from solid gold that requires no energy and has no movable parts. Digital data is written on the drive by the way of a protracted light diffraction process. This technology allows for the permanent storage of precious digital data, therefore eliminating any future
dependence on the Internet. That sounds to be like a book just in gold.
Yeah, well it's kind cool, or your your bitcoin seed phrase or something, but yeah, very precious informat, or maybe just your holiday snaps.
Yeah, exactly, what a waste of mine.
Anyway, I think gold's future is exactly what it's past has been. Store of wealth. Demand for it goes up when everyone's worried, and demand for it decreases when everyone's happy. And I've told you this story before, but the expression put ten percent of your net worth in gold and hope it doesn't go up. I thought was an old Wall Street saying, and I googled it and it turned out the person who coined it was me, But.
I thought it was me.
Do you hear it of me? But it's a great saying. And I don't think it's a bad maxim to invest in gold buy.
No, it's not. I mean we still say to everybody, whether you thought of it or I did, and I suppose I'll give it to you, you must have. We still say to people, hold wed a lot and hope it goes down.
Yeah, that's that's insurance. That's gold is insurance. That's that argument. In five or two is time if you had one hundred pounds worth of gold or one hundred pounds, one hundred pounds worth of gold will buy you a lot more than one hundred pounds will buy you in ten years time.
Of that, I'm sure, man, I think everyone would be pretty certain of that. Actually, even if even if gold were to have a massive price crash, we still know it's going to be worse than a pound in a decade, right, almost from that bit of misery you wanted to talk about silver.
Yeah, this fifty dollars mark in silver, it's such a huge line in the sand. It was a high in nineteen eighty and silver went from fifty dollars all the way to three or four dollars, meander around there for twenty five thirty years. Then in the late part of the naughties it went back to fifty dollars again. Couldn't get through, and it went back to about ten dollars, and it's been creeping up ever since. Here we are as we speak, silver's forty five dollars, maybe forty seven dollars.
Even it looks like it's about to test that fifty mark again. If you're a chartist and you like chart patterns, head and shoulders and all that kind of stuff, it's done a massive cup and handle pat pattern over the last fifty years. And a cup and handle pattern is a very bullish pattern. If it can break up above that fifty dollar mark, and if it does, it projects to a price of easily one hundred dollars an ounce. And so the big question is does silver get through.
My guess is it'll fail at the first attempt and maybe get through on the third or something like that.
But if it gets through it potentially catapults, and everyone gets so insane about silver and all these false you know, with solar panels, and it's going to be money again, and it's in every phone, it's every computer, and silver, silver, silver, And there's a shortage, and we haven't consumed the goal, but we've consumed all the silver, and the silver gold race is going to go back to the historical average of fifteen and all these arguments, and on the back
of all of those silver could go to one hundred dollars quite easily, and that would be a major, major blowoff top and time to roll your gold and silver assets into something else. But I have to say I'm even tempted. If I was full out risk taker, I'm leaving all all my money on the table until one hundred dollars silver. That's that's the time to get out
of precious metals. But the cautious dominic Frisbee, the wise money pincher, is like, take a little bit of your money off the table at fifty dollars.
Let's go back to the ordinary retail investor, our ordinary listener who's been listening to us for a while and thinking I should buy gold. I should buy gold. I should buy gold, or should buy selver, maybe seven Press metals or god, maybe I should have some uranium and maybe leave that for another podcast. They haven't got any exposure to precious metals right now, what do they do.
Well? The problem with bull markets is you never feel that you own enough of the underlying thing. And I know, you know that's the psychological thing. And so you know, even me overweight gold and silver, don't feel like I own enough gold and silver at the moment, and I'm looking around, So that in itself is a bad sign. I just think in order to buy and invest in something,
you have to be persuaded of the story. So the first thing I would go and do is listen to podcasts like this, like you and I talking other people talking about gold. Read some books.
Can't imagine which book would be suitable.
But just read it and inform yourself, and try and listen to people who aren't insanely one way or the other. Try and listen to people who are sensible about their subject. And you know, the first thing I would do is literally educate yourself. And then if you're persuaded, as I say, I believe one hundred pounds worth of gold will buy you a lot more than one hundred pounds in ten years time, and so your first place to start is
with physical bullion. Sovereigns are a good place to start because you don't pay that big a premium over the gold content. The capital gains free when you die. If you never sell them, you can you know, pass them on to your heirs. And it's money that is, it's unlike any other investment because it's outside of the system, and there's a beauty to that. Interestingly, I think Morgan Stanley put out a think they've gone from the sixty forty to sixty twenty twenty twenty percent gold. Did you
see that? Yeah, that's a big evolution.
Well, it's massive. I mean twenty percent is that you don't very often see, you know, establishment institutions telling you you'd have twenty percent of your portfolio in gold. I guess they've been listening to the podcast.
They must have been. But to I mean, they've halved their bond allocation.
I think more interesting is that they've got that. I don't know what the gold allocation was before, but I would say much closer to five, closer than nothing. Massive.
Yeah, I mean that, and then once one bank does it, the others follow.
Yeah. And if that means that there's an awful lot of wealth management portfolios that will follow that, you've got a huge level of demand coming through from retail.
And what tends to happen in bull markets is is you see how much gold you get for your money, how little gold you get for your money, and you just automaticly think, well, silver's better value. People buy silver instead, and that's why silver sort of lags and then it leads. But I just don't think there's anything wrong with having even at these high prices. You know, high prices usually lead to higher prices. Goes against your instinct. Do you
want to wait for a pullback? But then when there's a pullback, everyone gets scared and you don't buy for that reason, you don't catch the low. The normal thing that follows an all time high is another all.
Time high until it doesn't one day.
Until it doesn't. But does it matter when you've got physical gold unless you really need the money for something else. It's as good a way part your capital as anything else.
All Right, I think we will leave it there dominant be Is there anything that we haven't mentioned that we really should have.
We haven't talked about bitcoin, but we'll do that another day.
Yeah, we're not going to talk about bitcoin because this was our gold podcast. Good, So no bitcoin today, although I'll just tell me there's anything changed in your view on bitcoin.
No, there's no buzz around it at the moment. The buzz is around gold and silver mining, and bitcoin is digital and gold is analog. It's gold is the most analog asset there is. It's physical and analog, and we're in a digital world where all the value is digital. But gold is pure wealth and people have It's inspired people to do some of the most amazing things in history. It's like the three great motivators of food, sex, and wealth, and gold is pure wealth. And people have discovered continents,
they've taken incredible risks, they've made scientific breakthroughs. Incredible things have come about as a result of this greed for gold. But also terrible, terrible actions have been done as a result of this greed for gold. And there, I suppose, is the yes, another contradiction at the heart of this amazing metal.
Tom Nic, thank you, that was absolutely fascinating.
Thank you for having me.
Thanks for listening to this week's Marin Talks Money. If you like our show, rate review, and subscribe wherever you listen to your podcasts, and keep sending your questions or comments to Merrin Money at Bloomberg dot net. John and I are super keen to have another question and answer session. You can also follow me and John on Twitter or x. I'm at Marinus w and John is John Underscore Stepic.
This episode was hosted by Me Maren zumset web produced by Someersadia Moses, and sound designed by Blake Mabels and Aaron Caspers. Special thanks, of course, as usual to Dominic Frisbee and again go and buy Dominic's book. It's really good.