"WE HAVE GOLD BECAUSE WE CANNOT TRUST GOVERNMENTS.” ~ Franklin D Roosevelt, 32nd President of the United States

We really like gold. We like its durability, scarcity value and shiny appearance. We especially like the price. We like the price not because its high…but because it is going higher. 400 ounces packed into a shiny brick, aka a gold bar ‘Good for Delivery’, is now $1 million and will get more expensive over time.

Bizarrely, western investors have been consistent net sellers of gold since interest rates started going up in 2022. But despite this waning interest in the West, demand for gold remains robust, particularly among central banks and emerging markets. This demand surge is partly driven by fears of de-dollarization, especially in the wake of Western sanctions against Russia, which have heightened concerns about the U.S. dollar's reliability as a reserve currency. Central banks in emerging economies are increasingly turning to gold as a hedge against geopolitical and economic instability.

But it is not a recent phenomenon. Since the end of the gold standard and Bretton Woods, our economic and social experience has been dominated by sanguine inflation and relative stability. In the absence of economic uncertainty, hyperinflation, and geopolitical risks, why own gold? A recent survey revealed that 75% of advisors had allocated less than 1% of their portfolios to gold, with only a small fraction considering increasing their exposure.

The correlation between gold and real yields has also shown unusual patterns. Traditionally, rising real yields would put pressure on gold prices. However, despite a surge in real yields in recent years, gold prices have remained resilient. This anomaly can in part be attributed to the sovereign dynamics referred to above, but the broader macroeconomic environment and growing expectations of financial repression has also played a part. Financial repression, characterised by low or negative real interest rates and capital controls, is seen as a likely strategy for managing the escalating burden of government debt in an era of shifting demographics and fiscal dominance.

As western central banks begin to ease their monetary policies, a shift in gold demand from western markets is expected as a decline in real rates should boost gold demand. This shift is underscored by the broader economic narrative, the rise of The Fiscal Age and the underappreciation of macroeconomic and geopolitical risks are key themes.

In conclusion, the dynamics surrounding gold are evolving, with a new class of strategic buyers — less sensitive to price and more focused on long-term wealth preservation — emerging. This shift, coupled with rising geopolitical and economic uncertainties, positions gold as an essential asset for all investors.

“GOLD IS THE MONEY OF KINGS, SILVER IS THE MONEY OF GENTLEMEN, AND BARTER IS THE MONEY OF PEASANTS. BUT DEBT, DEBT IS THE MONEY OF SLAVES.” ~ Franz Norm, Author of Money & Wealth in the New Millennium

“GOLD IS WORSHIPPED IN ALL CLIMATES, WITHOUT A SINGLE TEMPLE, AND BY ALL CLASSES, WITHOUT A SINGLE HYPOCRITE.” ~ Thomas More, Author of Utopia

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