Lead-Lag Live

Why Gold’s Quiet All‑Time High Matters (and How BAR Lowers the Cost of Owning It)

• Michael A. Gayed, CFA

Share episode

A record high without the roar—gold has climbed to new territory while the crowd looks elsewhere. We sit down with GraniteShares founder and CEO Will Rind to unpack why this is the most interesting precious metals cycle in years: a quiet surge powered by falling real yields, relentless debt growth, and a decade‑long shift by central banks toward gold as the de facto alternative to the dollar. Will brings rare perspective from building gold ETFs in the UK, stewarding GLD, and launching BAR, a physically backed gold ETF designed to cut costs and increase transparency.

We dig into the mechanics that matter to serious allocators: why BAR’s 0.17% expense ratio compounds an edge over time, how allocated bars and third‑party audits reduce custody risk, and where gold fits on the efficient frontier as a true diversifier with near‑zero equity correlation. Along the way, we pressure‑test common narratives. Bitcoin gets the headlines, yet gold and BTC have moved in step from key points while official reserves tell a different story. We explore how to read the gold price as a mirror of fiat dilution, not just momentum, and why this rally can coexist with rising policy rates when the bigger forces—deficits and credibility—dominate.

The conversation widens to the rest of the complex. Platinum’s breakout, a persistent supply deficit, and a growing role in hydrogen technologies add torque to a metals allocation that often plays catch‑up as gold leads. For investors hunting income without abandoning diversification, we walk through GraniteShares’ options‑based Yield Boost ETFs—weekly distributions generated by defined‑risk put spreads rather than uncovered calls—to complement core holdings like BAR or a platinum sleeve. If your portfolio still leans entirely on stocks and bonds, this is your cue to reconsider what real ballast looks like when passive flows and public debt keep climbing.

Enjoy the episode, share it with a colleague who still thinks gold is only for crises, and subscribe for more candid, research‑driven market conversations. If it helped you think differently about allocation, leave a quick review—it makes a big difference.

#LeadLagLive #Gold #Bitcoin #Investing #fiat #StockMarket

Start your adventure with TableTalk Friday: A D&D Podcast at the link below or wherever you get your podcasts!
Youtube: https://youtube.com/playlist?list=PLgB6B-mAeWlPM9KzGJ2O4cU0-m5lO0lkr&si=W_-jLsiREjyAIgEs
Spotify: https://open.spotify.com/show/75YJ921WGQqUtwxRT71UQB?si=4R6kaAYOTtO2V

 Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.


Foodies unite…with HowUdish!

It’s social media with a secret sauce: FOOD! The world’s first network for food enthusiasts. HowUdish connects foodies across the world!

Share kitchen tips and recipe hacks. Discover hidden gem food joints and street food. Find foodies like you, connect, chat and organize meet-ups!

HowUdish makes it simple to connect through food anywhere in the world.

So, how do YOU dish? Download HowUdish on the Apple App Store today: Support the show

SPEAKER_01:

Hey, folks, give us a second. Looks like people are starting to come in here to this webinar. Uh, do me a favor for those that are starting to trickle in. If you're an advisor and you're physically at an office, I know people don't think that actually happens anymore, but it does. Uh, do me a favor, tell your other fellow advisors this webinar is taking place. It'll still be a uh a very good conversation with Will Rind talking about uh an asset class that's doing pretty well. Gold. And uh in particular, their bar ETF, uh, which is really a better way to play gold than some of the other funds that are out there. If those are here for the C credit from the CFP board, do me a favor, stick to the end of the presentation. I will email you towards the end of the presentation or after after the end of the presentation to get your CFP uh number, first name, last name, all the good stuff I need. But the key is you got to be on the webinar the entire time. Uh and if any of you want to involve, get uh get involved, ask questions, get engaged, uh put it in the chat. We'll do an interactive QA back and forth towards the end here. Uh with all that said, my name is Michael Gaia. Uh this webinar is sponsored by Granite Shares. Today we're going to be talking about gold, and I want to get into it with my friend, Mr. Will Rind, uh, who built kind of a big company uh in Granite Shares.

SPEAKER_00:

Yes, sir. Well, thank you, Michael, and of course, thank you, everybody, for tuning in today. I think it should be a good conversation around gold, is something that although gold has gone to an all-time high, uh, it's not talked about perhaps as much. And certainly not talked about as in previous cycles where gold has hit an all-time high that I've been involved in. In other words, there's no, you know, people screaming on CNBC every five minutes that gold's in a bubble. You know, this has definitely been a silent rally. And something that we'll get into is maybe that's a sign that we're only just getting started here, as opposed to uh this is in any way a near the top. But that is something that we can discuss as we go forward. So Gospel Slides here today, as per usual. And as we go through here, this is going to be a conversation around gold and state of the precious metals market uh more broadly. But just for those of you that don't know me, my name's Will Rind, uh founder and CEO of Granite Shares. As it comes to gold specifically, I've been involved with gold for a long time in my career. Um, originally evolved with an ETF issuer uh out of the UK, uh, where we were doing the first gold ETF and precious metal, more broadly commodity ETFs uh in that market, and then went on to be the CEO of the GLD ETF, uh, the Spider Gold Shares with the World Gold Council and partnership with State Street, and then launched Bar, our own ETF, um, back in 2017. Uh, and we have this one of our flagship funds here at Granite Shares, you know, over a billion in assets. So we've been involved with the gold market for a long time. Um, a little about us as an ETF issuer, for those that view that don't know. Um, I found the company 2016. We're based in New York. Uh, so we've been going almost 10 years now, um, but we're 11 billion uh in terms of assets. We have multiple ETFs uh here in the US, like over 40 here in the US, uh, multiple products in European markets, and a team uh in Asia as well. So lots of different things to talk about. Um specifically, the bar ETF uh is our flagship gold ETF. That's a physically backed gold ETF with physical bars of gold and a vault. Um, the key proposition with bar uh we'll get into is it's a low expense ratio, 17 basis points, um, which makes it less than half the cost of GLD, for example. And some of the key things that we also bring uh in terms of bar is we have an underlying custodian, which is different to some of the major gold ETFs. Uh we hold the gold physically in London. Um, those gold bars are audited two times a year, one at random. And we have the share price based on a tenth of an ounce of gold as opposed to a hundredth of an ounce. So it makes it easier to be put into model portfolios where the amounts uh that people are buying are less. And of course, like an ETF and specifically gold, you have that transparency with the bars, etc., listed on the website, grantshares.com. So with all of that, uh gold, as everybody knows, has had a pretty good run um this year. So outperforming the market considerably. Uh gold is up year to date, I think, of you know, vis-a-vis 40% versus the SP 500. Uh so incredible run. And this is a run that um really has been going on for the last few years. And this chart here obviously goes all the way back um to you know the early part of last century. Um, and you can see gold prices really start to take off after uh the gold standard was broken um back in the early 1970s. In other words, when the gold price was decoupled from the US dollar and became officially free-floating on world markets. And in that time, you can see that the gold price has taken off. And in this century alone, uh the price of gold has performed very well. And we'll get into some of the reasons behind that. But, you know, again, this year, I think in particular, you know, gold has a standout um performance going to a new all-time high, um, which we've seen obviously over a few cycles since the early 2000s. Um, but this one, you know, much more significant price-wise than ones before. And then again, looking back in some periods uh in terms of where gold shines, uh where gold has done well, I mean, typically these are periods where we have some stresses in the economy. Um, gold does particularly well when there's a crisis. This particular chart shows you all the way back to the Great Depression, you have the stagflation era, the 1970s, um, the tech bubble, then the 2000, the financial crisis, you know, COVID, and then today. And there's slightly different, different environments, but in this particular case, um, this is about where you have falling or negative real yields. And you know, indeed, the scenario we're in today is we have falling real yields again, um, which is one of the many factors which is propelling the gold price um to record highs at the moment. This particular chart shows uh a 1978 going back all the way, a stock market efficient frontier analysis here, using uh for US stocks the the Dow versus the interest rates, uh, the 30 year. And this is showing that an ideal portfolio uh here from an efficient frontier perspective would have an allocation to 62% US stocks and 37.8% to uh long-term treasuries, of which that gives you a sharp ratio of 0.57. By adding in gold here, in this case, the efficient frontier analysis suggests that the optimal allocation is around 14% uh gold. So 55% stocks, 30% uh long-term treasuries, and 14% gold, you get an improved sharp ratio. So in other words, you have a portfolio that has a better risk-reward ratio by adding gold than by leaving gold out. I think most people know this, but uh one of the great things about gold is it has little to no correlation with pretty much everything, uh, asset class-wise. Most relevant to most of the people probably listening to this call uh is going to be stocks. And gold has a very, very low, practically zero correlation to stocks and uh the majority of bonds as well. At different times, you know, you have commodities where you have a mild positive correlation, but it's still pretty low. And I think, you know, in terms of gold acting as a diversifier, a true diversifier in a portfolio, you know, the value of a true diversifier is something that really doesn't have a correlation to the rest of the assets in your portfolio, which are most likely going to be made up of stocks and bonds. There's another chart here just showing the gold price um versus the 10-year real yield. Uh, and you can see that again, you get an environment where the gold price typically rises, where real yields are falling. And again, that's the kind of the environment that we've been in um this year. All right. In terms of um, oh, we're gonna go back there. Maybe we should just talk about the meat of the conversation. Yeah. Of course, why is gold so high at the moment and what are the key factors driving it? So we talked about real yields, and real yields ultimately is is one part of the the equation. But I think the bigger thing that's going on here is that for some time, you know, we've been in this environment where governments around the world have been increasing the amount of spending and therefore the amount of debt that they've been taking on, and that has extended to you know the corporate world and to private uh citizens as well. And so, in other words, the level of debt, but particularly from the government perspective, is sitting at all-time highs as we speak. And the net effect of that is that uh paper currencies, so currencies issued by governments around the world uh in the form of, say, global M2, in other words, the amount of paper money that's in circulation increases year by year. And the correlation between that and the gold price is pretty strong. In other words, gold is like an antidote to paper money. And from that perspective, when you measure the value of a dollar in terms of gold or the value of a paper currency in terms of gold, we see that paper currencies have lost almost all of their value when measured in gold since the gold standard uh ended in the early 70s. And so at the moment, what I think is happening is gold has become the de facto alternative to the US dollar. And we know the US dollar is the world's reserve currency, is the most important, most traded uh and held reserve asset. Gold very recently surpassed the Euro in terms of the second most held asset. So up until literally a few months ago, the Euro was officially the world's second most held reserve asset. And so that has now been surpassed by gold. So gold has become the de facto alternative to the dollar, and there has been a super macro trend over the last 10 years plus of central banks around the world buying gold and adding gold to their strategic reserves. So, you know, in a world whereby, or in a world where the amount of debt keeps increasing, you know, the value of an asset that doesn't have any counterparty risk or credit risk that can't be printed, um, and supply is fairly limited and historically increases by around 3% per annum, but a fairly constant rate, you know, is or has become ever more valuable. And I think to a certain degree, you see this in the Bitcoin market as well, or in the in the crypto market, but specifically Bitcoin, that there's a similar narrative around people looking for an alternative, and you're starting to think a little bit about a endgame scenario for the amount of debt, you know, that despite the best efforts of Doge and all the other things, um, you know, that that doesn't have or didn't have an impact in terms of the absolute amount of debt, and that continues to rise. So maybe just pause here. But um, do you have any comments on that, Michael? And let's uh talk about that a little bit.

SPEAKER_01:

Yeah, on big, it's funny, as you're talking about Bitcoin, I'll share my screen here as well. So if you see uh folks here, this is the ratio of Barb divided by Bitcoin itself. Uh going back to 2021, the ratio is the same today as it was back in 2021, which means that Bitcoin and gold have actually performed pretty much in line with each other from those two endpoints. Um despite everybody saying that Bitcoin would replace gold, gold's market cap is way, way bigger, right? And continues to compound off of this. Uh, are you surprised, Will, that in the digital world that Bitcoin hasn't gotten more traction relative to gold? Because I gotta tell you, I think it's interesting that gold and Bitcoin have kind of fare at the same here.

SPEAKER_00:

Well, I think maybe to maybe to put it in another way, you know, in in my mind, Bitcoin has had a huge amount of traction. Um, and you know, it's it's kind of remarkable, you know, how far we've come in such a short period of time. Now, you know, part of the part of the reason for that is I think, again, the the value that people, and people have their own reasons. I mean, clearly there's a lot of it is is purely speculative, which you don't have to the same degree in the gold market. But leaving that aside, I think part of the argument for for owning Bitcoin is very similar to gold. In other words, people value something that is decentralized, something that you know is not controlled by a government, something that lives independently from the traditional financial system, uh, and of course is low or has an has no correlation to traditional financial assets, something which is portable. And so I think the one of the things that's missing clearly is the official central banks or governments using Bitcoin as an official reserve, which we know has happened in a couple of small cases. But I mean, you know, if if the United States was to start officially uh adopting a Bitcoin reserve, then that would change, change massively. Um, but I still think that irrespective, it's not an either-or argument. It's just it it's it's kind of an interesting um you know, time or point in time whereby you know it increasingly is becoming more and more valuable to have something that is genuinely uncorrelated to to traditional stocks and bonds. And you know, the value of those assets is increasing, you know, the scarcity of those, uh and therefore, you know, the the price keeps going up.

SPEAKER_01:

So I actually didn't know this. That the uh the AUM in GLD is like 100x, right? What's bars? Like 127 billion and where's the 1.2. If I look at uh the ratio of bar to gold, and again, this makes sense because of the feed differential, bar has outperformed GLD. That ratio has trended higher. And again, that makes sense because of the lower expense ratio. Um but there's all this sticky money that's in GLD. I'm just curious, given your experience in the ETF industry, you know, when you have a superior product like bar relative to GLD, why aren't more people gravitating towards bar?

SPEAKER_00:

I think it goes back to, you know, one of the biggest issues is that it goes back to the chart that we showed like at the beginning of the gold price, which is gold's been a one-way trade. I mean, with with the exception of obviously like any asset class, you have a few dips, but it's basically been a one-way trade for the last 25 years. And so with that, the vast majority of people that are strategic, in other words, holding gold for a long time, are sitting on big, big gains. Um, so if you're sitting on big gains, then it's hard to sort of realize that tax event uh to make a move to another product that's that's cheaper. And so, you know, that I think is the single biggest reason why, you know, bar's not 50 billion in in AUM or whatever, because uh it's hard when you're sitting on embedded gains um to trigger that tax event when gold's just performed so well. So there hasn't been that opportunity to harvest losses in the way that um you see in other asset classes.

SPEAKER_01:

It's interesting to me just looking at GLD on white charts for whatever it's worth. When you look at uh which kind of goes to your point about the excitement level, when you look at the uh one-year fund flows on GLD as a proxy for demand for gold ETFs, just give the sheer size of it. Looks like only 11.82 billion uh have has actually gone in of net crease, net new additions to the GLD. I I would have thought it would be much more uh given the momentum and gold. So it being just number wise, like you're not getting that sort of euphoria yet.

SPEAKER_00:

Absolutely. Look, I think this is again, this is the silent rally, or this is the the all-time high no one's talking about. And it's just so I I can't think of certainly another um period that I've been involved in where this has happened. Um every time gold made all-time highs, whether it was in the mid-early 2000s, um, all the way back to even around COVID time, that you know, this was front-page news. In every newspaper, this would be CNBC talking heads, you would have Jim Kramer screaming about gold being an all-time high, et cetera. This time it's nothing. It's barely even mentioned. And so I think that you you couple that, which is purely anecdotal, by the way, but with more data-driven evidence that you just presented. Like, okay, flows are flows are positive, but flows are nothing compared to what we've seen in equity markets and otherwise, that it kind of leads you to the conclusion that maybe we're in the early stages or we're earlier in the game than people think, because that euphoria isn't here, that mania isn't here. You don't have um that same level of interest that you might have expected in a market which you know is showing very strong price momentum. So I do think it's it's a very uh very different set of circumstances this time around than in previous uh instances where we've seen gold go to all-time highs.

SPEAKER_01:

How much of the uh demand in gold is more central banks, institutions versus the retail side? We know retail's been driving the market, but they're not really driving gold.

SPEAKER_00:

Not really. I mean, you know, gold has a relatively small, and that's part of the attraction, um, relatively small demand component from technology or from industrial purposes that's you know fairly steady. Um so the majority of demand for gold comes from investment andor jewelry. So jewelry is a big component, investment, and particularly central banks, you know, buying, but the marginal buyer is the investor, and the the marginal buyer is the most important in terms of moving the price. Um, and you know, while that marginal buyer is certainly buying gold, um, like we talked about, I mean, it's not to the levels of mania that you might expect given where the price is today and given where people are forecasting the price to go.

SPEAKER_01:

Look at uh some of the questions, some of the comments, uh Jay saying crypto has stolen the headlines. Yeah, I think that's probably true. Uh certainly sexier in the headlines to talk about crypto than gold, right?

SPEAKER_00:

Until gold it has a blow-off, in which case. Well, I think I think that's in in a way that's always been the case, right? Because you know, the in a in a funny way, the more um or the higher the Bitcoin price goes, I think the less attractive it is, ironically, to people, because for a lot of those people that are chasing price momentum, um you know, the the chances of the probability of Bitcoin doubling, you know, from here clearly diminishes the higher the price goes. So it comes back to an argument which is never really made of gold, albeit investors in gold have done very well, which is that you know, gold, the value of gold um increases over time, and that that people are buying gold to make money, which is an argument that never really gets made, because the principal value of gold is not that it's a defensive asset. It's like buying insurance or something else, that you know, you're you're you're holding in your portfolio as a hedge or as ballast against the other assets in your portfolio, so that if you have a market crash or market decline, et cetera, then you have something that um will hopefully maintain its value. And that is, in my mind, always been the argument for having a permanent piece of your portfolio in gold. And I think there's a different art, there's a different article, a different argument than the Bitcoin one. However, the there are there are multiple elements to the Bitcoin argument, just like um there are to gold. And I think part of those arguments that involve having something that's decentralized, something that is a store of value outside of the financial system, um, are clearly analogous to gold. And that's you know one of the one of the reasons why they're remaining popular.

SPEAKER_01:

You mentioned the uh relationship to fiat, the dollar. Uh, but there are a lot of other interesting things that are happening broadly in the middle space. Uh and I think we should touch on platinum, which I didn't realize today uh is in ANUI.

SPEAKER_00:

Yes, that's right. So, you know, it typically in a world where gold is reaching all-time highs, then you have this sort of, dare I say it, like the undervalued, overvalued type argument whereby it lifts up other precious metals in the complex as well. So most um noticeably you would have silver prices rising, and silver has started to break out as well. But I think platinum, um, which, like you said, has also gone to an all-time high, has been the best performer year to date. I think platinum's up 60% um year to date versus 40% for gold. And you know, platinum's been a metal that um has really been in the doldrums for quite some time, and now looks like uh it could be finally breaking out. I mean, platinum's a crazy story because you know, you you have a platinum-gold ratio. So an ounce of platinum was historically always more expensive than an ounce of gold, and quite considerably so is referred to as the gold-platinum ratio of platinum premium. And this became so sort of embedded, uh, and it was always so much the case that platinum was more expensive than gold that in the English language we associated the word platinum as being above gold. So a platinum credit card was better than a gold credit card, et cetera, et cetera. And it was it was sort of so commonly understood that that was the case up until probably um you know around the time of the financial crisis, and the price of platinum dipped below the price of gold um and has never recovered since. And this may be maybe the start of a situation where platinum's starting to break out. And you know, the the forces around that are quite similar to what's driving gold, albeit platinum has more, way more of an industrial component than gold. So platinum's used much more in industry than gold is, but it has jewelry demand like gold and it has investment demand in gold. But it's a metal that is suffering from a supply uh demand deficit at the moment. In other words, there's more demand for the metal than there is supply. And that supply comes from most uh from most of it comes from South Africa, a little bit comes from Russia as well. You know, places that clearly have been hit by supply constraints, whether it be power or labor shortages or strikes, etc. So it was an interesting time where you know, if if we weren't talking about any specific supply deficit or any specific situation that would favor platinum, we'll be talking about a generic or general environment where the price of gold goes up, the price of silver also goes up, the price of platinum goes up, the price of palladium. But we have a enhanced situation for platinum where there's also some a structural deficit in the market uh and more demand than we have supply.

SPEAKER_01:

The demand for platinum, where what's what's platinum specifically getting the most use in?

SPEAKER_00:

It's mostly for catalytic converters, so the devices on your cars that uh clean the emissions from your engine. And specifically, if platinum is more used on diesel vehicles than gasoline. Um, but increasingly, you know, the world is moving away from traditional hydrocarbon uh economy and from you know internal combustion engines to new technologies. And what's interesting about platinum is it's used in hydrogen uh generating technologies, so hydrogen fuel cells specifically. Um and in your hydrogen fuel cell technology will be one of those technologies that we have increasingly or make use of increasingly in a you know, an electrified or electrification scenario. So batteries, clearly we all know the story around batteries, but there'll be other or there are other competing technologies to batteries, of which hydrogen fuel cells and hydrogen more broadly are competing technologies, competing energy sources, and platinum is needed for um that process in terms of turning hydrogen into electricity.

SPEAKER_01:

An interesting question from some of the anonymous on the QA uh asking about the paper market versus uh the physical gold market. Um I don't know if it's conspiratorial or not. I often see these sort of interesting questions about paper versus not paper. Uh maybe explain what what the difference is and why people focus on it.

SPEAKER_00:

Yeah, I think, I mean, again, broadly speaking, um this refers to mainly the amount of derivatives outstanding that are either directly linked to the price of gold or indirectly linked to the price of gold. And by definition, they're multiple in terms of size of the actual physical backing. So it's like you know, the margin on a futures contract and the notional amount of the futures contract being 10 times the amount of cash that's that's sitting on margin. Um and this is you know, just I guess a state of the paper, the futures, the derivatives, market for gold. It's always been always been the case. I think again, it goes back to that's the system that we have. And you know, that's the value in all in owning physical gold or physical gold ETF like bar, where the assets are not pledged or they're not lent out, um, that they are what's called allocated gold, which means that the property of the trust or the ETF alone, and the ETF, the trust is owned directly by the shareholders. So they're unencumbered. And you know, to the extent that there's ever a meltdown in the futures market, uh, and you know, you don't have enough physical gold to settle those outstanding claims, then anybody that owns allocated gold is separate from all of that and effectively probably has an asset that's worth a lot more in that scenario because the value presumably would be going up. Um so again, I think that comes down to just the value of gold more broadly and beyond just getting price exposure. A really important part of the gold argument is how you hold it. And you know, that's something that we focus on in terms of bringing making sure that the gold is all allocated gold that's held specifically by bar, and then you know, providing investors with that sort of extra transparency and comfort by having it audited by an independent third party, not just the the custodian uh that owns the gold and having that you know published on the website, etc. So I think it's something that again exists, but it goes to the value of knowing what you own and how you own it. I really want to see this vault.

SPEAKER_01:

Like I'm I'm literally picturing just gold everywhere. It's kind of like a White House, right?

SPEAKER_00:

I mean, look, I mean I've been fortunate enough to be in uh or or visited a number of different gold vaults and um you know it it it they're very I suppose impressive might might be the right word to say. It but um you know when you get inside one of these facilities and see the amount of gold and treasure more broadly that uh is in these places, it's pretty pretty mind-blowing. So um yeah, gold certainly, there's just something about it that you have you know piles and piles of of gold. Um it's as impressive as it as it you know can be in the movies. Yeah.

SPEAKER_01:

What I find interesting also about the the macro environment is that still nobody trusts bonds. Right? So they're looking for alternative yields. We'll talk about yield boost as a way of doing that. But you know gold has really been the alternative to bonds, right, in terms of that 60-40 type of mindset.

SPEAKER_00:

I mean, and and and especially especially in an environment where bonds weren't delivering any yield. So, you know, sometimes you get a counter argument to gold. And people say, well, you know, I want to own gold or I'd like to own gold, but it doesn't produce a yield. So it has no value in the portfolio for me because I'm looking for yield. And again, I understand that argument, but people miss the point if they define the value of gold purely in terms of yield or lack thereof. But clearly, in an environment where we had zero interest rates and negative real rates, then that argument went away entirely. And you know, then it was probably more reversed in terms of what was the value of what was the value of bonds, um, particularly in a rising rate environment. So I think you're right that people increasingly have questioned the role of bonds in the portfolio. And you know, again, going back to the fundamental issue with the debt and deficit issues, you know, the it and again, it's the credibility ultimately of governments' ability to honor their longer-term financial commitments over time. And it's not just a problem for now, it's a problem that people looking out in the next 10, 20, you know, 30 years as the value of interest, interest payments that governments are making on that debt outstanding increases seemingly every year. And and that that I think is goes goes to the crux of you know why gold has gone up so much and why it most likely will continue to do so.

SPEAKER_01:

There was a chart you showed before that showed a gold performed during major crises. Yeah. This isn't a crisis uh in an obvious sense, so the debt crisis has been talked about for a long time. But um is gold now shifting from a crisis asset to more of a momentum play, or is there still a message there, you think?

SPEAKER_00:

Well, the probably the the strongest correlation with gold, and it's a negative correlation, is against the US dollar for obvious reasons. And so in a world where there was no crisis, the market was going along as normal, if the dollar was depreciated or declining, the value of gold was rising, or most likely it will be rising. So you have a situation where you know, since early 1970s, we've been through different periods of crisis, but the price of gold has slowly increased over time. And part of that is to do with the central debasement of fiat currency argument. And I sometimes say to people, think of the gold price rising as not necessarily the gold price rising, but more the US dollar or paper currency values falling. And you know, sometimes it's just a reframing of the argument or reframing of the outlook, which makes you see it from a different angle. So it's not necessarily the case that gold is increasing in value, it's that these paper currencies are falling in value. And that's kind of the core that's going on. And of course, we have periods of crisis, periods of market dislocation, panics, manias, et cetera, where gold provides additional um value add to a portfolio. But I think in its simplest form, if you look at a chart of gold versus the dollar back to the early 70s, you see that the value of the dollar has decreased by almost 100% at this point when measured in gold. And that's that's really, I think, you know, what people are trying to stop or trying to hedge themselves against when they're buying gold. It's the purchasing power and preserving that.

SPEAKER_01:

The question from George, I want to expand on, uh, because I think it's interesting. What happens next when gold, uh, with gold when interest rates go down? Now I think we have to distinguish between which interest rates and gold in which currency, because it's more than just a US dynamic, right? Gold in every currency has been rising, uh, and even those rate those rates have been falling or having different time frames, right? Than hours, different cycles.

SPEAKER_00:

You know, the the the classical answer to that question is that the price of gold goes higher. But I think the the more important um observation is that you know, gold has, I don't want to say entirely because it wouldn't be true, but I think gold has in some respects, you know, decoupled a little bit from its historical relationship with interest rates. In other words, up until the Fed officially started to cut rates, we were still in the environment where we were raising rates and the price of gold was going up. Now, that's very unusual in a historical context. Um and I think again, the the answer to that lies not just in the inflation um that is present in the economy, but again, it's the it's the bigger fear of where this is all going in terms of the amount of debt outstanding, the deficits, the money printing from governments around the world and the unsustainable uh obligations that that they've put themselves in. So, you know, my my sort of response to that is that I think it's good for gold. You know, certainly when interest rates come down, you've seen a little bit of that already. But um, the interest rate argument, I would probably make the case is less important than it perhaps once was for where we are today.

SPEAKER_01:

What's interesting to me is that uh gold has done better than the SP. And yet the SP gets the passive flows, the automatic buying from the 401ks. So you've got gold demand outpacing the automatic flows that were going into the water markets. I mean, that's actually pretty remarkable. And it's still about to your point talked about as much.

SPEAKER_00:

Yeah, and again, I I think, look, we we have to be honest, and just at the end of the day, everybody on planet Earth knows what gold is, but the vast majority of people don't invest in gold. And if they do invest in gold, it's a small part of their portfolio allocation. That's just the way it's been. Um, and it's a similar, similar phenomenon with Bitcoin. That, you know, your your your classic institutional argument right now is put 1% of your portfolio in Bitcoin. That might even be too much for some people. But um that's a tiny amount. And so the vast majority of assets are going into traditional stocks and bonds and are not going into gold. And again, that's another the ball case for uh gold in part is that supply, basic supply-demand argument that if you had a major asset allocation shift um across global portfolios of global assets more broadly, and gold's market share, if you want to look at it, that increased from, let's, for argument's sake, say 1% to 2%, then the amount of demand that that would create, you know, would would put you know huge pressure on the price, output pressure.

SPEAKER_01:

So you said earlier that gold does not have yields, it obviously doesn't attract certain investors. But you can create yield uh in the options market with certain strategies that Grant Shares is doing. So I feel like we should touch on the yield boost fund family. And just to put a uh bow on this, bar makes sense. Obviously, it's a better play than GLD just from a pure expense ratio perspective. You can see that from the relative chart. And I think if you're bullish on gold very long term, bar is the way to play it.

SPEAKER_00:

Yeah, I think look, the the message, I think everybody should own a portion of gold in the portfolio. It's an asset that has performed well over time. I wouldn't look at it as a get rich quick scheme. It's definitely a more defensive asset than you know offensive, but the value is you know, the value is clear, or should be hopefully clear for all to see. Um interesting point about yield because there have been a number of uh attempts over the years to to sort of create yield out of gold, and we we've you know been asked a number of times to do that. And I think I always come back to this idea that gold is a funny asset in that sometimes you get people that hate gold. And it's different to other asset classes because even if you don't like it, we very, very rarely come across people willing to short gold. So, in other words, people can be bearish on gold or they might hate gold altogether. They'll never short it. So they just don't want to own it. And I think that comes a little bit in the yield argument where ultimately either you're lending gold to produce a yield or you're selling an option against gold to generate yield. And I think part of that goes to maybe the reason why those products haven't been as popular. It's because people just want to buy and hold. And you know, they're not necessarily interested in lending out their gold or trading around it. It's more a defensive longer-term play. But for those looking for high yields, you know, certainly the yield boost range that we offer is absolutely where those yields can be found. And those are options-based income ETFs, weekly uh income payers that can generate exceptionally high yields from selling options on typically single underlings, but we have uh index-based underlings as well, um, which have proven very, very popular for this particular market or this particular market environment. And I think one of the reasons for that, which is related to the gold argument, is this idea of a nest egg, a safe haven, whatever you want to call it. And increasingly I hear from customers on the yield boost side is people in North America typically just have one income stream. They rely on one income stream, and that's their job. And the question is, what happens if you lose your job? Or what happens if one day you can't rely on that income stream? And I think just like gold, that you have an insurance policy for the value of your portfolio, ETFs, the things like yield boost, are increasingly becoming important for people that want to manufacture a source of income or a stream of income outside of their job. Um, and that is something I think is becoming increasingly popular, particularly among the younger generations. So I think, you know, baby boomers are in a very envious situation where majority have done that anyway over time. But, you know, this is about creating peace of mind, um, an income stream that you can rely on if something was to happen to your primary income stream, um, all it buys you buy you time in terms of thinking of what to do next. So an interesting, an interesting idea. Increasingly, we're getting a lot of feedback from people that are interested in doing that.

SPEAKER_01:

Distribution rates have been uh eye-popping on those yield boost funds. The mechanics of it are different than other uh strategies that sell options, right?

SPEAKER_00:

Yeah, for the most part, I think um you know people are familiar maybe with the concept of a covered call uh strategy, which is you know selling a call option on an underlying asset. Um in the case of yield boost, the strategy is slightly different. We sell a put option that gives you economically the same exposure. You're selling an option and getting a premium. The difference is that in covered calls, traditionally, there's no downside protection. So the underlying goes down, you get exposure to 100% the downside. In yield boost, we actually buy a put option as well. So that offers some downside protection. So you're you're engineering a put spread, um, which is the combination of selling a put option to generate yield with buying a put option to get some downside protection.

SPEAKER_01:

I love the idea of uh PLTM on the plantum side, bar, and a couple of these yield boost funds. That's a very alternative mix that could perform quite differently and quite better than SPY.

SPEAKER_00:

Yeah, and I think, you know, again, we're increasingly seeing um people looking outside the traditional realm. You know, not just it's not just a question of people being, you know, buying, I would say, like, you know, 10 years ago, people were probably buying a generic mutual fund, which was styled or labeled as growth and income. And actually what they got was very little growth and very little income. And so now with the ETF market, you get this hyper-specialization or hyper-personalization of investment strategies whereby you can target very precisely, like I want something that is very growth-oriented on the one hand, or I want something that's very income-oriented, or I want physical gold, or I want you know, exposure to oil, whatever it may be. But you get this um, you know, very, very precise series of investments that people can make. And the the modern portfolio is increasingly made up of these specialized um applications versus a much more generic flavor of years past.

SPEAKER_01:

Uh by the way, folks, again, for those that want to see credit, I will email you after this webinar, get your information, submit to the CAP board. Um we're uh we're towards the end of the webinar here. Will, what other key takeaways uh do you think the listeners, the attendees here should pay attention to when it comes to bar, platinum, uh markets, yield, anything and everything?

SPEAKER_00:

I think the main thing is just to be aware. I mean, if we if we take away one thing, just be aware of what's going on with gold. And more importantly, I think what's going on with the other precious metals, um, with silver and platinum. Because in an environment where the gold price continues to rise, you know, these metals can also do well in that environment. And platinum uh is in a particular interesting situation. But I think it's really just to cast some awareness on a section of the market that doesn't get talked about as much as it perhaps should, um, given the fact that it's an all-time high. And um to really, I think, question uh what people own in a portfolio, and they're having the role of something like gold in a portfolio, which can provide a form of insurance, but a ballast diversification to other traditional asset classes, particularly in a world where seemingly global debt keeps increasing, and there doesn't seem to be that sort of willpower from any particular government to do something meaningful about it.

SPEAKER_01:

There aren't too many guarantees in our business, but uh two things you can probably guarantee are debt's gonna keep rising, and bar has a lower expense ratio than GLD. So go with bar as your gold exposure. Uh and everybody again, thanks for attending this webinar. Hopefully you enjoyed it, and we'll see you all on the next one. Appreciate it. Yeah, thanks everybody. Appreciate it.

People on this episode

Head Shot

Michael A. Gayed, CFA

Host