John Reade of the World Gold Council joins the podcast to discuss demand trends in gold in 2025 and what changes to expect for prices going forward.
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Transcript
Ben Nadelstein
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein. I am joined by my friend John Reade, who is the Senior Market Strategist at the World Gold Council, and in my opinion, one of the world’s leading authorities on all things gold. John, welcome back to the show.
John Reade
Thanks, Ben. That’s very you. It’s a pleasure to be back with you guys. Certainly interesting times in gold at the moment.
Ben Nadelstein
Let’s start where maybe you think we are in this gold cycle. So obviously, gold has been hitting all time highs. Actually, interesting fact, so So far, the LBMA gold price has hit now 20 new record highs in 2025, which is already half as many as it hit in 2024. So let’s start there. Do you see this trend continuing where gold continues to break through all-time highs in 2025, or is something going to change in that strategy?
John Reade
Well, I think the most likely scenario is that gold continues to make new highs, and I’ll explain why. I think We’ve done extremely well in terms of gold price performance over the last couple of years, and that’s been in the face of a relatively strong US dollar. Now that the US dollar is showing signs of weakening against other major currencies, that probably propels the dollar gold price, the US dollar gold price, to further gains. Whether that will translate into what we saw last year when gold was making new all time highs in all currencies, I’m less certain about that. Certainly, the behavior of the gold price has changed somewhat this this year with this combination of a weak dollar and higher US dollar gold prices. But certainly, in terms of your first statement, will we see gold trading higher? It certainly looks like that, particularly with what’s happening in economics and politics coming out of the United States at the moment.
Ben Nadelstein
I wanted to ask you specifically about that point. So you said you believe currently that it’s more politics that’s driving gold prices as much as economics. So unpack that for the audience a bit. What What do you mean? And do you think if the political news cycle does calm down, which who knows if that will happen for the next four years, but do you see gold cooling off with politics cooling off, or is the economics going to step back in at some point?
John Reade
Well, I think we will see economics becoming important again. And the reason I said, and I’ve said it in conferences and statements recently, that we got our expectations for the gold market wrong this year. The World Gold Council, we published an Outlook document in December, and we looked at various economic scenarios in terms of interest rate cuts, inflation, growth, all of those factors, and suggested across a number of different scenarios that on average, gold should do modestly well this year. And that’s been completely blown away by the performance of the first quarter. And that’s because of the political statements that have come out of the US following the accession of Trump II or President Trump for his second term. So I think it’s the state It’s words that have been driving gold this year because the statements, the presidential decrees that have been signed have led to a big increase in risk and uncertainty in the world. But ultimately, those words will translate into economics. There will be economic consequences of the introduction of the tariffs and all the other changes that are taking place in the United States. When I say politics has been driving it.
John Reade
It’s been perhaps the economic implications of the political statement, which will become a much bigger driver as we go through the year.
Ben Nadelstein
I want to ask you about one of those policy changes. In the United States, there was a proposed tax change that would divert a few basis points of the tens of trillions of dollars of mutual fund assets potentially into gold. I want to ask you, is this actually meaningful change where you see US institutional policy saying, Hey, maybe let’s start to favor gold a bit more. And as the Wall Street Journal recently said, Everyone’s a gold bug now. Or do you think otherwise, this is just a headline that people like to push to be bullish on gold?
John Reade
Well, I think it could certainly have an impact because as I understand it, and I’m not an expert in this field, my colleague Joe Capotoni in the States has spent much more time on this than I have. But as I understand it, the proposed change would allow mutual funds to invest in gold. The headline on that is good, and there is still quite a lot of assets under management in the mutual fund industry. But as you’re no doubt aware as well, is there’s been a big move away from mutual funds into other vehicles, particularly ETFs. So yes, I think it’ll be positive, but just as an observer from across the pond, it would seem that the mutual fund industry is in decline and busy transitioning towards perhaps new structures, particularly ETFs. So perhaps it wouldn’t have been as… If this does go through, it won’t be as big an impact as it would have been, say, 10 years ago.
Ben Nadelstein
So I actually want you to break that down for our audience. So let’s talk about the ETFs in gold. So can you explain what that really means, first to someone who maybe goes to a coin shop and buys a gold bar? What should they think of when they think of a gold ETF? And what do you think of when you see demand for ETFs in golds changing? Does that matter to the price at all or not really?
John Reade
Sure. An ETF is a listed vehicle, listed on a stock exchange, and you buy a security. Now, that security is issued by a company whose only assets are gold, physical gold, and the only liabilities that they have are the securities that they issue. So it’s not the same as buying physical gold. You are buying a security, but you are buying a security, as I say, that is as close to physical gold as you can get. The gold is bankruptcy remote. So if the repository, for example, where the gold is being stored, were to go bankrupt, then the trust that is behind the ETF continues to own that gold. So after probably a little bit of wrangling and maybe some cues to get gold out from that repository, the gold is still the possession of the of the trust that stands behind the ETF. The gold is, as I say, physically allocated. It’s in a vault. There’s a barless produced every day, and that gold cannot be lent out. So as I say, it’s not the same as physical gold. It’s not the same as picking up a bar and feeling it or having gold coins in your hands.
John Reade
But it is a vehicle which you can transact through your brokerage account, and in many respects, much more easily than buying physical bars and coins. Now, the second part of your question, when we see inflows into ETFs, and the World Gold Council tracks about 100 exchange-traded funds around the world. I have a database up in front of me, which we produce every every day so I can see how much gold has flowed into ETFs and out of ETFs. And we produce comprehensive reports on this all available on our website for free. Well, what it means is before an ETF company can issue new securities, they have to have received gold in their vaults or in the vaults of their custodian. And therefore, when we see new shares or new security is issued by the ETFs, then it means that gold has been purchased and delivered by somebody into that vault. So I think that it is one of the most timely and obvious indicators of an increase in investment demand for gold. And as I say, ETF security can’t be created unless gold has been delivered.
Ben Nadelstein
And when we saw outflows from ETF, let’s say, particularly maybe in the last year or so, Was there any correlation with the price, or is that something that investors should not think about? Is it a leading indicator to the price? Is it just correlated to the price, or is there almost no correlation whatsoever?
John Reade
I’d say there’s almost no correlation whatsoever. And the reason for is that ETFs are a very visible and potentially substantial component of the market in gold, but they’re only a component. So it’s actually been the last four years. So 2021 through 2024, we saw outflows from ETFs in each of those years. And yet the gold price has performed very well during much of that period, certainly in ’23 and ’24, because there are other components of the gold market as well. Bar on coin demand, so the physical or coins you were talking about before, is usually a much bigger component of the gold market than ETF flows. And certainly, central banks, which have increased their purchases dramatically since 2022, have been a larger driver of the gold price than have ETF flows. And it fits in actually to a broader pattern that we’ve seen over the last few years, where Western investors have been quietly, gently reducing the amount of gold that they hold via exchange-traded funds. At the same time, we’ve seen a fall in demand from buyers of bars and coins, both in North America but also in Europe. And those are the two big Western markets.
John Reade
So for all of the excitement that we’ve seen in the gold price, Western investors haven’t really been paying too much attention to it, and if anything, have been buying less, or in the case of ETFs, actually gently selling some.
Ben Nadelstein
And I wanted to ask you about that, seeing as I’m in the United States. For my economic analysis, analysis, I’ve always thought of gold as a vebbling good, meaning as the prices rise, more people actually want to buy it. And for most goods, that’s not the case, right? If your stake keeps going up and up in price, most people are like, Okay, at a certain point, I’m not going to buy steak. But it seems with gold that sometimes the opposite is true. The higher the gold price, the more interest, the more demand there is from investors. Why do you think that hasn’t necessarily happened as much in the Western world, particularly North America and Europe, whereas the prices rise, investors investors actually are allocating less of their portfolio to gold? Is there a specific reason behind that and why the Eastern world is picking up that demand, picking up the slack, or do you think it’s just going to take a little bit more time for them to see higher prices?
John Reade
I think most investment assets are Vabland goods. So if you think about the excitement that we’ve had with the Magnificent Seven tech stocks in the States, they’ve been bought largely because they’ve been going up. I don’t think gold is any different from that. I think the Magnificent Seven and the performance of US equity markets generally has been one of the reasons why we’ve seen less interest in the United States for investment in gold. Because in the end, you buy equities because you’re positive about the economy and growth and great stories that come from some of these tech companies. And if you think the world is going really well and you’re going to make loads of money on your tech stocks, and you have been making loads of money on your tech stocks, then you probably don’t think too much about an asset which is considered to be a safe haven, considered to be a diversifier, and seen as something that needs to protect you. So I think gold has actually lost out a bit then from the very strong performance of equities in the United States in general, and certainly the hot sectors of the equity market, which have captured so much attention.
John Reade
Another aspect as well, of course, is higher interest rates. So to the The degree to which cautious investors might be buying gold, they’ve now got an alternative. They don’t want to take any risk. They can just put their money on deposit with a bank or in a money market fund and a much higher interest rate than they have done for years to come. I certainly think that’s been a factor in Europe, where we’ve seen still reasonably good buying of physical gold, but also a lot of selling back of investment gold that was bought some years previously. And one of the motivations behind buying gold the few years previously is that you were getting zero % on your savings. And in some cases, government bonds were trading negative. So higher interest rates have been a big factor, I think, in Europe. They’ve probably played a role in the United States as well. But the big thing has been the strength of the equity market over the last year. So that’s perhaps the trigger now that we will see to bring North American investors back towards gold when they start to see losses coming through on their equity portfolios.
John Reade
Now, again, one of the problems with bar and coin demand is we don’t see that demand on a timely basis. It’s much harder to estimate and to measure than it is for the ETFs because they disclose their gold holdings every day. But one of the things we’ve definitely seen in the first three months of this year is very strong ETF demand. And I would expect that what’s happened in the last, maybe the last two weeks of March and into April, will be starting to make people think about buying physical gold again, even though the fact that we’re at an all-time high.
Ben Nadelstein
And if the interest rates turn around and maybe not even go negative, but fall closer to zero. Equity markets start to falter or, again, don’t have such a magnificent run-up, that could be one trigger for gold prices to move higher. The opportunity costs associated with owning gold would be much lower. What What are some other triggers that you’ve been thinking about that maybe other analysts aren’t thinking about? I think a lot of people think, well, a risk-free rate of treasuries is definitely a push against gold. That’s maybe some strong headwinds when equities are doing well. What are some other areas that you think, well, people should be thinking about this when they think about gold prices?
John Reade
I guess there’s two things. The central bank story is well known, and we’ve seen strong central bank demand for the last three years. But I think there’s a decent chance that that could increase. And why I say that is the risk and uncertainty that we’ve seen coming out of the United States and the political pronouncements, in some respects, have been quite threatening to countries. Talk about converting treasuries into long data or 100-year zero-coupon bonds, the so-called Mar-a-Lago Accord, which I’ve read a little bit about, but wouldn’t pretend to know whether it’s true or not. And similarly, some countries that thought themselves as staunch allies of the United States might be scratching their heads and wondering why they own quite so many treasuries at the moment. So I think there is the potential for further acceleration in central bank purchases of gold, just simply because of just not knowing what’s going to come out the White House What’s next? I think the second thing is as well is a regulatory order, a regulatory decree, perhaps, out of China that took place earlier this year regarding the life insurance sector over there, which is the big pool of domestic savings or private domestic savings within China.
John Reade
The top 10 life assureurs were given permission to allocate some of their portfolios to gold, just 1% to start with. They had to have all sorts of risk management systems in place and prove that they could transact and book the trades and manage the risk, et cetera. Now, this is something that has been in the wings for many years. We’ve known about the proposals to include gold into the life insurance portfolios, but our experience of getting regulations changed around the world, it means that these things don’t happen quickly. But I’ve seen calculations from some analysts that say about 1% of the assets of these life insurance companies would translate to about 250 tons of gold purchases. My expectation would be is that 1% is very much a starting level for allocations to gold. All the work that we’ve done looking at these portfolios would suggest that you probably need something closer to 5%, maybe 10%, depending what’s in the rest of the portfolios. That’s a typical ideal allocation to Gold. And 1%, I think, is very much dipping the toe in the water, and there would be more to come. So potentially this news, which is known amongst the gold community, but I don’t think it’s actually got as much attention as it could do, could represent a new source of gold demand that could last for years to come and potentially be an important component of what is, by the way we measure it, only a 5,000 ton market.
John Reade
So you suddenly found a reasonable amount of fresh demand to come there.
Ben Nadelstein
And can you talk about Chinese demand for gold. In other countries where their currency isn’t as weak or as strong as the US dollar, they may be a weaker currency. They might have capital controls, for example. There might not be opportunities to invest in their own domestic stock market because there’s not really any stocks you’d want to invest in. Maybe the real estate market where a lot of people in their domestic or home country think, Oh, I’ll buy real estate. Real estate always goes up. What is it for Chinese buyers, whether it’s retail or institutional, that makes them think of gold in this different way, where most people in the Western world think of gold as maybe a shiny pet rock.
John Reade
I think you’ve highlighted some of the drivers there. In the end, Chinese citizens are subject to capital controls. They can take out a certain amount of money a year. It’s not particularly much, but most of the savings stay in the country. Traditionally, those savings have been either saved in banks or deployed in the real estate market, where speculative purchases of apartments has been really popular and has done particularly well until about 18 months ago when the Chinese property bubble seemed to come to an end and real estate prices have generally been falling. Now, there’s been some efforts by government to prop up and sort out the real estate market, but there’s plenty of more work to be done there. So I think the choices of deploying money into the real estate market, which was the, say, the number one choice of what you would due to invest in China, seems to have fallen away. The equity market, as you say, hasn’t been a particularly great performer, and it’s not as big a component of the investment choices within China as it would be in the United States, so. And then finally, you’re stuck with a currency which is again weakening now.
John Reade
And buying gold is a way of neutralizing that currency exposure. It’s the only asset, really, you can buy in China that is not denominated in RMB. So you’re taking your RMB or your Chinese currency and you’re exchanging it for gold. So investment in gold has certainly been benefited over the last 15 months or so. The investment market is smaller than the jewelry market, though. So what we’ve gained in terms of demand that’s come from the investment side, we’ve actually lost in terms of jewelry demand. So globally, jewelry demand fell about 11% last year in tonnage terms. In China, it was down 24%. And that’s because of the weakness of the economy and the weak consumer sentiment there. Even weddings, apparently, fell 10% in number last year compared to the previous number, compared to the previous year. And that’s another indication I think, of just a lack of confidence in the future. So yes, the investment story in China is definitely positive. And from what we can see in terms of turnover in the Shanghai gold exchange so far this year, and the fact that the gold is trading at quite a healthy premium in China versus the London price, suggests to me that the investment market is strong, but we’re hearing that the jewelry market is weak.
John Reade
At the moment, we’re putting together our numbers for the first quarter. We publish a quarterly document called Gold Demand Trends, which will be out at the end of April. We We’re beginning to get some of that data through, and I’m really interested to see what’s going to happen in terms of the Chinese numbers. I’m expecting decent investment numbers there, but weak jewelry. Also, as I say, I’m looking forward to seeing what the bar and coin demand is doing around the world, particularly in those Western markets, to see whether we’re seeing the first signs of recovery.
Ben Nadelstein
Let’s talk about jewelry for a minute. Most people who think of gold, they think, Okay, I know gold is used in jewelry, and then that’s usually where the sentence ends. How big of a component is the jewelry market for gold? Is that basically the number one area of demand outside of investor demand for gold? Or these other areas like gold recycling or gold plating? Should we be thinking about those, or is jewelry the main story when it comes to gold?
John Reade
Well, the way it divides up, if you look at the average over the last 10 years, so stripping out various fluctuations that might be there because of price or COVID, then jewelry demands a about 35% of annual gold demand on a net basis, and that’s after accounting for the recycling of gold. That’s about the same size. Sorry, actually, no, now thinking about it, that’s actually slightly smaller than the investment market. You then have about 7% of demand goes into industrial applications, principally electronics. We call that technology. We probably should call it industrial demand, but it’s principally goes into electronics. And then the balance goes into central banks. So central banks obviously have been an increasing component. But over the last 10 years, I think it works at about 17 or 18 %. So jewelry is really important. Investment is really important. And in some years, one is stronger than the other. Now, with prices up at record highs and back to the old fable and good, which the investment goal is, then jewelry is a smaller component at the moment. And I wouldn’t underestimate it, though. The amount of tonnage that have gone gone into the jewelry sector has declined a bit over the last decade, but not as much as you think.
John Reade
People are spending a lot more on jewelry because of the increase in the price. They may be buying a little bit less in tonnage terms, but it’s still a very Which is an essential part of the gold market, particularly in emerging markets, less so in the United States and in Europe, but particularly in emerging markets. Jewelry demand doesn’t drive the price up. But what jewelry demand does, though, is provide support to the price when from time to time, speculators and investors sell gold or buy less. So it’s important to see this market stays healthy. And under certain environments, maybe when the gold price goes through a week, year or two, then the jewelry market really comes into its own and supports demand overall.
Ben Nadelstein
I want to ask in that jewelry space, we’ve seen a lot of competition for natural diamonds by synthetic diamonds, where people can create diamonds basically out of carbon, some pressure, and a little capital, and next thing you know, out pops a diamond. So do you think gold could face a similar issue where someone comes up with a faux gold or a fake gold or a pirate gold, and that pushes down gold prices, and there’s a bidding war or price war between real gold and this new gold? Is that completely fanciful? Or do you think the fact that there is this now bidding war or price war in natural and synthetic diamonds, that that actually helps gold prices, at least in the jewelry space?
John Reade
Yeah, it’s an It’s an interesting question. I mean, look, ultimately, artificial diamonds or lab-grown diamonds and natural diamonds are both the same element. They’re both carbon. They’ve been produced in different ways, but in the end, you end up with something which is molecularly identical. You’re not going to get that threat with gold. Gold is gold. It’s an element. It’s a commodity in this respect. Gold that’s produced in a mine in South Africa is chemically identical to gold that’s produced in a mine in Nevada. So you’re not going to get threatened by a different method of getting to that end state. Where gold does come under competition from time to time, particularly when prices are higher, is from other precious metals. So platinum, which in most of my career has been a premium metal to that of gold, is currently trading at about a third of the price of gold. I would not be surprised to see in some markets that this cheapness of platinum is not reflected in some trends that might see some growth in the platinum jewelry industry. It doesn’t threaten gold, though, because of the different sizes of markets. I think from memory, the platinum market is about one-twentieth of the size of the gold market.
John Reade
So you can see a good boost to platinum jewelry demand, and you barely notice it in the gold supply demand balance. So I think substitution into things like platinum is one. We also see it in India. When the gold price is really high, then purchases of silver as gifts for weddings can displace gold to a degree. And that’s something I’ve seen myself when I’ve traveled around India in the last couple of years, is that you’re seeing a lot more silverware on display in jewelry shops. In terms of the diamond story, that’s quite interesting, though, because I have been following this one reasonably closely because of the impact that it might have on the jewelry sector. So speaking to a few jewelers, again, in India, and they’ll say, look, we do most of our turnover in gold, but the small amounts of turnover that we do in gem set jewelry, in other words, diamond jewelry, is where we make all our profits. So the weakness that’s coming through in the diamond sector may have the impact tax upon the jewelry trade, which we require to be in existence so that people can go and buy gold jewelry.
John Reade
Now, so far, the industry seems to be holding up well, but it is something I’m keeping my eyes on. Certainly, if I speak to my colleagues in China, they told me a couple of things. First of all, platinum jewelry is not selling. Platinum jewelry used to have this premium brand over gold, and they could say, It’s better than gold. You’re buying something that’s superior. So when the price has fallen relatively. It’s damaged the brand a bit. So we’re going to have to do some work there to find a way of selling that again. They also tell me that diamond jewelry has fallen off a cliff in China as well. So gold has probably gained market share from Both platinum, definitely, and probably from diamond set jewelry over the last few years. But I am watching the diamond industry carefully because of its potential impact on some jewelry sectors, particularly in India.
Ben Nadelstein
I want to ask now about silver. Gold and silver are both monetary metals. There are other metals that have non-monetary status, but gold and silver are both considered monetary metals. Do you think it matters that there is a price ratio between gold and silver that is increasing or decreasing or hits a certain number or passes a certain number? Or do you think this gold to silver price ratio is completely meaningless and it’s just a historical anecdote that people can look back and say, Oh, look, silver used to trade to this much gold, and now it trades to that much gold? Or do you think that’s actually something investors should be aware of?
John Reade
I think they should be aware of it, but they shouldn’t get married to the idea. They’re both monetary metals. They both have a history of being money, and they both have substantial components of investment demand. But as I mentioned before, industrial demand for gold is about seven %. Industrial demand for silver is more than 50. I don’t know how much. I’m not a silver expert anymore. I don’t look at the market closely enough, but I know it’s huge. So the way I think of silver is it’s half gold in terms of its drivers, and it’s half copper. So when we’re in a situation where gold is going up because of investment, because people are scared, and yet industrial demand is probably slowing because global economic growth is slowing, we might be moving towards a recession this year or maybe into early next year. Then you can imagine that the industrial demand for silver is probably fairly weak. And that’s probably why silver is underperforming gold at the moment. I think silver, again, coming back to my long history, I look at the ratio and it’s the way I judge whether silver is cheap or expensive versus gold.
John Reade
Now, the ratio at around about 100 at the moment, that tells me silver is cheap. But just because something’s cheap doesn’t mean it’s suddenly going to correct. It could stay cheap for a while. What we probably need to see to get silver moving, in my opinion, and relative to gold, at least, is to see a bottoming of the economic cycle and the beginnings of a recovery. When people are getting all bouled up about copper and iron ore and coaking coal and all the industrial commodities that will drive industrial output around the world. When that happens, if the gold-silver ratio is at 100, then people should have a really close look at silver because it could outperform gold considerably. And if you get a situation where gold is strong and industrial metals are starting to recover, then silver could have a really good run. Not investment advice, but that’s the way I think about it personally, having spent a lot of time looking at silver 25, 30 years ago, and much less so in the last seven or eight years.
Ben Nadelstein
I want to ask you now about a psychological factor. So when gold passed the $2,000 per ounce mark, a lot of people said, Okay, great. $2,000 per ounce is our new mental model for where gold’s bottom is, and it really shouldn’t trade below $2,000 per ounce. Now we’ve broken through 3,000 dollars per ounce, and we’ve briefly dipped below that back into the high twos in the United States. But $3,000 now is generally where gold has been trading. So do you think this is a new mental model for people where they have an anchor at $3,000 price for gold? Or do you think that right now there’s still a chance this can dip below?
John Reade
I think it can certainly dip below. I mean, we’ve moved from $2,000 an ounce to $3,000 announced very quickly. And there’s no doubt you can see there’s some decent size speculative positions in gold that can reverse. And indeed, the dip below $3,000 that we saw at the end of March and the beginning of April was probably associated with some liquidation of some of those positions. But that could happen again. So I think we have only just got above $3,000 an ounce, and we will need to spend some time above here and test it a few times and see that on weakness from speculators and investors, that we actually do see buyers come in and support the price around or maybe slightly below $3,000 an ounce. So it’s too soon to talk about $3,000 being a base. I think gold can go higher this year. I also think under certain circumstances, it could correct. So it’s not a shoe in. It’s not a guarantee, and that’s not investment advice either.
Ben Nadelstein
Can you give me some areas that investors should be thinking of when they think, Okay, this could make gold correct? Obviously, we’ve talked about the higher for longer. Maybe if that continues, that might push some headwinds towards gold. But what are some other things people should be thinking about when they think of a price correction for gold?
John Reade
Sure. I mean, we could suddenly return to an era of global economic collaboration. In other words, going back to where we were 10, 15 years ago, when countries are increasing the amount of trade that they’re doing with each other, when there’s collaboration on some of the challenges that are facing the world, whether it’s war, terrorism, or climate change. In other words, people are optimistic about the world. We’re cooperating with each other. We’re benefiting from trade. I don’t think that’s particularly likely in the near term, but it is something to keep an eye on. Gold is benefiting from the geopolitical tensions, and particularly the tensions that exist between the United States and China, regarding who is going to be the most important economy in the next 20, 30, 50 years. I think the other thing to bear in mind, though, is watch out for what the United States does with its reserves in gold. So the US holds more gold, 8,133 tons of gold, more gold than any other central bank. I think next in line is Germany with 3,359 tons, or or something like that. And the gold market has been able to ignore the US’s holdings of gold for decades because they haven’t touched it, they haven’t spoken about it.
John Reade
And it’s always been brushed aside whenever it comes up at a Fed press conference or whatever. But this new administration, and people close to the administration have spoken quite a lot about the Fed’s gold holdings. And there’s various proposals to go and audit Fort Knox, and fine, I’m not worried about that. There’s talk about revaluing gold as well. Gold is held on the books at $42. 22, and it could be revalued at spot, and that would make the treasury’s balance sheet a lot bigger. So what? That’s an accounting change to me. That doesn’t represent a flow in gold. But the one thing I am concerned about is we’re hearing proposals from people close to the administration or in office in the Senate to potentially sell some of that gold and establish a strategic Bitcoin reserve. Now, one of the narratives that’s helped gold perform well in the last few years has been this central bank buying, the very large central bank buying we’ve seen in each of the last three years. If suddenly the US were to sell to sell gold, it wouldn’t even have to be very much. It could be 100 tons of that, 8,000 tons.
John Reade
But as soon as they were to sell gold, that would change the narrative in gold materially. So that’s the thing that I’m paying a lot of attention to from the US regarding their gold holdings. And that’s the one thing I think that could really change the outlook for gold in a heartbeat, as long as it comes from the mouth of somebody important, in other words, President Trump, or maybe the Treasury Secretary Bessent.
Ben Nadelstein
I I’ve been thinking a lot about that. If there’s a chance the US might weaponize its gold reserves where they say, Hey, we have a lot of gold. Other countries have a lot of gold, but it’s not a big part of our balance sheet. It might be a big part of theirs. Hey, let’s dump some gold onto the market and see how it affects these economies. Do you think there’s a chance that that happens, or do you think this weaponization of gold is a bit far fetched?
John Reade
Yeah, I don’t see gold being weaponized. It’s not important enough to any economy, really, for it to be used as a political weapon, in my opinion. I mean, there are some countries that produce a lot of gold. There are some countries that own a lot of gold. But I don’t think that any of the particular targets that the United States might be looking at would be affected if the gold price would have fall back to $2,000 or $1,000 an ounce. So I don’t think that’s likely. Having said that, I’m not ruling anything out, because I think one of the problems we face at the moment is that our ability to predict what economic and political policy is around the world, and particularly at the United States, is at an all time low. Anything can happen, I would say, is fair enough. That’s one of the things that, in general, has been supporting gold, this uncertainty. But uncertainty could cut both ways. I don’t think it’s rational, and I don’t think it’s likely, but it’s not impossible.
Ben Nadelstein
John, as we come to the end of our interview here, I want to do a lightning round with you. I’ll ask you a series of questions, different areas, different topics, different genres. You can answer as long as you want or as short as you want. You can give me a tome or just one word. All right, let’s start. So do you think central banks are becoming more or less price sensitive as gold buyers? So do you think that gold has become a politically important asset for them to the point where it doesn’t really matter if the prices rise, they just need to have gold on their balance sheets?
John Reade
I think that the decisions taken about central banks of gold have become more political and therefore less price sensitive.
Ben Nadelstein
Next question for you. We haven’t talked a lot about inflation. Do you think inflation is still relevant to this bull market for gold, or do you think we’re in a post-inflation world, and maybe we should be focusing on something else, like deflation or maybe something else entirely? Do you think inflation is still part of the big picture for gold or not as much?
John Reade
I think inflation is always important for gold, but it’s most important is how central banks, and particularly the Federal Reserve in a US context, is able react to it. If there is inflation around, can the Federal Reserve hike rates? If the Federal Reserve can hike rates, then investors don’t worry about inflation because they know that inflation will come down. If the Federal Reserve is unable to, for whatever reason, hike rates, then gold becomes really interesting to the upside.
Ben Nadelstein
On that vein, do you think gold is becoming more sensitive price to fiscal policy announcements from the government or from monetary announcements? Do you think that’s changed where people should be focusing not just on monetary, but also fiscal matters, or do you think that monetary matters are still more important?
John Reade
I think monetary matters are important, but fiscal matters are becoming more important than they have been. I’ve had more questions from large investors around the world looking to protect themselves from deficits and debts, particularly out of the United States, but not only the United States. More of those conversations I’ve had in the last couple of years than I’ve had for a decade or more.
Ben Nadelstein
How do you weigh the US versus these emerging markets? So clearly, the gold price can be influenced by the Western world. It can be influenced by the Eastern world. How do you think about their weights in the gold picture?
John Reade
I suppose, yes, it’s an interesting one because in terms of consumption, emerging markets are more important. In London. In terms of price formation, though, we’ve always viewed in the gold market as the US, mostly, but also to a degree, what happens in London, as being responsible for price formation in gold because of the actions of fast money, speculators and investors who can move very quickly and rapidly increase and decrease their positioning in gold. That hasn’t been the case in the last few years because investors and speculators, broadly speaking, been more sidelined than in in the West than they have been in the past. So that’s allowed emerging markets to become much more important in price formation in gold. I think going forward, it’s going to be more nuanced and more balanced, because I think there are lots of reasons why Western investors and speculators will be paying more attention to gold than they have done over the last couple of years, particularly if equities remain weak, particularly if the US economy slows further. So it really depends who is most active in the market. And in the market in the last few years, on the investment side, certainly, it’s been emerging markets.
John Reade
Going forward, I think it might be more balanced. And look, the US is a big economy. It’s got a huge pool of savings. And if all that money were to be more direct connected towards gold than it has been in the past, then the US can dominate. But that’s not happening at the moment, not yet.
Ben Nadelstein
Do you think the idea of Bitcoin as a digital gold is dead, or do you think that idea is still worth pushing back on?
John Reade
I don’t think that the performance of Bitcoin justifies its tag of gold 2. 0. Not yet. Bitcoin has been behaving like a risky asset. It’s been rising and falling in line with equities, generally. Other stuff, too, but particularly, particularly equities. And that’s not what a safe haven asset does. It doesn’t mean it’ll always be the case, though. One of the things I think we have to recognize is that this appears to be the most crypto friendly administration that we’ve seen so far in the brief life of cryptocurrencies. And that probably points to more widespread adoption in coming years. Eventually, we could get to a stage where crypto assets and Bitcoin in particular fulfills its original role as envisaged as an inflation proof asset. But that’s not happening at the moment, or it certainly hasn’t happened yet. Perhaps a more widespread adoption on forwarding volatility, and perhaps more concerns about debt, deficits, and the prospect for high inflation, that could happen. But it’s not happening yet.
Ben Nadelstein
Let’s talk about volatility. Do you think volatility in gold scares away long-term buyers, or do you think actually it attracts them because there’s this price movement to latch on to?
John Reade
Well, longer term buyers shouldn’t be put off by gold’s volatility because gold is more volatile than bonds, but so is everything else. If you look at the volatility of gold compared to other mainstream financial assets, it’s very similar. So you look at equities, you look at equity indices, you look at commodities. Gold’s volatility is very much in line with or lower than all of those. It’s only government bonds, but it’s more volatile than historically. But as I say, everything is more volatile than bonds. In the short term, speculators, as opposed to longer term investors, like stuff that moves. And gold moves enough to attract investors and speculators. At the same time, it has enough liquidity, too. So the stuff that moves more than gold, like silver. But liquidity in the silver market is a fraction of what it is in gold. So if you try and put a big position on in silver, yes, you will move the price. Try and get out, and you’ll probably move it back to where you started from in worse. Whereas with gold, it’s big enough that you can deploy sensible amounts of capital looking for short term gains.
John Reade
But it’s not an asset, as I joked to the crypto boys. I said, it’s not an asset for you. You’re not going to get a Lamborghini at the end of the week, and gold is not going to go to the moon. It won’t deliver those sorts of returns. And people shouldn’t buy gold thinking it’s going to go five X by Christmas because it’s not going to.
Ben Nadelstein
What do you say to people who think gold is just a fear trade or just for doomsday preppers? And, Oh, I would never touch gold. I own stocks and bonds. What do you say to those people who dismiss gold outright?
John Reade
What I would say to them is I’d ask them, do they think about their investments as part of a portfolio, or are they just buying stuff because they think it goes up? If they’re just buying stuff because they think it goes up, then probably there’s not much of a conversation to be had with them, because as I say, gold won’t give you the returns that you’re hoping to get from upwardly moving stuff. But if they think about a portfolio, they think about some diversification in there, you’ve got some high-risk equity which you hope to make a lot of money on, you may have some fixed income in there as well to buffer the portfolio when the equities come under pressure. Then I really think you can make a case for putting a sensible allocation of gold into that portfolio. I think under the last in the next couple of years, and probably going forward, gold is going to be a better portfolio diversifier than government bonds. So if you can have a portfolio conversation with people, then you can persuade them very quickly of the merits of gold. If they’re just buying stuff because it’s going up, yeah, it probably may not be for them.
Ben Nadelstein
What do you think it would take for gold to return to a more formal role in the monetary system? I know you said many of these countries who have gold as central banks or on their balance sheets, it’s not a big portion of their monetary base. So do you think there’s a possibility or what would it take for gold to have a more formal role in the monetary system?
John Reade
We would have to lose faith in all be it’s currencies. Let’s Let’s just say, for example, you pick a random currency, take the pound sterling. Say for whatever reason, usually stupid politicians, the markets lose faith in the pound completely. That wouldn’t mean the UK would go back to the gold standard. It It might do something else. It might dollarize or it might euroise. So there would be choices. So similarly, any big major currency that falls completely out of trust will have choices. You’d have to lose faith in all the big liquid currencies at the same time. I would imagine there are scenarios where that could take place, but it doesn’t seem very likely to me. I don’t think we’re going to go back to a gold standard, and I’ve said that repeatedly over the last 20 or 30 years. What I would say is the chances of it happening are non-zero and probably higher than they have been 5 years, 10 years, 20 years ago, but it’s still fractionally small possibilities or that that will happen, certainly in my lifetime.
Ben Nadelstein
Next question for you, John. Do you think younger investors are warming up to gold, or do you think actually the gap is widening between older investors and younger investors when it comes to understanding and wanting to own gold?
John Reade
On a jewelry side, we see younger generations less inclined to buy gold than our older generations. We’re doing a lot of work on that to try and make gold rather than to younger generations, too, because the jewelry market is big and important. On the investment On the investment side, we get more mixed pictures. In some respects, one of the problems that gold faces is that people of my age remember a long period when gold didn’t perform, or in fact, actually fell from 1980 through to over the next 20 odd years. So the younger generation only remember gold going up. So that tends to help. The younger generation have also been through a number of nasty corrections, whether it’s the global financial crisis, whether it’s COVID, whether it’s what’s going on at the moment. So they do tend to be a little bit more risk averse, or at least recognize the balance of some diversification in a portfolio. So I think gold actually has a great opportunity here because it’s demonstrated it’s relevant so frequently over the last 25 years. I think that track record and the experience of people who have been growing up and then beginning to invest or observe markets, I don’t think that the gold is in a bad position not at all.
Ben Nadelstein
John, what’s a question I should be asking all future guests of the Gold Exchange podcast?
John Reade
Well, I’d make it twofold. Do you believe in a diversified portfolio? Number two, if you do, why don’t you own gold?
Ben Nadelstein
John, where can people find more of your work? Obviously, we love the World Gold Council. Obviously, the statistics, the reports, all the hard work you guys do in the jewelry sector, in the central bank sector. So tell the audience a bit more about the World Gold Council and where they can find more, John Reade.
John Reade
Well, we have a website which contains all that data, research, et cetera, that we’re speaking about. That’s called gold. Org or goldhub. Com, which takes you directly to the research and data site. I encourage everyone to go there and sign up. It’s free. I just have to register once, and then you can sign up and get all of the research we produce. You can follow us on social media as well. I still use X or Twitter as it used to be known as, but increasingly me posting more on LinkedIn nowadays. And you’ll see what we’re thinking and saying more or less on a real-time basis on those channels, too. But we do an awful lot of the World Gold Council, not just appear on podcasts and talk about gold. And for those of you that are interested in that, I would encourage you to go along to our website.
Ben Nadelstein
John, it’s been a pleasure speaking with you as always. For those interested earning a yield on gold paid in gold, they can check out monetary-metals. Com or click the link in description. John, the world is crazy, so we’ll absolutely have to have you back on to talk more gold. In the meantime, stay safe out there.
John Reade
Thank you very much, Ben. Cheers!
Ben Nadelstein
Thank you.
