Transcript
Everyone’s talking about gold going up… but no one’s talking about the real risk. In this episode, CEO Keith Weiner breaks down why tariffs could actually destroy U.S. price discovery—and what that means for investors like us.
Follow Monetary Metals on X: @Monetary_Metals
Follow Keith Weiner on X: @RealKeithWeiner
Additional Resources
Basel III and Gold Resource Center
How to Earn Passive Income in Gold and Silver
Transcript
Everyone thinks the gold tariff would send prices to the moon, but that’s not how markets work. Tariffs don’t create value. They create chaos. If this happens, the U.S. could lose control of its own gold market. The comments. So what happens if the United States government puts a tariff on gold and silver imports? Is that going to be bullish?
Is that going to be bearish? What is that going to do. Well I don’t think it changes the case for owning gold. I think people owning gold hedge against a variety of risks. And every day we wake up and see what’s going on the news. There are more risks that weren’t on anybody’s bingo card yesterday. But what it does do is it’s going to create volatility, especially in the in-country price.
So as you look at countries like India and Vietnam that have big tariffs on imported gold, what you see is the price inside the country can flip back and forth and kind of teleport back and forth between the world gold price and the gold price, plus the tariff rate, which in our case we know is to be 25%, $750.
You know, volatility, which is going to make it, less attractive to invest inside the country. So I bet more people will buy gold on some sort of account outside the country. More difficult for bullion dealers to hedge, which means wider spreads. So normally when you go to a clinch up and you buy that, gold Eagle for the gold price plus, say, 5%, and then you sell it back, it’s the gold price plus 1% or something like that.
Now instead, maybe that’s the gold price. Price plus 15%. And when you sell it back it’s gold -5%. Just hard. It has worked difficult more expensive. And countries that have these tariffs everything inside the country is chaotic. Less efficient. Things don’t work. Sometimes products are available. You come back to the same store the next day. Not available. Everyone shrugs.
We don’t know. Can’t help you. Sorry. So the big, lifts the gold market. And then in the United States, it’s called the gold futures market, also called Comex. Originally started in Chicago and basically run in New York. If there’s a tariff to import gold, then it becomes difficult and impossible to be a market maker on a platform like that because the market makers are trading for a spread.
So they buy, let’s say, 400 ounce bars in London. They sell, Comex, you know, futures contracts short and sometimes they have to deliver. But the delivery has a $750 tariff, if you see how that doesn’t really work. So what happens is they’ll destroy the Comex market. And either it won’t be operated in New York or will completely move out of the U.S. and just destroy one more American industry, or maybe the market, you know, financial side of the markets operate out of new York.
But clearly, all the vaults and all the warehouses, have to, you know, have to be somewhere else, whether that’s London, whether that’s Dubai, whether it’s Singapore, you know, some other jurisdiction that’s going to win. The United States is going to lose. And, you know, that’s just just math. The question is, will tariffs make the gold price go up in a certain sense?
That will make old less attractive because it’s more expensive to buy, you know, higher spread, and you get a bigger spread, you know, a bigger discount when we still look back, it makes it less attractive. But on the other hand, gold is the thing people buy when they don’t like and don’t trust their governments, so it’s more reasons to buy it overall, I don’t think it’s really price impactful.
I think it’s volatility impactful and spread impacts. Well, it just creates chaos. Uncertainly rising price but rising chaos. Well I think this coordination further to find a buyer minimum sell it harder to find a seller when you want to buy it. Wider spreads less efficient more aggravation and more friction unfortunately. So for the last several months, you know, pretty much since the election, there’s been a lot of important gold, from, London, but also Switzerland, and even the East.
You know, the old cliche is that all gold is moving from west to east. Well, not since the election that’s been moving from east to the United States. And as always with these things, there are a lot of, theories and some conspiracy theories, to, to explain, you know, what’s going on. One of the more creative ones.
I’ll use the word creative and leave it at that is, you know, the idea that, you know, the U.S. government certainly doesn’t have the 8000 tons that it claims to have. There’s going to be an audit of Fort Knox, I think, Elon Musk said he was going to show up for the camera and take, you know, video of all the gold bars.
By the way, that’s not how real audits work. Real audits of something like that will take months, generate piles of paperwork and be boring. Something that only, an accountant, you know, could appreciate. But yeah, that’s it, man. Okay, they don’t have the gold. They’re in a rush to get the gold for the Ryan gold, you know?
Certainly. Yeah, we’re really kind of sad. I don’t like to touch those sorts of things, but the ten foot pole, there’s there’s a an obvious spread between, you know, London, New York and, you know, that spread, you know, you know, drives that’s which is, that’s the basic spread. That’s what Mount Metals has made enormous amounts of research and reputation because we provide a free graph on our website, you know, looking at the spread, I spot sell forward and make profit.
And something on the order of $20 an ounce for two, you know, two months in a car, it’s not insignificant. So if you have access to essentially unlimited credit for dollars by spot simultaneous, which is London, simultaneously sell forward, which is, you know, futures, which is New York pocket $20 an ounce. The risk people then come to you and say there’s a risk of tariffs.
Okay, fine. You’ve already bought that gold in London. Just move it to New York. So now you have your carry trade and you take out the risk of tariffs and tariffs at $750. Was the profit on this trade is 20 bucks. Do the math. Right. So they’re moving it to New York to continue to do this profitable trading and remove the risk of, of tariffs coming in and destroying any other business.
And, and that’s what drives it. So very simple. So the question is, is, is is this going to keep, you know, afloat, going to keep up forever and wonder who’s drained of all the gold and almost in New York? I wouldn’t think so. I would think that we’ll get to a point where either there’s clarity that we do have we don’t have tariffs, in which case this kind of trade stops.
I don’t know that the gold would all immediately be, you know, transported right back to London right away. Imagine once it’s in New York, it’ll tend to stay there. There tends to be an inertia to these things. Or we do get tariffs, in which case no more gold coming to the United States. That was going to be a hard window slam shot.
And then after that and you can export it apparently without any, any tariff, the markets will have to figure out, you know, where, where to do this trade. And it can’t be New York anymore. So it could be Canada, could be London, could be Dubai. Other all these other jurisdictions are, you know, rubbing their hands with, glee, saying, if you want to bring it, we’re looking for that business.
But, you know, so I don’t I expect this is a temporary dislocation. So for retail gold investors, what does this mean? Especially in terms of price trend? I don’t think it really affects the price strength. You know, there’s arguments to be made both pro and con. I think they’re both sort of secondary and tertiary arguments. You know, the primary trend is the risks.
People want to hedge the madness of central banks, which is only growing madder by the minute. I don’t think this really changes any of that. You know, in a certain sense, if you don’t have any gold at all, there’s never a bad time and never a bad price to buy some. If you have some you’re looking to load up more.
People tend to like to look for pullbacks. At the moment we’re recording this, March 4th. Excuse me, April 4th. There’s been quite a significant pullback. And so pull back and to grow even more possibly but maybe not. But in terms of tariffs all tariffs are going to do is just to make it more frictional. So if you want physical gold, maybe now’s the time to get it in your hands.
And after that it may be more attractive to get gold on account in some jurisdiction where there’s no import tariffs. And, you know, nobody wants to pay 25%. So I mean that just kills it, right? So instead of paying, you know, $3,000, you’re paying 37 and 50. That’s nuts. And I don’t think anybody’s going to be willing to do that.
So they’ll buy gold in another jurisdiction. Which, you know, that’s what people are, people. There’s always a workaround. Whenever the government does, people work around it. You know, in other places. Lichtenstein, that people will have to go there and have it on account and you just your gold and you can’t hold it together in the United States, $750, tax.
But, you know, you have the same gold with the same price exposure. Or people will buy an ETF for gold, that source of gold in London. It will just push the gold to other push the gold demand to other outlets. Is that good? No. People want to have it in their hand. They should have a right to have it in their hand.
But there’s you can’t have it in yourself. There’s a $750 price tag to have it in your hand. Most people are going to say, well, I don’t really need it in my hand. Not badly, do I? The well, the ETF market benefit even from tariffs, you know, maybe it could be the the precious gold you know other gold demand into other channels.
Yeah probably being picked up in ETFs. You know on the other hand you know in the gold community ETFs have a reputation of not being physical gold. So it could be that people tend to prefer more like a gold program. You know, gold 2.0 probably more gold cryptocurrency which offers redeem ability. So, you know, could push it into something new that doesn’t have a lot of volume right now.
It could grow as a result of that. So I imagine those people also are rubbing their hands with glee. You know, what, what tariffs might bring to their business. The question is, does Basel three really affect the price kind of gold? Well, Basel three was implemented in most places in the world several years ago already. And, since then the price has been up.
Not because of Basel three, in my opinion, but so Basel three makes it more, onerous. There’s a higher opportunity cost for banks. That gold is an asset in the balance sheet. There’s a big misconception. People say Basel three treats gold as a tier one asset. There’s no such thing as a tier one asset. The tiers refer to the capital viability side of if you that the balance sheet.
And so Basel three says if you’re going to own gold it’s announced that on the asset side you have to have 85% of the funding that supports that asset has to be long, you know, stable funding, which is equities selling shares on equity. And, one of your bonds, which is very unattractive for banks to sort of tends to want to force the banks to make the banks want to, you know, leave the business.
A lot of that’s happened, a lot of the former bullion banks have gotten out of the business. Scotiabank a couple of years ago closed the accounting division, you know, other other building banks, exited the business. It hasn’t been good for, you know, the market makers and, you know, sort of market efficiency. This makes it more difficult for your dealer to hedge, you know, hedging costs go up there for spreads, get wider.
But in terms of the broader megatrend of buying gold, you know, as long as, as long as governments continue to do bad things, and continue to abuse their credit, people turn to gold and certainly no end in sight of either of those trends.
