August 2025
Tune in if you’re interested in…
• Learning how silver, platinum, and palladium fit into the picture
• Understanding the case for (and against) gold in today’s markets
• Exploring whether metals really hedge inflation and market risk
• Discovering when precious metals make sense in a portfolio, and when they don’t
Watch previous episodes here:
Ep. 150 What The One Big Beautiful Bill Means For You
Ep. 149 How to Build a Business that Lasts in a Recession
Jeff. Gold. Precious metals. They've had quite a year.
It's been fascinating to watch. We talk about inflation and how things move and the importance of owning it. But it's been an interesting year as it relates to the performance of these. Feels like maybe it's becoming a little bit more stream. Maybe not. Yeah.
No, definitely more people are talking about it.
We've been investing in gold for quite some time. Why don't we start there? Like when did we start sort of allocating money to gold and why gold?
Goes back a long ways. We really incorporated in our portfolios across the board, call it in 2015, and we did an allocation of gold and gold mining stocks, I believe around that time, I'm sure we'll talk about both. But at its core, why gold is something we've talked a lot about, but it's really a store of value.
In many ways, it's a hedge or, insurance policy against reckless monetary, fiscal, money-related policies on the part of government, where, you know, dollar can be printed willy nilly, you know, just at the click of a button. And we all know, I mean, that debt levels are now finally in the news being talked about a lot, but seems like our deficits are increasing with each passing year, which theoretically over time your dollars are going to be worth less.
So it's really an inflation hedge against, debased currency over time.
And so a pure play against the, the debasement of a currency. I mean, I think last week we finally clipped $37 trillion worth of debt.
I can't even keep track. I thought we were in the 36 trillion range, but yeah, I mean that, it seems like every few passing months, a new trillion dollars gets eclipsed in terms of our debt levels.
Yeah, I still go back to your statement about 1,000,000,000,000 seconds is like 30,000 years.
So gold isn't the only thing in the headlines that's getting a lot of attention. I mean, you've got silver, you've got platinum, you got palladium. Why not these other, you know, forms or metals.
They've all really taken off. Really in the last year or two. Gold's had a nice run now for five, six years. You know, I think it was $2,000 an ounce just maybe 3 or 4 years ago. And now we're at $3,400 an ounce. These others have finally caught up, and a lot of them for... it's around inflationary pressures, generally speaking.
So all of these tend to march in the same direction. When you have inflationary pressures, typically they will all go up as opposed to down. That being said, there's a real difference with those other metals, like silver, platinum, palladium, in particular. And that, yes, all of them have cases or use cases as a store of value to some degree, but especially with palladium and platinum, what really drives your price more than anything else is industrial use.
So things tied to GDP growth, economic growth, and industrial uses in certain instances. So a little bit more convoluted in terms of what drives the prices of those as opposed to gold, which again, really has very little in the way of industrial use. It's really just a store of value in alternative currency.
I was blown away by some of the research. I want to give credit to either Amber or Ian who helped did this. I'm pretty sure that this was Amber. So, Amber, thank you for this research. Palladium. Their demand is heavily tied to gasoline engine catalytic converters, 80 to 90% of their demand. Whereas you look at gold, that's not what the demand is for.
I mean, there's use cases for gold, but palladium- 80 to 90%?
I actually think the numbers are similar to platinum. It has a little bit more use cases in terms of jewelry and other things, but both palladium and platinum, the lion's share of the use case of how they are used, is with regards to something as narrow as catalytic converters. So great. All well and good, but think around, think about the trends and the risks to that, as we move continue to move more towards electric vehicles which don't need catalytic converters.
Can we wake up a decade from now where we have around the globe, much less in the way of gas powered engines, much more in the way of EVs? And then you don't need as much of palladium and platinum, in terms of industrial use anymore. And therefore it the price might soften as a result of that decreased demand.
And that's one of the comments that you made about, look, we're already tied to GDP in a lot of our other investments like U.S. stocks, international stocks. So why take on that extra layer of risk there?
And yes, exactly. We're already exposed to GDP growth in a much more diversified, I think thoughtful way through stocks. So to have such concentrated exposure specifically to something as unique and niche as catalytic converters on cars, that's sort of a vulnerable place to be. One last point. Even just thinking about where does the supply of these metals come from?
70 to 80% of the supply for both platinum and palladium come from Russia and South Africa. Just those two countries. So now you're exposed to tremendous geopolitical risk as well. And we have no crystal ball in terms of the tailwinds or the headwinds with regards to geopolitical risk in Russia and South Africa. So those are just, reasons really to be very cautious when it comes to investing in those types of metals.
I mean, that just made me think about copper and the recent announcement of like, hey, we're going to impose a tariff on copper, sort of a similar thing. That's the type of geopolitical risk that you could potentially face.
Completely out of our control.
I like that point of how it's out of our control. Let's talk about silver real quick. I mean, silver tends to be popular. They say it moves in correlation with gold. Yeah. There's a lot of use case for silver. It's in many of the products and technology that we have. Yeah. But you were talking to me a little bit about the volatility of silver versus gold.
That's extremely different.
Yeah. So from a high level I tend to like silver as opposed to shy away from it for similar reasons to why I'm a fan of gold. I do think there are some elements of it being, again, a currency hedge against debasement of currencies. It also has use cases from an industrial point of view.
That being said, it is very volatile. Roughly the numbers are basically twice as volatile as gold. I mean, gold. It's funny, I was thinking of, someone who I follow in the precious metal space, and he said, silver is not an investment or a commodity. It's a personality. And it really is. I mean, silver is a unique personality that will just zig and zag in a variety of different directions.
Very volatile. Backing up a little bit. That reminds me, platinum and palladium in many ways are even more volatile, like palladium. I just saw this stat the other day. In one day in March of 2020 was down 40%. I mean, so you're just it's a wild ride with these types of metals. So back to silver. Yes, I like the dynamics and I think the tailwinds that are driving silver.
But again there's industrial cases tied to GDP. I'd rather be in a pure play like gold that is more resilient and less sensitive to GDP or economic growth.
And you know, as a firm, we sort of made that levered bet on gold by owning gold miners. I know silver is up what, 30% for the year. Yeah. The gold miners have done significantly better.
Yeah. Gold miners are up call it north of 50%. So our more resilient stable play is gold. Still somewhat of a volatile asset. And the way we've put our foot on the gas is with a smaller acknowledgment, slightly more risky position in gold mining stocks. But to your point, an example of the year where silver's finally caught the attention of the investing public.
It's up. Call it 30 ish percent. People are starting to talk about silver, but no one seems to be talking about gold mining stocks, which is good. We love to be in areas that are less crowded, and yet gold mining stocks are up over 50%. So I think we've had the right allocation given our view of the world.
I was talking with Ian on another episode not long ago, where just the global demand for purchasing of gold has increased over the years against, you know, traditional monetary policy, trade, other type types of things. Emerging economies have accounted for 600 metric tons of purchases, just the last few years. Yeah, which is a lot of purchases. Let's talk, let's talk a little bit about, you know, RIAs and investment houses and their allocations to gold.
So, the average IRA across the industry maybe has about a 2.5% position, tied to gold. It's weird because we talked to a lot of them, and they don't have any.
Yeah. When I saw that stat, that actually even surprised me, I thought the number was less. But maybe people are, wealth managers are starting to catch on and add a little bit to it. That being said, and this is a little bit more anecdotal, but my experience in looking at allocations across endowments, foundations, large institutions, the most common number I see is 0% allocation of gold.
So it's still really an underappreciated and unloved asset, and especially in the United States.
And we have about close to a 7% allocation. So I'm not sure about the stats for this study. Yeah. And I know we're big. We manage 3.1 billion in assets, but we're not big enough for our 7% allocation to make the industry 2.5%.
We don't pop up.
But what do you think that says about the perception of gold? Like what are people missing besides some of the things you mentioned?
I think it's just an ignored asset class. It's just outside of the United States where it's not ignored. You hit on in emerging economies, international countries, mainly central banks, continue to buy a tremendous amount of gold year after year. But in the United States, specifically in North America, really just an unloved asset class, even just a simple example, if you look at like gold mining stocks, an example you'll get on the quarterly conference calls, for one of the large, large, substantial gold mining stocks.
And it'll be crickets. I mean, there will be a few analysts on the call, and the company will give their financial summary, and they'll ask for questions, and there will be sometimes two questions, sometimes one, sometimes zero questions. I mean, it's just not covered by the analyst community. So it's just very much of an unloved asset.
Now from our point of view, that's wonderful, right? Because it's undiscovered. It's still had a tremendous run without actual buying power behind it. So that's why we think there's tremendous optionality not predicting this, but there is a potential like a coiled spring where if the American public, investing public in particular, starts to realize, maybe they need more gold and maybe gold mining stocks as well in their portfolio, that, you know, I hate to say this, but the sky is the limit to some degree, not predicting it by any by any means.
But there is some real upside potential in gold and more gold mining stocks. Even with the recent run we've had.
And so that's potentially where, gold could be as mainstream as maybe real estate in somebody's portfolio. I mean, we talk about, potentially low growth scenarios, higher inflation, sort of a stagflation rate environment going back to maybe the 70s. I mean, the majority of investors that we deal with or that are alive today and actively investing, they've been investing in a period where stocks have done well over the last 40 years.
Bonds have done well over the last 40 years. Gold has been done very well in the last 40 years. Real estate. We haven't been in an environment like the 70s that you mentioned where, you know, gold can all of a sudden become really attractive. While those other industries face some challenges.
The 70s were a great example, right, where stocks had a long run and of poor, challenging returns. People really started selling their stocks. No one really wanted to own stocks to a large degree. What did a lot of institutions and wealth managers want to own in that environment? It was gold. So there is the potential that gold can become a staple of investment portfolios.
We're not there yet, but there is always that potential.
And we're obviously choosing gold as opposed to some other precious metals. As we alluded to today. One of the key themes is around diversification. We're trying to build a more resilient boat, a bigger boat that can navigate, you know, murky waters and higher tides. Let's talk a little bit about the diversification aspect.
Yeah. So gold is obviously a diversifier. Now that being said, other commodities you can invest in other commodities, whether metals, or even agricultural goods, even let's say oil, natural gas. And that is how some wealth managers diversify their portfolio. Instead of a 60/40 stock and bond portfolio, maybe they'll have a 55/45 and then maybe 10% to make up the difference in commodities.
And that's all well and good. Again, we've done it just through gold and avoided those other commodities. And why is that? One of the reasons, I think those managers that do dip their toes in the water or into commodities, do allocate to that degree is they really have no other options, right? They know they need to diversify outside of stocks and bonds.
And what's the easiest thing to do? It's to diversify across the commodity sector. Really at a click of a button, you could buy an ETF or a mutual fund and can get that diversification. We obviously have so many tools in our toolbox where, you know, private lending as an example, which we've been doing for so many years now, where instead of being in some random commodity that's not spilling off cash flow, right?
And it's very volatile. We're in a very stable asset class in private lending and making a nice yield along the way, and it's a diversifier to. So we feel like we have all of those aspects of diversification, resiliency and cash flow and commodities at large really don't provide those benefits.
You know, when you mentioned the commodities at large, it always takes me back to energy and oil. Yeah. You know, you and I were joking last week talking about this oil in the mid to early 2000 reached over $100 a barrel.
And then all of a sudden it's back up to 60 and I think for the life of me, I just can't quite understand it. And I know that you don't either. Like. Yeah. How do you determine the price of it and why is it not over $100 or where it's at today. Yeah. Gold just seems so much easier to understand when you just look at the protection against the devaluation of a dollar and the amount of money that's been printed over the last, you know, 20, 25 years.
Gold suits a very specific purpose in our portfolio, again, as an insurance policy. Across those risks. You talk about geopolitical risk as well that we keep it simple and pure, and then we look for diversification outside of commodities and other areas.
Yeah. And the private credit private lending. Yeah. Ways to protect each other. So let's play a little game I got optimist or pessimist. Three questions. Let's say that there's rising global inflation. Will that keep pushing commodity prices higher?
Oh yeah, I think so. So does that make me an optimist or a pessimist because I'm a pessimist... I do think that is a risk that inflation will continue to have legs going forward in the coming years. But in terms of commodity prices and specifically with gold, I think there's still room to run.
Specifically with gold because we don't understand oil. So geopolitical risks will continue to drive safe haven gold demand.
This is kind of going back to the crystal ball that we always talk about. I have no crystal ball whatsoever. So I'm going to be neutral. That being said, just like any insurance policy think of the analogy, do you have fire insurance on your home? Are you predicting that there's going to be a fire or not?
The answer is, who knows, but are you going to have fire insurance or earthquake insurance on your home? The answer is absolutely, because we cannot predict if that risk is going to increase or not. Same with geopolitical risk. Geopolitical risk is by its very nature unpredictable. Can it flare up or calm down? I don't know, but I want to own insurance to protect against that risk.
And then last one, as we talk about like new mining technology, could that potentially ease supply shortages? Putting a cap on the spike of the price of gold.
So meaning because of technology, new supply can come to the market, flood the market, and there may be prices of all commodities, including gold. Come down a little bit. Yeah. Listen, technology is always a powerful force and there's always more efficient ways to get things out of the ground. But that being said, the general answer is no.
That's not really a concern from a pricing point of view. At a certain point, ground is ground. Dirt is dirt. Yes, you can, but you can create better tractors, better manufacturing equipment to actually get the metal out of the ground. But that only makes a marginal difference over time. So one of the reasons we do like gold is it's a very supply-constrained asset class, meaning it's very predictable.
Typically, only 1 to 2% of the global supply of gold comes to market each year. So, the punchline is technology won't make much of a difference from my point of view.
Yeah. So limited availability, very little comes online. It's unlike something like oil where all the sudden you could, you know, flip on the switch and then produce more barrels, you know, fairly quickly.
Oil does have that dynamic. True. Where you can turn the switch on or off and increase production or decrease production. Very different with regards to mining metals.
Jeff, thank you so much. I, have fun talking about gold, other precious metals, commodities, why we invest in it. And it's always it's always fun to have you on.
I enjoyed it. Thanks.
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