Central banks are allocating gold as a strong diversifier for their reserve portfolios, says Joseph Cavatoni, Market Strategist, North America, World Gold Council. He tells Daniela Cambone that the correlation between gold and the US dollar still exists, despite rising gold prices and a strong dollar, driven by high demand in Asia. “Our expectation is that the Fed pivot will likely lead investors to increase their gold allocation,” he concludes.<\/p>\n
CHAPTERS: <\/strong><\/p>\n 00:00 Western investors towards gold TRANSCRIPT FROM VIDEO:<\/strong> 00:25 00:54 01:22 01:51 02:19 02:48 03:15 03:42 04:09 04:39 05:09 05:38 06:06 06:36 07:05 07:30 08:00 08:29 08:58 09:27 09:57 10:23 10:50 11:18 11:48 12:17 12:47 13:16 13:42 14:12 14:42 Central banks are allocating gold as a strong diversifier for their reserve portfolios, says Joseph Cavatoni, Market Strategist, North America, World […]<\/p>\n","protected":false},"author":23,"featured_media":35823,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2922],"tags":[132,248,323,578,654,658,1692,2450,2951,3467,3623,3626,3665,3682,3736,4139,4140,4141,4142,4143,4144,4145,4146,4147,4148,4149,4150,4151,4152,4153],"class_list":["post-35821","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-daniela-cambone-show","tag-world-gold-council","tag-gold-investing","tag-gold-demand","tag-gold-price","tag-gold-investment-options","tag-gold-as-safe-haven","tag-us-dollar-2","tag-currency-devaluation","tag-daniela-cambone","tag-inflation-hedge","tag-gold-etfs","tag-gold-market-dynamics","tag-gold-market-trends","tag-gold-market-analysis","tag-central-bank-gold-buying","tag-joe-cavatoni","tag-gold-bars-and-coins","tag-retail-gold-investors","tag-china-gold-demand","tag-gold-portfolio-allocation","tag-gold-diversification","tag-gold-price-catalysts","tag-gold-investment-strategies","tag-gold-reserve-asset","tag-gold-market-outlook","tag-gold-in-asia","tag-gold-etf-inflows","tag-gold-market-education","tag-rick-rule-natural-resource-symposium","tag-gold-market-insights"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/35821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/comments?post=35821"}],"version-history":[{"count":2,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/35821\/revisions"}],"predecessor-version":[{"id":35824,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/posts\/35821\/revisions\/35824"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/media\/35823"}],"wp:attachment":[{"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/media?parent=35821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/categories?post=35821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.itmtrading.com\/blog\/wp-json\/wp\/v2\/tags?post=35821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n5:53 Wall Street towards gold
\n7:08 Central banks buying gold
\n10:17 Gold price
\n12:58 Concluding words<\/p>\n
\n00:00
\nYou’ve got a wide range of the largest asset management firms. They’re offering gold, and they’re offering gold in a lot of different ways. The top reasons for allocating to gold include concerns that they have around inflation and financial market stability. So they’re allocating to the safe haven nature of gold. Really behind the motivation for the central banks allocating the gold is a real good diverse fire into their portfolios at the reserve level.<\/p>\n
\nand they’re looking away from the dollar and looking at gold as the right kind of addition to the reserve portfolio. Hi everyone, Daniela Cambone here. Hope everyone is enjoying the summer series and your summer overall. I know it’s the time that we’re supposed to be kicking back and relaxing, but important that we don’t become complacent. And if you do not have a financial strategy in place, I strongly urge you to contact us. Book a Calendly appointment.<\/p>\n
\nwe will offer you and give you a free information session. All you have to do is click on the link below in the description of the videos and choose a time and day that suits you best. And one of us here at ITM Trading will reach out to you and help you build a surefire, foolproof wealth preservation strategy. I strongly urge you to do that. Now check out today’s video.<\/p>\n
\nHi, it’s Daniela Cambone for the Daniela Cambone show here on ITM Trading on the Road in Boca Raton, Florida, continuing our coverage from Rick Rule\u2019s Natural Resource Symposium. And joining me now on the sidelines of the show is Joe Cavatoni. He is a senior market strategist with the World Gold Council. Joe, welcome. Thank you for having me. It’s great to be here. Yes, I hope you can help answer some questions I have regarding- We’re ready. Let’s go. Gold appetite.<\/p>\n
\nAnd obviously we’ll talk central bank buying and all that. But look, it’s been an incredible year for the gold price. Sure has. Yet we’re not seeing huge appetite from the retail investor in North America at least. We’re seeing the, you can definitely disagree, but from what I’m hearing from my friends, the appetite’s not really there in North America. Obviously we’re seeing it in places like China where people are just gobbling up gold.<\/p>\n
\nCan you tell us the real deal and set the landscape for gold right now? So it’s a great question, and it’s a very popular topic of discussion. And what I’d say in general, I would agree, Western investors have not been actively adding to their holdings of gold. What I would say, though, is that they aren’t unwinding it in large scale ways. Now when it comes to investment, you’ve got two main categories, bars and coins, and you’ve got exchange traded funds.<\/p>\n
\ntotal transparency in the exchange traded fund space, and we know what’s been going on there. The AUM levels with the price increase have been rising. The volumes have been exceptionally high in terms of the secondary trading. But the outflows net have been what have been getting a lot of attention, globally about 110 tons out. But that’s still a very healthy AUM on a global scale and in North America as well, over $115 billion of AUM in the US alone.<\/p>\n
\nNow when it comes to bars and coins, it’s been a little bit more interesting and probably more aligned with what you’ve been saying. There’s been peaks and valleys in terms of the interest. And what we’ve seen there have been first quarter of 23, third quarter of 23 record levels in terms of US activity in terms of bar and coin buying. But outside of that, a definite slowdown in terms of new purchases and even a shift as we move into 2024 of some selling back.<\/p>\n
\nof bars and coins and an increase in the bit of recycling. That’s a little bit more on the silver side, but also that kind of activity where people are seeing high prices and taking advantage of it. So the new net flows in coins and bars has slowed. ETFs are still on the sidelines. There’s a big catalyst we’re waiting for to actually see the investor there move back into the space. But in general, it’s been a healthy market. It just hasn’t been as buoyant as we’ve seen in the East, where you’re right.<\/p>\n
\nChina is, and I like your term, doubling up the gold. Right, but imagine when the retail investor does show up, really show up in North America. That’s right, and actually the retail investor will show up in both of those categories, bars and coins, and also ETFs. They’ll be involved in both, and I think they’re looking and waiting and seeing what the catalyst needs to be, and it’s a lot of people talking about it. It’s basically that rate environment. If you’re looking at what you can earn from an opportunity cost away from gold right now, if you can put a deposit at your bank for 5%,<\/p>\n
\nor look at a higher yielding bond market, that opportunity cost has drawn cash away from new additions of holdings in gold, and it’s actually keeping people moving away from gold on the short term. When that rate environment moves and changes, it’ll bring people back to gold. Because I was gonna ask, you know, in the past when Bitcoin was taking off, people were blaming Bitcoin or the interest is moving away from gold to Bitcoin. So I was thinking, well, what about the action, obviously, that we’re seeing in the S&P with no slowdowns of…<\/p>\n
\nNo, no. You got that right. I’d say Bitcoin will put that to the side for a moment. But when it comes to risk assets and equities in particular, it’s kind of hard to ignore the space. Even with this concentrated performance, it’s definitely frothy and it’s definitely keeping people in the equity market. And that’s that opportunity cost as well. So not only those certainties around yields that you might get with a cash deposit, but also risk assets like equity. So people are making the most of that. But-<\/p>\n
\nLook, again, I would amplify the fact that Western investors haven’t been really selling out of gold. It’s been definite net outflows, but what’s interesting is that it’s been up on the AUM side. I need to ask you, Joe, because you were previously at BlackRock. You were part of the Wall Street crowd. You berthed on Wall Street for all your life. So we often hear, well, Wall Street just doesn’t like gold. I don’t know if I would-<\/p>\n
\nDefinitely agree with that. I think that when Wall Street looks at where asset flows will go, where they can make money, how they can actually keep their businesses as buoyant, and where the appetite is for client investment demand, equities and bonds are definitely larger allocations in portfolios. Commodities, including gold, are a smaller component. If you go through who trades gold and gold ETFs, it’s a long laundry list of firms that provide the offering.<\/p>\n
\nAnd actually, if you just look at who offers access to gold in the US, you’ve got BlackRock, you’ve got State Street partnering with us, you’ve got Aberdeen, you’ve got Franklin Templeton. In Europe, you’ve got Invesco, again, BlackRock. You’ve got a wide range of the largest asset management firms, which I’d argue are where you really should be thinking and looking when you think about the most progressive asset allocators and who’s really at the tip of the spear in terms of how to manage your money. They’re offering gold.<\/p>\n
\nAnd they’re offering gold in a lot of different ways. When looking at who is buying gold, at historic records, I mean, we’ve seen a bit of a slowdown now, as central bank buying, I know World Trade Council’s put up numerous reports showing this. And again, China was leading the pack, now they’ve stopped for the past two months. But what do you think was driving that central bank demand? What are they seeing happening?<\/p>\n
\nWe’ve got our annual survey report out, and I would encourage your listeners to check it out because it’s fantastic and it gives us a lot of insight. And the top reasons for allocating to gold include concerns that they have around inflation and financial market stability. So they’re allocating to the safe haven nature of gold, the need for a liquidity vehicle that they can trust in their portfolio, and ultimately concerns around their homegrown inflation challenges.<\/p>\n
\nNow, added to that are geopolitical concerns, this potential risk of the US maybe seizing assets. But that’s not the top reason that many people were thinking. Really behind the motivation for the central banks allocating the gold is a real good diverse fire into their portfolios at the reserve level. And they’re concerned about assets like US-based assets. So they’re not dumping the dollar because they’re trying to come up with another scheme of how to settle things worldwide.<\/p>\n
\nThey’re worried about the risk of US assets right now and the dollar strength and weakness. So they’re diversifying. So devaluation of currencies. That’s right. And they’re looking away from the dollar and looking at gold as the right kind of addition to the reserve portfolio. Yeah. I think the China story, having followed it for so long, Joe, they were dormant for so many years not filing anything in terms of their gold reporting. We know that everything that is mined in the country stays in the country. So I’m always skeptical.<\/p>\n
\nof numbers coming out of China. Is there any secondary fact checking of numbers coming? Sure. We do a lot of work with Metals Focus to compile our quarterly numbers. Now we get the official reported numbers, for example, from the IMF and others. Then with that, Metals Focus do a pretty comprehensive review on the ground. And that’s where we get reported and unreported numbers. And we stand behind our numbers because they do a lot of the heavy research that goes along with supporting it. So those numbers are…<\/p>\n
\nharder to get and take a little more time to validate. But when we see what we see, we’re quite comfortable. And what you also have to remember is the PBOC is one entity that will buy gold. In China, there may be other state-owned enterprises or organizations that might also be buying as part of a broader picture of securing and supporting the overall landscape in China by holding gold as well. So that’s where I think it gets a little bit more of an art as opposed to just the science in terms of trying to track the numbers.<\/p>\n
\nSo it’s important to see what’s officially reported. And you’re right, May and June, no new holdings. But there’s also some unofficial, unreported numbers that will have some color coming out in second quarter to give you a little more flavor. But generally, at these higher levels, our sense is that central banks are gonna slow down a bit. We’re obviously at our retail conference here, Rick Ruhl’s Natural Symposium. What are you hearing? I mean, what do folks wanna know?<\/p>\n
\nabout the gold price. They obviously want to know what insights can you tell us? I mean, is there anything that you found that’s really shocking? It’s a really great question. And I think most people are saying, why aren’t we at fill in the blank in terms of their price level? And I think that that’s actually where when you hear people saying gold and the dollar and its relationship with real rates is broken down, I think that’s kind of misplaced. I think it’s actually still happening. The correlation.<\/p>\n
\nThat’s correct. And what I think is happening, and we’ve written about this in our mid-year outlook very briefly, what we see is happening is that that’s a dynamic that is impactful on Western investors. And I think that’s what’s holding us back from a 3,000 level. What’s happening is that most people subscribing to that view on how gold is going to perform has probably overlooked the fact that there is a wealth of asset purchasing that’s taking place in Asia.<\/p>\n
\nChina in particular, Southeast Asia, India, where sophisticated investment portfolios are now adding gold to those portfolios. If you’re sitting onshore in China, do you know or care what happens with US rates? You don’t. You’re more concerned about property markets. You’re more concerned about the domestic equity markets. And you’re more concerned about how the Chinese government’s managing the RMMB. And the RMMB is on the mind of a lot of people who understand the dynamic of what’s going on. So you see three billion of Asian ETF inflows.<\/p>\n
\nover the course of the first half of the year. That’s a pretty surprising number to people. Everybody’s thinking it’s outflows, with one exception, in Asia, inflows. So you’re seeing that take place, and you’re seeing the OTC markets supporting the buying in that part of the world as well. So I think lots of people are asking, why aren’t we up at these higher levels, or what could cause it to drop substantially? And I think that that’s probably the biggest factor right there, is the fact that the rate environment for Western investors has kept that at bay.<\/p>\n
\nand it’s still in place, one rate starts to move, we’ll start to see it. Now, I was talking a little bit about in Europe, we’ve seen a little bit of instability in France with the politics and a 25 basis point cut by the ECB. And dynamics in the ETF market have shown 2 billion in inflows in the last two months. So with the Fed pivots eventually? Our expectation is that it will likely lead investors to come back to look for the gold.<\/p>\n
\nallocation increase. That’s our expectation. Could that be the catalyst for the year? Maybe. There might be other things on the horizon. We’ll see how the politics play out. We’ll see how things go. All right. Well, you’re doing great work at the World Gold Council. We were talking offline. And you got Indras Alba to do a spot for a whole video. He did a wonderful movie. I encourage everybody to take a look at it if you haven’t seen it. I watch it all the time. Produced by the World Gold Council. Absolutely. Wow. Absolutely. We’ve actually just struck a deal with Netflix.<\/p>\n
\nthe UK and Ireland for it to be featured there as well. And I’m not gonna spoil anybody, but anything for anyone, but I think we’ve got more in production. I don’t know who’s involved from the actor side or what’s gonna happen on it. I’m always available, Joe, if you need me to do some sort of cam, I’m just putting it up there. Okay, that sounds great. And by the way, John Reed and I have been running our Unearthed podcast, and actually we’ve just done some really cool filming in Canada as well.<\/p>\n
\nOh cool. So keep an eye out for that. Yeah well I want to thank you for spreading the word about gold because like I said You meet so many people who don’t even think about have never even thought about Having gold as part of their well as best man for you You can get it from a lot of different places these days including Costco including your your retail gold dealers Do you like that? Do you would you like the fact that Costco? I don’t I can’t even the number was astronomical but I think the the the the fact that a trusted<\/p>\n
\npartner for people to go make purchases is actually in the business of offering people gold is a great thing for the market. And I think it just basically tells us that there’s a demand and there’s, there’s more opportunity for people to get involved in the distribution of gold. And I think it’s a great story. But I always say educate yourself though. You got to educate yourself. That’s why you need to stop at gold.org and educate yourself. And then basically, or the Daniela Cambone show, or you can always listen in. Joe, thank you so much. We’ll see you soon. Absolutely. Thanks for having me.<\/p>\n
\nAnd thank you for watching. We’ll have more great content coming your way. So be sure to stay tuned to the Daniela Cambone show on ITM Trading and you can sign up to stay on top of it all at daniealcambone.com. Thanks for watching.<\/p>\n","protected":false},"excerpt":{"rendered":"