How Gold Quietly Claimed the No. 2 Reserve Spot
In this episode, Ronnie Stöferle breaks down what’s really driving gold’s strength today. He explains why countries around the world are increasing their gold reserves, why fiat currencies keep losing purchasing power, and why gold is becoming more important as a neutral monetary asset.
We also talk about the myths around BRICS, the shift toward a more multipolar financial system, and why many investors in the West still underestimate gold’s role.
If you want a clear, no-nonsense explanation of the main forces shaping gold demand right now, this conversation lays it out plainly.
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Transcript
Monetary Metals:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein of Monetary Metals. I’m joined by our good friend, Ronnie Stöferle, who is the Managing Partner at Incrementum, author of In Gold, We Trust Report, and of course, an advisor on the Monetary Metals Advisory Board. Ronnie, welcome back to the show.
Ronnie Stöferle:
Good to see you, Ben. Thanks for having me again.
Monetary Metals:
Ronnie, it is a crazy busy time in the gold world, which is actually not usually known for being so exciting. So give us a 50,000-foot overview of what is is happening in the gold world. We’ve seen gold prices basically double in the past few years. Some people are calling this a top. This is a bubble in gold. This is a peak for gold prices. Where do you see us in the gold world today?
Ronnie Stöferle:
Well, I would say bull market. I mean, it is what it is. It is a bull market that has picked up momentum. It was primarily being driven by emerging market demand. This is what we described last year in the new Gold Playbook. Now it seems that a little bit, pretty late to the party, there’s like Western financial investors coming. It is a really relentless bull market where every major dip is being bought.
We’re now seeing, and I think this is a confirmation of the strength of this bull market, that silver finally started outperforming gold, that mining stocks are outperforming gold. We’re seeing an increasing amount of risk appetite in the sector.
Therefore, I would say we’re definitely not at the end of this bull market. We’re somewhere, let’s say, in the middle of the second half of this bull market, if we want to talk football, so soccer terms, but we are definitely not at the end of this game and not in overtime yet.
Monetary Metals:
Can you talk us through a little bit about what you’re seeing in terms of a global picture? Obviously, a lot of monetary factors are at play. Some people are saying, well because of de-dollarization, where countries are looking to use the dollar less.
They’re basically putting that capital into gold because it’s really the only asset class that can soak up that level of funds. But also, can you tell us about the de-euroization, which maybe people don’t think about as often?
Ronnie Stöferle:
Yeah, I think it’s interesting, Ben, that now the term debacement trade is so popular on Wall Street. I think this debacement trade is going on for a couple of decades already. I think it’s pretty funny that now the Wall Street is finally realizing that actually measured in hard money, it’s the purchasing power of all those fiat currencies that is just constantly evaporating.
I would say that the de-dollarization obviously has been a topic, obviously also heavily influenced by the political developments that we’re seeing with Donald Trump basically saying there’s three categories of countries now. You’re either a friend somewhere in between or you’re an enemy. It’s no coincidence that basically since 2022, the invasion of Russia in Ukraine, and what followed was obviously the confiscation of Russian FX Reserves.
That since then, more and more people or more and more countries are actively diversifying out of US treasury holdings, out of dollar-based reserves into gold as a neutral non-inflatable monetary reserve asset. Now, obviously, de-dollarization is a big a buzzword.
But as you already said, I think that de-euroization is actually a bigger story than the de-dollarization because the reserve data says that the dollar still dominates global reserves.
It’s roughly in the high 50% range. While the Euro has been stuck around 19%, with the ECB just recently calling its international role as broadly stable. Gold now is actually also, obviously due to the performance recently, is now the second the most important reserve currency at around 27%. I think the real story is not the UN replacing the dollar, but rather gold displacing the Euro as a reserve asset and becoming the second pillar.
I think the de-dollarization is some a slow erosion, while the de-euroization has obviously already happened. But If you have a look at the price performance of gold in US dollar terms, in Euro terms, and in basically every fiat currency, you can see that, obviously, there’s fluctuations. This year, The gold performance in dollar terms is significantly better than in Euro terms. But the big trend is obviously all those fiat currencies constantly devaluing against gold.
Monetary Metals:
Ronnie, does this idea of a debasement trade where obviously fiat currencies are being inflated away or debased away and people say, I just trust my local currency a lot less than I trust gold.
Do you think that that loses steam if someone like a Donald Trump is no longer the President, if global trade comes back, if the Euro becomes stronger?
Do you think that this deep basement trade is really just a short term move where people are pushing towards safe haven assets? Or do you think this is a longer term play that outlasts the different political camps, whether it’s Trump or the Euro itself?
Ronnie Stöferle:
Well, I think that’s another great question, Ben. I think that obviously deep basement trade, that’s a little bit of a buzzword now. I think that most people that I know on Wall Street or in, let’s say, in traditional capital markets, they don’t really understand, or let’s let’s put it that way, they’re not really interested in monetary history.
They’re not really interested in learning more about or just asking themselves the most important question, probably in capital markets, what is money and what is sound money? I think it could be some a short term trend. But this year’s in gold The Trust Report was called The Big Long, which was obviously an analogy to the big short.
We said that There are many analogies because back then, Michael Burry, Steve Eisman, and so on, when they came up with their theories, they were ridiculed by traditional market participants.
They were not taken serious when they came up with the subprime thesis and their traits that they put on. But actually, then there was a point, say, like 2006, 2007, where a few people on Wall Street realized, okay, perhaps they have a point. If all those package deals, they shouldn’t carry an AA rating.
They had a feeling that if subprime blows up, it will have an impact not only on the whole real estate market, but also on the US economy and on the global economy and on many financial institutions. I think with gold, we’re at a somewhat similar stage. We’re not in 2005 where gold is a big contrarian trade anymore. Definitely not.
But we are, I think, at a stage where, like in 2006, 2007, more and more people on Wall Street are realizing, well, actually, those gold box, and I don’t like the term at all, they’ve got a point. We now have in the White House, people like Scott Bessent or Stephen Miran who actually really openly talk about the flaws of our monetary system, people that actually address the tripping dilemma, that know about the virtues of gold.
Scott Bessent and Treasury Secretary, he says his largest position is physical gold, and he wants to be a part of a Bretton Woods type of realignment of our monetary system.
I think gold has really become center stage. Now, as I’ve said at the beginning, finally, more and more Western financial investors are joining us at this party.
They’re coming very late, but now it is happening.
Monetary Metals:
Ronnie, would you say that someone like a Scott Bessent calling for a Breton Woods realignment, whether that’s offering a dollar-linked treasury security, which is something Judy Shelton has advised on, or just saying, Hey, listen, we’re going to offer some gold and dollar product together. Do you think that offering is basically going to be good for gold no matter what?
Because either it works out well, and we have some linking of the dollar and the currency to gold, which, of course, boosts trust in gold, or it goes terribly, it completely fails, and people say, Listen, clearly, the government is worried about the value of their currency. They’re aiming at gold, so I might as well have some gold myself because I won’t mess it up.
Do you think that people are going to trust gold more, regardless of whether the currency is backed by it or not, because they see the governments are interested in gold again?
Ronnie Stöferle:
Well, I think Churchill famously said that you can always count on the American do the right thing after they have exhausted all the other possibilities. This is a very famous saying about American decision making and US politics. I think that now, finally, topics like gold-back bonds, for example, as you mentioned by Dr. Trudy Shelton, that we interviewed her a couple of years ago.
But also a revaluation of gold and the US US still has a price tag of 42 US dollars per ounce on their books. If they would revalue to current prices, that would be more than a trillion now in just basically just for accounting terms. Now, that doesn’t really solve the debt problems. But if you read Stephen Miran’s paper, for example, he’s openly talking about a revaluation of gold and perhaps a significantly higher price, who knows, to create some, let’s say, a sovereign wealth fund that could also be levered 10, 15, 20 times.
With That amount of leverage, you can do all sorts of things. I think those ideas, they are now really being discussed in the highest political spheres Also a Bitcoin, strategic Bitcoin reserve. I mean, who would have thought that this is going to happen?
I think that the Trump administration is aware of that exorbitant privilege. They want to defend the status of the US dollar as the world’s reserve currency. But then on the other hand, they also want to devalue the US dollar to make US manufacturing more competitive. This is basically squaring the circle from my point of view. It is something where I would say that in Vienna, we would say that this is like warm ice. How do you say? Ice lollies, basically.
You cannot have both. This is the really big question that the market will be solving over the next couple of years or next couple of quarters, actually. And then Judy Shelton, she was quite vocal saying, the US should come out next year with those very long term century or 50 year gold-backed bonds.
And if you have a look at the genius act and the importance of stablecoins, for example, like Tether, as new sources of demand for US treasuries, as I’ve said, the US always, in the end, they come up with the right thing after they have exhausted all the other possibilities. I think this Churchill quote is playing out in real-time again.
Monetary Metals:
Ronnie, does this basically spell the death of a either common BRICs currency or basically any other currency outside of the US dollar taking center stage? Because now not only is the US saying, Hey, we’re stepping coming back from a global world and people who need dollars, sorry, you’re going to have to figure that out on your own. While at the same time, companies like Tether or other stablecoins are basically saying, Hey, we’ll offer you digital dollars.
And so now anyone who wants a digital dollar, whether you’re in Nigeria or Chechnya, basically, you have access to dollars that you didn’t have before, making your local currency even less of something that you have to have, whether you’re in Turkish Lira saying, Maybe I’ll get some gold, or maybe you’re in another country saying, Hey, maybe I’ll get Do you think this has basically cemented the US dollar at the top, saying, Hey, of the paper currencies, the US dollar is king?
Ronnie Stöferle:
No. Good question. I think the BRICS as a as, let’s say, a BRICS currency, from my point of view, that’s a geopolitical pipe dream. I don’t really see that replacing the dollar for the time being because the countries, the members of the BRICS, they’re vastly different with their inflation regimes, with their political situation, with capital controls, with security interests.
It is not a homogeneous block of countries. But then I think some a slow asset bath, bath under the dollar’s monopoly, I think it’s actually real because it’s more trade being settled in local currencies. We’re seeing alternative payment systems like the so-called Sips system, which should reduce the dependence on Swift and US banks. Then you have actually, obviously, the trend to a neutral collateral, which is gold and not the renminbi.
It’s not a coincidence that China, India, Russia, they really aggressively buying gold. But it’s also Turkey, it’s Poland, it’s Czech Republic, it’s Hungary. So a little bit of the mavericks within Europe, you could say. I think that BRICS is quite unlikely to produce the new dollar, but it clearly accelerates the move to a more multipolar gold-backed reserve mix. So this is happening, but we always said it’s a long process.
It’s not one moment in time.
Monetary Metals:
And What do you think about these countries, rather than settling their net differences, not their total trade, but maybe just the net trade in gold, where someone like Russia, instead of getting rubies, which they’ve declared are completely useless, instead of getting rubies at the end of the day for their oil, they say, Hey, listen, you owe us 20 billion.
Why don’t you just send us some gold to whether it’s Switzerland or Dubai, and we’ll trade our net differences in gold?
Do you think that is maybe more likely than something like a BRICS common currency where countries say, Hey, let’s trade in gold. It’s a neutral currency. It’s not one of ours. We can’t inflate it away. At the end of the day, we’ll trade our balances on net in Gold.
Ronnie Stöferle:
Yeah, I think that’s actually happening. If we have a look at the importance, let’s say, of China, but also the renminbi in bilateral trade, I think this is clearly happening. Let’s not forget, it seems that compared to the first term of Donald Trump, I think the Chinese do much, much better cards because back then, from a negotiation point of view, I think that Trump still had the feeling that he has got better cards in that big poker game.
But now we know this Trump always chickens out thing. We know that actually when it comes to technology, but especially when it comes to the production and refining combining those rare earth metals that China has huge leverage on the United States. Therefore, I think that if you compare the language of the big agreement between the US and China, and I think that Donald Trump said on a scale from zero to 10, it was a 12. It was a really positive outcome.
If you then read and compare it to the official statements by China, It sounded much more neutral and even negative, basically kicking the can further down the road. I think if you take a step back, I think there was big, big progress being made by China when it comes to technology, when it comes to, as I’ve said, the leverage that they have, but also when it comes to trade agreements with other emerging markets.
I think that if you remember those pictures from when was it, I think September, when we had the meeting of the Shanghai Corporation Organization, and there were Modi of India, then Vladimir Putin of Russia and Xi Jinping of China. They seemed very, very close.
I think the body language was really what’s quite interesting to read. One day after, we had one of the largest energy deals of recent times. Then one day after, there was a big military parade. I think that also had an influence on the price of gold back then. It seems that this alliance, China, Russia, and India is getting stronger and stronger, which is a very, very powerful combination in the grand scheme of things.
Monetary Metals:
Yeah, large landmass, large amount of people, and of course, large economy. So, Ronnie, what do you think about this idea that institutions are now also going to get in on the gold game? Obviously, on one end of the barbell, you have retail investors, whether they’re in Turkey, the United States, Germany, India. And then on the way other end of the barbell, you have someone like central banks, which are basically the biggest institutions of all buying gold, whether it’s Poland or Russia or China.
But it feels like in the middle, all the way from family offices to institutional investors, we’re missing out on that gold play. Obviously, Morgan Stanley has said maybe a 60-20-20, J. P. Morgan, call it for $5,000 gold. But where you see these middle market players, the big institutional players, are they becoming more interested in gold?
Ronnie Stöferle:
Well, to some degree, I would say. But I can tell you, Then from talking to institutional players like pension funds and so on over here, it seems that most of them, they actually miss the party, and now they say it’s too late. Then there’s quite a lot of conversations that we have where they are talking about taking profits and going down from 3% allocation to 2%, and I think that’s actually pocket change.
There was a survey by UBS regarding the allocation of single family offices to physical gold, and it was a mere 2% allocation. I would say we’ve got this big structural demand that is coming coming primarily from emerging markets. I know that Monetary Metals is also very, very active in United Arab Emirates, and Keith is quite often in Dubai, and I think you hired also some people in this market.
The last time I was in Dubai, I was really astounded. 25% of global gold trade happening out of Dubai now. If you add China and India, you can basically say that two-thirds of the whole gold demand, the physical gold demand, is now coming from emerging markets. This is, from my point of view, the foundation of this bull market.
Then added on top, starting in 2022, official demand with three years in a row of more than 1,000 tons of gold being purchased by central banks. I think this will continue. I think for this year, we’re right on track, so we should end up at like 900 to 1,000 tons of gold by central banks.
Then what we’re now seeing is ETFs and more momentum traders coming in. There was a great chart by Bank of America showing the inflows into gold since the year 2020. It was roughly 100 billion. Now, if you compare it to cash to equities and bonds, those numbers were between 3 to 5 trillion. I would say, again, we’re in the bull market.
Gold was overbought in October, but I think it’s still vastly under owned in the Western world. I think this will continue. I think the fact that silver is now starting to outperform gold, that’s a pretty decent sign that we are now in a different stage of this bull market.
Monetary Metals:
Ronnie, before we get to the lightning round, I want to ask you about some of the risks to gold. Obviously, they can’t all be bullish signals because, for example, on one hand, you might say, Hey, central banks are buying gold. That’s great for the price.
But on the other hand, if they need to defend their currencies, they may need to sell something liquid, and that’s where gold comes in. What do you think are some of the biggest risks to the gold price right now?
Ronnie Stöferle:
Well, I think one of the biggest risks is obviously the Federal Reserve being more hawkish than anticipated. We’re already seeing, I think for the December meeting, it’s like a 50/50. While the market wanted to discount a very, very dovish Federal Reserve. But then we also know that J. Powell, that his term will end next year in spring, and Donald Trump will probably introduce somebody very, very dovish to the Federal Reserve.
I think there should be some pressure on the downside for interest rates. Then obviously, the whole debt situation, if there should be some a turnaround, that would be a threat for the price of gold. But let’s face it, Elon Musk, he tried everything, and he came in with this DOGE idea and said the US could save, what was it, like three trillion And nothing really happened. And I think he ended up with $155 billion.
So the interest situation hasn’t really changed. The US is spending almost a trillion this year on just servicing the debt or the interest on the debt. So I don’t really see any major threat. Does that mean that the price of gold cannot go sideways or correct even further?
Yes, obviously that can happen. After such a huge rally, let’s not forget the price of gold was trading at, what was it, 2,700 just one year ago. That’s a major, major run. I think actually it’s good that we’re now taking a breather, that we’re consolidating. I think that 3,800, that would be the target for my correction.
Actually, our active aurum signal switched from bullish to neutral. That doesn’t mean that we’re stepping on the brakes, but it means we’re taking some profits in the mining space. The mining stocks are up like 160% since we got that green light from our timing signal. We’re taking the foot off the gas pedal. We’re rotating more into quality names again. I think I’m feeling quite happy with that game plan.
Monetary Metals:
All right, Ronnie, let’s move into a rapid fire round. I’ll ask you questions all over the map. You can answer as short or as long as you want. Let’s start with all these different measures of financial repression that we’re seeing towards gold owners. In China, there is a VAT tax that was lifted.
Italy has proposed taxing, newly declared gold holdings that come into the official sector. What do you think about this idea that countries are going to add more financial repression to gold and not Yes, this is something that I’ve been addressing quite often recently, some a soft gold confiscation, not a 1930s confiscation, but instead of that, countries weaponized organizing tax codes and reporting rules, this is happening.
Ronnie Stöferle:
In Italy, the government wants a one-off levy, so households can legalize undeclared bullion, jewelry, and coins by paying, I 12. 5% on current value instead of risking 26% tax on a full sale value if they can’t prove the purchase price. You have to have the invoice. I think things like that will happen more often.
But then, on the other hand, in the European Union, you cannot, for example, introduce a VAT on gold, or you simply cannot confiscate it. Because actually on a gold coin, like the one ounce Philharmonic coin, this is actually legal tender. It has a face value of €100. Obviously, the material value is significantly higher, but it is legal tender. I can go to a grocery store and pay with that for like €100, and actually the stores have to accept that.
Therefore, I would say more measures to give you a hard time buying gold, for example, in Germany. If you don’t want to show your ID, then you can only buy gold up to €2,000, which isn’t a one-ounce coin anymore. In Austria, it’s still €10,000. I think we will see more and more of those measures. Also in China, they’re introducing a new VAT regime on exchange-traded investment gold.
I think those things will happen going forward, but I don’t really see. Just one final thing, the best definition of financial repression is by my dear friend Russell Napier, who said it’s stealing money from old people slowly.
So money will more and more being funneled into that directions where it would normally not go to, for example, government bonds with negative of real interest rates. I think this will be happening plus higher structural inflation.
Monetary Metals:
Okay, Ronnie, next one for you. Is the idea of a 60/40 portfolio being the benchmark for investors? Is that idea basically dead?
Ronnie Stöferle:
I would say so. Why was the 60/40 portfolio so popular? Obviously, because inflation wasn’t the concern. Obviously, because we saw a negative correlation between equities and bonds. Every time equity struggled, bonds basically worked pretty well as an insurance policy. That changed in 2022. Now, they’re positively correlated. From a portfolio point of view, you want to own something that is not correlated or negatively correlated, which is gold, obviously.
We came out with the new 60/40 portfolio already last year. Now, a company that is slightly larger than incrementum, Morgan Stanley came out with the 60/20/20 portfolio, 60% equities, 20% bonds, and 20% gold. I think that’s quite interesting if a name like Morgan Stanley is recommending that. I think that if you believe that inflation volatility will stay around, then I think the 60-40 portfolio is dead.
Monetary Metals:
I think In Gold, We Trust is a lot better than the Morgan Stanley report, but that’s just my opinion. Okay, next one for you, Ronnie.
What about silver and specifically the gold to silver ratio? Should that still matter to investors where they should be thinking about the gold to silver ratio, or is it more just a historical artifact that gold and silver used to trade at a certain ratio, and now they don’t?
Ronnie Stöferle:
No, I think it’s on a relative basis, silver is dirt cheap. We’re still at a gold-silver ratio above 80. The long-term median is roughly 60. I think on relative terms, silver is cheap. We know that usually within the gold bull market, the gold-silver ratio is trending down.
I think that the risk-reward ratio for silver is actually even more interesting than the risk-reward of gold. Where I’m always a little bit cautious is people saying that 15 to 1 or 16 to 1, that’s like the natural Gold Silver Ratio. I don’t see it as a mystical target, but I think that usually every big trend ends in extremes, and therefore, I think that the gold-silver ratio will not end up at the long-term median at, let’s say, 50, but definitely lower.
I’m clearly seeing triple-digit silver prices going forward. Yeah, and as I’ve said, the risk reward for silver is excellent.
Monetary Metals:
All right, last This one in the rapid fire section, Michael Burry, of the fame from Big Short, is actually shutting down his fund, supposedly. Do you think this is a contrarian top signal, or do you think it is something else entirely?
Ronnie Stöferle:
I think it’s a late cycle indicator. Skeptics, they get exhausted and they step back. I think Michael Burry said he clearly doesn’t understand the market and valuations anymore. It’s also a sign of this This time is different narrative that is really dominating and basically pushing market participants more on the value side out of the market.
We’re clearly seeing that positioning has become very one-sided. It seems that everybody only cares about NVIDIA numbers anymore and all those AI stocks. We all know how it’s going to end. This I think, very stepping down, it clearly fits the picture of a very mature macro cycle where the risk isn’t that bears are early, but rather that they’ve stopped being listened to.
Monetary Metals:
Ronnie, what’s a question I should be asking all future guests of the Gold Exchange podcast?
Ronnie Stöferle:
That’s a great question, Ben. I would say quite a lot of our work is around the question of sound money and what is sound money and are we going back to sound money? Perhaps a good question would be, and this is really dear to my heart because we’re doing that for 20 years now, publishing the In Gold We Trust report.
For 13 years now, we’re managing investment funds that should make a difference for our investors. I think it would be an interesting question for all your guests I’m just asking, what are you actually doing in your daily life and in your business life to get people more interested into the topic of sound money and discussing money and discussing the question, what money actually is, where it’s coming from, and if we go back to some…
It doesn’t have to be a gold standard, but more of a sound money regime. I think that would be an It’s a interesting topic.
Monetary Metals:
Ronnie, where can people find more you and more of your work?
Ronnie Stöferle:
Yeah, obviously, for our investment funds, it’s incrementum. Li. We offer funds that are primarily, I would say, gold, silver in the commodity space, also the combination of gold and Bitcoin. Then I would say we’re very deep into the topic of inflation protection and really achieving positive inflation-adjusted returns for our investors.
In Gold We Trust is Our yearly publication, we publish it now for 19 years. So next year’s edition, save the date, 20th of May will be the 20th edition of In Gold, We Trust. We publish in German, in in English, in Japanese, in Spanish. And today, actually, we published the Mandarin edition of this year’s In Gold, We Trust report.
You can also download our monthly chart books. We’ve got special publications about gold. Have a look at ingoldwetrust.report. This is all totally for free, thanks to the support of our premium partners.
Then if you want to follow me and my thoughts on charts, but also some random thoughts about sports, music, and so on, follow me on Twitter or X. It’s @RonStoeferle.
Monetary Metals:
Ronnie, it’s been a pleasure interviewing you and having you on the Monetary Metals Advisory Board. We’ll have to have you back on soon.
Ronnie Stöferle:
Thank you very much, Ben. Always great talking to you. Thanks for your great questions, and all the best. See you.
Monetary Metals:
Thanks, Ronnie.
