70: World Gold Council's John Reade – Gold as a Long Term Asset

[i3] Institutional Investment Podcast

John Reade is the Chief Market Strategist for the World Gold Council. John is not only a former investor with a well-known US hedge fund and strategist with investment bank UBS, he actually started out in the mines of South Africa as an engineer. In this podcast, we talk about gold as a long term asset, the potential as an inflation hedge and discuss some of the common criticisms of gold voiced by institutional investors. Please enjoy the show. Overview of Podcast with John Reade, World Gold Council 02:00 My father was the second most important engineer on the Queens Elizabeth ocean liner, so I have been surrounded by bits or metal and projects around the house since young 03:00 My mother wanted me to become an accountant, which seemed rather boring to me, but mining and traveling around the country seemed really interesting. 03:30 I was told that I would struggle to work with all these Northern miners who were rough and tough and ended up working underground and in projects in South Africa 05:00 My mining background allowed me to ask questions of mining companies they were not expecting 07:00 I always had an interest in financial modeling, even when working in mining, and eventually went into stock broking, covering South African mines. 09:00 I had been frustrated as a gold analyst in the 1990s, because the gold price was basically flat to heading lower. 11:00 During the GFC gold went up again and I got to speak to lots of people and tell them my views 12:00 It is your job to love gold, but from an institutional investor perspective isn’t gold speculative? Is it possible to determine the intrinsic value of gold on a consistent basis? 13:30 I’m not one of these gold bucks that you see all over social media. We look at gold as a strategic, long term asset 16:00 Moving to an integrated model to determine the gold price 19:00 Is the role of gold in a multi-asset portfolio simply to be a disaster hedge? 21:00 Gold is not the only asset that hedges against inflation as was the case in the 1970s, you now have inflation-linked government bonds, but it has a lot of useful attributes to hedge against inflation as well 22:30 You often hear from commentators that gold isn’t a very good hedge of US CPI. That is true when there hasn’t been a lot of CPI 26:00 Correlation between gold and US monetary policy 28:00 The long term impact of geopolitical event, such as the invasion of Ukraine, on the gold price 30:00 If we end up with an environment of lower growth and higher inflation, then yes that will have an impact on gold returns 31:00 Are cryptocurrencies a form of digital gold? “That is nonsense. It is not behaving like a store of value; it is behaving like a risk on asset”. But there are some similarities 34:00 You can’t have a store of value when you have an implied volatility of 50 - 150 per cent 35:30 What is the best way to gain exposure to gold in your experience, gold companies, commodities, or ETFs?