Transcription
The whole system is going to collapse, and none of us own enough cash if the path of least resistance is inflating our way out of the system.
And so, >> wait a minute, what do you mean the whole system is going to collapse? >> Special coverage from the floor of the Royal Symposium is brought to you by Palace of Gold. >> Does the latest cooling inflation indicate to you or to markets overall that inflation is over? Well, that's a question we're exploring with Tavi Costa, co-founder and CEO of Azura Capital. And more broadly, what Tavi is looking at right now for the best plays into the end of 2026. We have a few important questions. If the Fed raises rates into September or into the end of the year, is that a gold buying or topping signal? And furthermore, with uh semiconductor stocks selling off, especially abroad in Korea, does that present an opportunity to rotate into that sector or is that an indicator to rotate out of tech? Welcome back to the show, Tavi. Good to see you. >> Good to see you too, my friend. Would you like me to answer that question already? [laughter] >> Yes, please. Tavi, let's let's go uh right into the answer if you have one for us. The great rotation, is it happening right now and how would you be positioned?
>> Yeah, look, I I I'm not sure I would rotate back, you know, into into tech. I think if anything, things are so overbought and um so concentrated in that aspect of the market that I certainly would would shy away from having any exposure to that at all. I think that it is we need to to take two assumptions when investing, just my my two cents, and that's the US has uh two limitations, if if if I could say. Um, I'm not sure we can really embark on another tightening cycle like we saw back in 2021 when inflation got out of control after COVID and the Fed decided to go through multiple hikes uh in interest rates that basically caused the metals to go through a a correction in that time. So, I'm not sure we can really go through that again. I really don't believe that that's going to be the case. And number two, I don't think we can really afford a war like at this point. I mean, I think that those two things, you have to sort of act accordingly. And in other words, if metals are selling off because of that um and and you're seeing uh of some other assets getting discounted because of those two reasons, I think you need to act accordingly. And so I I view this as a as a very significant opportunity. There's not going to be a lot of times in a secular bull market for metals that you're going to see the market as discounted as it is. And the beauty of it is that you're seeing some of the the best and well-run businesses in the mining industry now down 45, 50%. So it is to me a very uh very important opportunity that I'm I'm willing to uh uh to put capital to work in this in this situation. Okay, that's the focus of our conversation today is where you're putting your capital into, how you're putting your capital to work, and whether or not you're rotating back into gold mining stocks after their big uh decline. GDX is down to something like 35% year to date, but we'll come back to that. On inflation, I mentioned in the introduction, inflation data has been softer. The latest CPI print came in not only lower than the previous month, but lower than actual Wall Street consensus expectations. Now, Federal Reserve Chair uh Kevin Walsh did say in his testimony to the House Finance Committee earlier this week that inflation, long-term inflation is a monetary phenomenon or at least caused by monetary policies. That's what he said. Long-term inflation is caused by monetary policies. Do you agree?
>> Agree 100%. And if you look at the money supply of the US, of which the Fed has some control but not full control over, it has gone up tremendously, right? It's going straight up again. Fiscal discipline is out of the window. I mean, I think Kevin Walsh puts some incredible commentaries out there, but I'm not sure he can do much. It sounds great, everything he's saying. But what is he? I I I'm very skeptical of the all everything that he's saying because despite the fact that it sounds wonderful, all the changes that he's looking to do, this sounds to me like Doge. If you recall when we talked about reducing spending and making a bunch of changes fiscally, and guess what? We're two years from that and there are no changes. In fact, the fiscal situation has only gotten worse. And and now we are also engaging in a war. Um, and so it is, you know, spending >> is not likely to stop anytime soon. And that, you know, if it is a monetary phenomenon, you know, then act accordingly here. Like this is literally what's happening. And inflation, if if if that's the case, and inflation is not going to stop. Um, and so maybe government data, maybe they will manipulate the data and show different things and different measurements, which is very possible. I mean, they're literally making changes that we haven't seen in a very long time. Uh, or or we have seen in a, you know, there there are precedents of changing the measurement of inflation. We all know that. But um, you know, have we seen this level of commitment from a Federal Reserve recently? Uh, no. This has been definitely a change uh in in the way we may uh we may approach how inflation is being calculated. And and that that will probably be uh, you know, all sorts of justifications to allow the Fed to um, you know, to reduce rates and actually be much more accommodative than than people believe. So I stay very firm on that view because if we're not going to do that, then the whole system is going to collapse and and none of us own enough cash if that's the case, really. Uh, that's that's going to be the case. And so um, I'm not sure, I'm not sure even Trump uh would would allow that to happen on his own uh under his own uh leadership. So um, yeah, I think that as always, we've always talked about this, but the path of least resistance is inflating our way out of the system. And so uh that is the more likely path that we are likely to see here.
>> Wait a minute. What do you mean the whole system is going to collapse?
>> Well, if [laughter] if we tighten conditions and we're really going to be serious about inflation, which is, you know, at levels we haven't seen, you know, in a very long time. And I'm talking about real inflation, not just all these crazy metrics that government and other people tend to see. I mean, walking on the grocery store shopping and and uh and doing grocery shopping or anything along those lines or any service businesses that you see, you know, inflation is is definitely at a level from five years ago that uh are it's it's a measurement that is it's way way above anything that it's been reported so far. And if that's the case, we're going to take it serious, all those implications that we're seeing in society, and we're going to be tightening conditions accordingly. What do we need? We need 15% interest rates, 10% interest rates. That would be insane. You know, the system cannot afford this. In fact, the system can barely afford the current interest rate regime. Uh, at 375 right now, you know, the entire the entire Treasury market is is is borrowing money at a rate that is just unsustainable. We're trying to grow the economy of four to 5% just to pay down the debt. For how long can we be doing this?
>> So what you're saying is we we can't afford to go to war with Iran?
>> I don't think so. I don't think we can. And I it's not a question of me agreeing or not with the war. Like that's not the point. It's not a political uh >> statement. All I'm saying is we're not in a position that we can just keep spending uh this this type of capital. Um, or that's is precisely what you're seeing the the the movement in the treasury market is is is exactly because of that. It's because spending is is out of window. It's not it it's not the way it was praised by Doge literally two years ago that we would stop spending. We're seeing the opposite of that. And so, you know, hence why a lot of assets are performing the way they are. We're in my view not too far from seeing an emerging markets, you know, sort of volatility in in the treasury market. I mean, the treasury market is is almost as volatile as the treasury market for any other emerging market nowadays. And so, you know, what are we doing here? I mean, this is the treasury market just to be very specific is what holds the key for the dollar, right? Like it's used for collateral for every every country in the world and sovereign institution, central banks, you know, that's what they use. And um, if we start seeing this level of volatility persist, it's going to be a problem very quickly. So the system cannot allow this uh for too long. And you know, so I I don't really buy into this this conversation that any Federal Reserve chair has that level of control that Kevin Walsh is referring to. I think this is his his his actions are highly limited.
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>> If we do have data that shows us that inflation is coming down though, how would you interpret the recent data?
>> Yes, data can be manipulated. Yes, they can change definitions. Yes, they can change measuring systems. But take a look at not just CPI that I brought up earlier in the introduction, but also PPI, producer prices, not just disinflationary, but outright deflationary for the latest month, with uh goods prices down 1.4% on the month, overall negative 0.3% in June.
>> On on the month over month? Not year?
>> Month over month. Oh yes, you're right. You're you're right. You're right. Yes, that is an important distinction, month over month. Thank you for correcting me. Month over month. But still, the trend is disinflation. At least for the latest couple of data points, Tavi, people are looking at this and probably thinking to themselves, inflation is over. Gas prices have come down because the war in Iran has um has has has reached a pivotal point and now it's reigniting. But that's a different story, which we'll talk about. At least in the short term, it looks like inflation expectations are coming down a bit and consumers are looking to see a bit of a reprieve in prices. Is that your expectation?
>> You know what what's fun about this situation? I've been covering macro for for a long time and I I have a very strong feeling that this type of data is becoming completely irrelevant. And and it's not me just trying to justify my views by saying that the data that is being presented against the view that I believe is is is proving otherwise and and rather just just to say that in inflation in the real in the real world has not gone down at all. I mean, we can talk about growth. We can talk about how some things in terms of growth have decelerated, but we're still expanding on prices of goods and services in the US and other parts of the world in in a degree that, you know, it it is unsustainable. Um, what I what I would say, look, there are some data points that I would point out that have come down that are going to become Kevin Walsh's best friends. Uh, you know, you can call it the true inflation uh index. If you look at that index, it's gone straight down, right? Um, and and it's claiming that there's no real inflation in the system today. No, I I don't I don't think I don't think that's >> you know, government data is becoming sort of a joke here. [laughter] It's it's it's hard to believe in any of these numbers. Um, but um, but but look, you know, if if that's if that's the case that people want to make that inflation is, I I I I I would say I would say there's two types of of of inflation in the system. There's government data and there's a real inflation. I think real inflation is is is is even hard to measure, but we all know it's not going lower, it's going higher. The government data has decelerated here recently, and it's exactly what is used to impose monetary policy. And if if that's the case, um, and you know, I think it reinforces again, uh, Kevin Walsh's, uh, potential, uh, direction of policy that would be easier, not not tighter. Um, and that's not what the the the Treasury market as well is is pricing in. I mean, we're seeing hikes already. 100% probability is is is already priced into the markets. And >> I I don't buy into it. I don't think we're going to see rate hikes. I really don't think that that's going to be the case. Um, and uh in the next 12 months. Uh, and maybe we see one, maybe maybe I'm wrong and we see one of them and and uh and but but I don't think I don't think there's much of room here to to again to to really uh impose that type of policy moving forward.
>> Well, Tavi, you're looking at it from the perspective of what should the Fed do. Yes, you're right. And look at this chart that you've tweeted here. The US 10-year real rate has gone up. It's the highest level in two years. In Euro, when Scottisen said to judge him by the 10-year Treasury, while the uh markets are the ultimate judge of fiscal discipline. Remember, the US simply cannot afford both the war and higher interest rates. So that's what you posted on X. So given that that's what you think the Fed should not be raising interest rates, but what data would they be looking at that would make them raise interest rates anyway? In other words, what is the Fed's framework that they're basing their judgment on?
>> Well, I think that the only way to justify a rate hike in these days would be potentially looking at the obviously the energy price and what's happening with the war. Um, and in a normal world where there's no debt in the system, you should be raising rates in this environment. Look at what's happening with the equity markets. Um, you know, equity markets at all-time highs. Uh, earnings are going in a vertical line. Uh, so there's definitely plenty of justifications to hike rates. The problem is again, the system cannot tolerate much higher cost of capital here. Um, maybe one rate hike. Um, again, we're growing the economy at 4 to 5% just to pay down the debt. Like what are we talking here? We're going to raise rates again. Um, about, you know, 25 to almost one-third of the of the entire debt needs to be rolled over in the next 12 months. So we're just going to increase the cost of the debt overall. Like we're just inflicting that pain in ourselves. I don't think that that's what we want to do either. So, and more importantly, I think of fiscal spending as a pie. And there's a very growing percentage of that pie, which is on interest payments to GDP. That used to be nothing. And now it's it's a huge amount of of of of the of the fiscal spending that we we have. And we need to reduce that in order to spend money in infrastructure, healthcare, um, you know, uh, education, all sorts of things, all sorts of sectors of the economy that is needed when it comes to that. And so I I would think that that's a a bigger priority uh for policy than uh than than hiking rates to to accommodate for energy prices. You know, we literally cannot afford that.
>> Okay. What does that mean for the US dollar if the debt continues to uh increase?
>> Look, in theory, economic theory should tell us that the home currency, domestic currency, should devalue if debt increases, all else being equal. Uh, that has not really been the case at least in 2026. The DXY, which is the dollar relative to other currencies, has strengthened since the beginning of the year, gone down a lot since last year though. Um, yeah, your comment on the recent movements in the dollar and ultimately how the debt situation will impact the dollar going forward.
>> Yeah, look, I I think the dollar has been an extremely strong currency recently relative to other fiat currencies, and uh the the likelihood of that continuing to be the case is is is also very unlikely in my view. Um, and that's mostly because, you know, when you think about again, the compounding factor of of the debt, it comes down to two things. Is is not just the fiscal side. The fiscal side is is an obvious problem, but there's a second side of it, which is the trade balance. And the only way you adjust the trade balance is either with trade agreements um or you can also make another adjustment, which is through a US dollar that devalues, uh, and makes your exports more attractive to other counterparties, and that way increasing uh, or improving our deficit. And we still have to run a deficit on the trade side to provide dollars to the rest of the world. But despite all that um, we don't need to run a deficit that is as steep as it is right now. We're looking at a twin deficit problem of about double digits right now, which you can think about this as, I like to say, I mean, running a country is like running a company in a sense. You have two sources of revenues. You either collect more taxes than where you spend, or on the other side, you export more than you import. When you're running both of them a very steep deficit, you're compounding your debt, you know, you're you're just having a loss in your your net income, and you're compounding your debt problem. And so, you know, that's has been happening for for decades in the US, but we're seeing this uh at a degree that it's now becoming more and more alarming. And so, yeah, I don't I don't see how we uh we we do this without having to force uh the Fed to lower rates and at the same time cause uh the dollar to be readjusted much lower as well. So, you know, if we want to continue to use the dollar as a global reserve currency, we need a much weaker dollar. This is way too strong for for being uh in in a dollar system in my view.
>> What is America's primary economic advantage into the next decade?
>> Um uh there's there are plenty. I mean, that, you know, the leadership that we have in AI is going to be an important role uh into into that. Um, I think there are a few things that the gap between the US and the rest of the world is is likely to change. It's likely to narrow, if you will. Like like let's just think about labor markets. You know, labor markets in the US have been a pool of of labor that we haven't seen in a very long time in history of economics where some of the best brains of the world are all wanting to come here to work. You know, and and that creates an atmosphere of labor markets that we don't see anywhere else uh in the world today. Uh now with AI, I think it does, you know, uh uh it does help to reduce that advantage in the US versus other parts of the world. And I think that needs to be readjusted on multiple differentiators of businesses uh in the US relative to other parts of the world. And so that, you know, but the US is still ahead of, you know, rule of law. You know, it's another thing that certainly is imposed in in a much more strict manner than other parts of the world. Um, and it still is the best place in the world to to to uh to work and so forth and so and to create a business. Um, although again, that gap has been shrinking, it's not a gap that is is is is straightening. And we have to acknowledge that from so you basically seen that gap shrinking, but the valuation of businesses have not shrunk at all, right? Like it continues to expand relative to other parts of the world. So that concentration needs to be adjusted accordingly in my opinion. Um, I think we're going to go into the next five to 10 years into an era uh which is not the end of the world. It's just the cyclicality of of leadership in markets may rotate back into the rest of the world. And and hence why I think Latin America would be one of the areas that that will attract some institutional capital moving forward as well.
>> Is that uh due to um currency differentials or something more fundamental with the economies growing in Latin America?
>> You know, it is remarkable that you're seeing some of the, and not very reported by many people, but if you look at the performance of currencies across the last, I guess in the last five years, um, the best performing currencies in the world have not been uh developed markets or anything along those lines. It's actually been uh Latin American uh currencies. The the uh Peru, Mexico, Brazil, um, all those have actually seen outperformance relative to the. And I think that that's, you know, that's a strong sign of of of smart capital coming into those areas in a in a significant way. Um, I would say that Latin America also is one of the most unexplored regions of the world when it comes to natural resources and is becoming increasingly attractive for strategic partnerships with areas like the US that are seeking those resources moving forward. And it's a much easier place to navigate than areas like Africa. Um, so no, I I would put a lot of weight on on how Latin America will become more and more strategic. And on top of it all, you're seeing a very significant shift in politics, leadership, uh, that we haven't seen in a very long time. At least in my lifetime, I haven't seen that occur. And so the polarization and the shift towards capitalism in those areas can be a very powerful shift that markets are underappreciating. In my view.
>> Latin America is very big as a region. Uh, I know it's classified as one kind of jurisdiction from an investment classification standpoint, but there's a big diversity in areas, cultures, uh, even inflation rate. The Mexican inflation rate, I think, is less than 5%. Argentina is greater than 30%. Venezuela has hyperinflation. And so, you really have to pick and choose here. How do you decide?
>> Well, investing, the the good news about investing is it's not about where where we are. It's about where we're changing towards. And so you're always thinking about the net change we're going to see a year, two years, three years, five years, whatever the horizon is that you're investing. The problem can still persist, but if it's changing in the right direction, you're probably going to make money on your investment. So that's the plan here. In in Latin America, it's not that it's going to become a perfect place to live, but it's it's likely to change in a positive direction. Um, and so I do think that there's a lot of cultural differences in the region, but I would argue that the cultural differences are not as far as you see in other areas of the world. Yeah. Um, I also think that it's those parts of the world are very uh open-minded to resource businesses. And if we are indeed in a hard assets era where capital will be flowing back into hard assets, you would suspect that that these companies and these businesses that are running in those countries are going to perform better. Also, I would I would say that in a lot of ways, like let's take Chile as an example. If you want to invest in Chile today, you're going to take the ECH ETF and you're probably going to be looking at that as as your alternative to invest in the country. You know, it's a country that is highly highly linked to copper prices, as one of the largest, call it the Saudi Arabia of copper. But the problem with that is is that when you look at the Chilean ETF, it barely has any mining exposure into this uh into this ETF. But the the beauty of it is that the ETF itself follows copper prices because indirectly that copper prices would change completely the the direction of the country. And so, you know, you may see copper prices go up 20, 30%. It may help the banks in that region as well. And so, you know, everything is linked to the resource prices in a significant way as well. And so I I, you know, I I think that that's uh that's going to be the core uh aspect of of the thesis overall is understanding if if you're right about hard assets. If you're right about this the trend uh that that would move back into the commodity space, I would suspect that Latin America is going to be benefiting from that tremendously.
>> Yeah. Here's a chart by the way from our friend Ronald Stoeferle. He called you out on X1 for you, Tavi Costa. This from Bank of America. Emerging markets enter secular bullface. Here you see the S&P versus EM uh with the ratio topping in January 2025. Uh, does the EM market uh or the EM markets overall, they do they follow long-term secular cycles throughout history?
>> Yes. I mean, I mean, look, and funny enough, it's a derivative of the gold space, right? Funny enough, this if you get the gold, the gold trade right, you're probably going to get the emerging markets trade right as well. Emerging markets is a broad, is a broad term to uh to talk about as well, because if you look at the index that you're presenting here in this in this chart, it's actually has got a lot of exposure to China, which is a commodity importer, not exporter, and actually gets impacted by uh commodity prices moving higher. Um, and so in in a negative way. And so I, you know, I I think there's parts of emerging markets that look more attractive than others, uh, particularly the ones that have uh there are commodity producers and are able to actually be commodity producers and trade with the rest of the world. Like places like Russia are very difficult to uh to invest, obviously, because of the the authoritarian uh uh regime that is is in place and and the difficulty of of getting institutional uh money attracted to those areas. And so, so you got have that as well that you have to to uh to to be aware. Uh, but yeah, I mean, I look, there has been back in the 1970s, uh, the derivatives of the gold trade are emerging markets tend to perform well. The dollar tends to be more weaker relative to other currencies. Uh, those those are the most important aspects that you need to be aware of. The early 2000s, we saw exactly the same thing. If you just bought the IBOVESPA, the Brazilian index, back in the early 2000s and sold it in 2011 when was the peak of the commodity cycle, you know, you pro I think you made about 18 times your money. Uh, you know, that's the most boring way to invest in in Latin America. If you took a little more risk and uh was smart enough to pick better investments in the the overall index, you could have done a lot better than that. And so I'm not saying we're going to replicate those types of returns here or anything along those lines, but I do think there's a opportunity to see something similar.
>> Speaking of gold cycle, here's an article from the WSJ. Let's just get your opinion. We talked about rates a lot already, but this article is saying that uh because of higher rate expectations, gold is selling off. Gold was rallying to unprecedented highs above $5,000 an ounce earlier this year when Stu Bradley jumped to the chance to sell. This 83-year-old retired financial advisor wanted to pair some of his holdings, doubtful the prices could climb much higher in the near term. Now he's glad he sold. Yes, it's down 25%. Um, that has increased the opportunity cost of holding gold, or the perceived cost of holding gold. Which they're talking about investors have been worried that the war with Iran could drive up energy prices and inflation, which in turn could lead the Fed to keep interest rates elevated. Okay, that's the key here. Uh, what if they're right? What if real interest rates do go up? Do we get a sell-off in gold? Further sell-off?
>> Yeah. No, that's that's going to be damaging for the gold space for sure. Um, I think um, that's that's that's your bare case. Uh, indeed. But um, I think that that sentence uh that you refer to is is probably in hindsight now. And, you know, investing is thinking about the future, not the past. And so I I think although the past does help to understand what's likely to be in the future, that's not the case here. What we're talking about is is explaining the facts that cause a sell-off. Uh, and, you know, while we can come up with all these reasons, was also very overbought. It was also very over uh gold prices above $5,000 an ounce, and, you know, was was due for some sort of correction. None of us knew when it was going to happen, and none of us knew how steep was going to be of a correction. But the question when you have corrections is always to think about, is this a does that fundamentally change the the thesis for that asset? Either if it's a business or a macro asset like gold, uh, or is it, you know, if it hasn't changed, you should probably be adding to your position. Um, I would I would argue that we haven't seen a fundamental shift on the thesis at all. Uh, in fact, I think all we got is a cheaper price to acquire the asset. So I I would suspect we're in the accumulation phase. And I know it's difficult when markets are going down and most people tend to sort of step back and let the market sort of sort things out, and then they want to step step into the market again. Uh, uh, after you see some sort of relief in the markets. Uh, that's definitely not my approach. You know, I I don't mind to step in at a at a volatile environment like we're seeing now. Silver prices are looking extremely attractive at these levels right now in my view as well, which which is which is uh uh, you know, becoming again, I do think gold, silver are in a different environment than copper at this point. Although all them, all of them, the three metals look very attractive. Um, gold and silver look like more oversold, steeply uh uh, you know, in terms of history. Um, and and should be bought for those reasons. Copper, very different. Copper is more in a price discovery situation, really being driven by a market that we saw with gold prices, you know, six, seven months ago when was accelerating to the upside. Um, and that's kind of how it feels like looking at the the way copper has been trading. When you see a chart like this that's I'm going to put this back on my screen. Gold on an inflation-adjusted basis has not even retraced its 1980 top.
>> What does that mean to you?
>> Oh, it means opportunity, right? I mean, if if uh that means we're not at all-time highs. As Dave, I used to have to answer this question, similar question back when I was initially investing in silver, where people used to say, well, why would you buy that if that hasn't is still lower than it was in the 1980s in prices, you know, like who would buy an asset that is that is down from 40 years, 30 years ago? Um, and my answer was, I I I wasn't buying silver in the 1980s. I, you know, I wasn't even born at that time. And so I, you know, it's I'm not there to defend that thesis from back then. I'm I'm I'm interested in things that are cheap on their own, and and there's plenty of justifications to to take the other side of that view. And I think I think gold is is a I think it's a wonderful asset to own for the next five to 10 years. It's going to be volatile. We're going to have ups and downs. And um, you know, I want to I want to make sure I have my arms around the best ways to to express that view in the markets here.
>> Let's take a look at this chart that you love to post. And I've been following this chart for quite some uh many months now because you started posting it. The divergence between copper and gold.
>> Let's talk about that. Uh, what does this mean? And just for a bit of context for the viewers, let me just pull up a copper chart here. Copper and uh and gold have traditionally um have traditionally been pretty much closely correlated. Okay, this is not gold per pound, but I'm just going to use this as a uh as a variable to highlight the correlation, nothing more. So, um ever since the beginning of April, which you've highlighted, uh the divergence has been getting wider. And now it looks like copper has been trading alongside stocks. The correlation between copper and the S&P 500 is stronger between the copper price and the gold price. Why is that?
>> Well, look, you know, copper is usually the most volatile metal across all of them and usually the more cyclical that is driven by economic changes and forces that we tend to see. Um, what is interesting about copper is becoming less of an economic driven model and metal and more a u you know, an asset that is driven by real supply and demand imbalances that we're seeing that mostly come from structural demand uh from construction, either data centers, onshoring, manufacturing, industrial capacity, highways, whatever that is, residential market. And the other side of is how supply has been so constrained. A lot of people have pointed out how sulfur prices have gone higher because of the war. All that plays a role here. It's not the main role. Like it's just it's so important to understand like that that it's not the reason why copper's divergence is because of that. It's it's one of the reasons and it's an important reason, but I think that the main reason is because copper prices from a behavior standpoint, you don't go to all-time highs, you know, break out to the new highs and go up 5 to 10% above the prior high and and stop there. What you tend to see is sort of an explosion to the upside once you break to those levels. Sort of like what we saw with silver when we hit the $40, $50 level and then it sort of went all the way up to $120, or when gold was at $2,000 an ounce, uh, you know, sort of retesting prior highs and then went easily and quickly up to over $5,000 an ounce. So that's the stuff that we haven't seen in copper just yet. And I think we're in the process of seeing that. Of course, the market is very clouded. There's a lot of things going on that are driving trying to drive the markets lower, especially copper. But copper has been resiliently uh u you know, showing uh a very different behavior that tends to show it tends to lead to the downside in in metals markets like this. And that's not what we're seeing right now. I suspect that this is a stronger sign for if anything for the precious metals side of things where we're probably uh uh, you know, just seeing again uh another way of thinking about if we are in a bull market for metals overall, u what you would see is is actually copper prices leading the downside, not keeping up and and and being so resilient and strong and diverging positively relative to gold prices, even. Um, so I suspect that that means a lot more for the catchup opportunity in gold. Uh, and also how copper will continue to move higher. It almost feels like in a certain way. The great analogy for me is almost feels like somebody's trying to hold a beach ball uh under the water and copper keeps keeps moving higher.
>> And uh, billionaire mining financier Robert Freeland summarizes it uh, in his words, copper is the new safe haven. You actually retweeted that. Gee, that's a bold statement. Not just for copper, but also for gold. I mean, that's more of a statement for gold than it is for copper, I think.
>> Yeah. I mean, he's also talking his book. He's owns a lot of copper, but I respect the guy a lot. I think he's very smart investor. It's good to be on the same side of the of the idea as him. Um, and uh I think I think he's a brilliant mining investor that that needs to be studied and and uh and and folks uh in at least uh that are in the similar position like myself uh need to be trying to learn from him rather. And so um I I appreciate that that he shared that uh because I'm a big fan of his work. But nonetheless, I I also think that uh um I I think that there's a lot of truth to uh how the this changes that we're seeing with copper. I mean, copper used to be a great uh barometer for economic growth and and sort of your real uh task to see how the economy is doing. Um, and I I I also think that that now we're seeing a big change towards that given that the imbalance on the supply side is so severe that is is becoming less of a cyclical commodity uh and and and acting more of a haven asset like like Robert uh Freeland actually mentioned. So I agree with him. You know, it's interesting how we're talking about copper in the context of a safe haven asset and, but but at the same time, copper has been accumulated by governments worldwide as a strategic asset as well. It's been being stockpiled. And that leads me to wonder, there is a case to be made for why oil is stockpiled. That's clear. The strategic petroleum reserve in the US and the and similar petroleum reserves around the world have been used for exactly this particular purpose that we're seeing right now in Iran and fold. Copper makes sense as well. What would be the quote unquote strategic purpose for central banks around the world to hold gold?
>> Uh, debt? [laughter]
>> Okay. All right.
>> Amount of debt we have in the system. I mean, gold is is there's a I think a lot of people think that uh sometimes I I not saying you are asking that question with that idea, but I feel I feel like that question often is is placed as as if gold is not relevant for industrial purposes and other things. And the main reason that I think people are lacking when they claim these things is that they don't understand uh uh the usefulness of gold itself. And and the reason why gold is is a currency is not because it's shiny and it's pretty and it there isn't enough supply. It's because it's so useful, so useful. It's the most useful metal in the world that it became a currency. And now it's so expensive that it can't be used in the real economy. And now it becomes a monetary asset. And so I think that's the importance of of all this. And when you think about the anchor that gold has provided in terms of value for monetary systems globally throughout history, and we looked at how much debt we have, not just in the US, but in the rest of the world. It is highly unlikely that we are not in a structural demand process of accumulation from sovereign institutions trying to accumulate the metal itself. Um, think about the US alone as a great example. The US used to be backed by about, you know, 50% of its treasury market used to be backed by gold back in the 1940s. 1940s was we had as much debt as we have today. And, you know, actually, we have more debt than we had back then relative to GDP, even. And I think that the that, you know, when you look at how much of a treasury market today is backed by gold, it's only about 3%. So yeah, you know, there's there's a a lot of room for that to change. It could happen through revaluation of the metal or just also through an accumulation of the metal. And I suspect that we're going to see a little bit of both.
>> Okay. If gold does fall, I'm not saying it will, but by the way, Bank of America also cut their gold forecast to $40 uh $360 an ounce later this year. So that's down 14% from their previous forecast. But anyway, if gold does fall a little bit later this year for whatever reason, does that put pressure on silver? Does that put pressure on commodity economies like Brazil and Latin America, for example?
>> It should. Yeah. No, I should. I mean, if if that's going to be um, you know, if gold prices go lower, the derivative of gold would be potentially real assets with real real uh interest rates would be moving potentially higher. And you could probably see uh that the dollar would be actually rallying, and that would have an impact as well on on emerging markets. So um, yeah, I would uh if if if I had a crystal ball for gold prices uh where I knew the gold prices will fall, I would not be investing in in in emerging markets because that's uh I think that trade is going to be impacted. That's not my view. I just want to be very clear. That's not my view. But I I'm not also stubborn to to, you know, I I'm very open-minded and flexible to that. If that happens, I will be wrong on these other positions most likely. [snorts]
>> Okay, let's talk about the miners. Now, I understand why juniors could be down a lot. For example, look, if your entire net valuation is dependent on the value of the deposit, then the price of the gold is going to affect the price of your money. I get it. Even at $4,000 gold, we're just below $4,000 today, Tavi, as we're speaking. Uh, the price of gold at $4,000 is still very lucrative for the big miners, the producers, right? That's the view that many people on my show have been telling me. Agnico Eagle right now is on my screen. It's down 44% since the top in March.
>> Um, and by the way, the the it's not even the top in February when gold topped. They they went up a lot more. And then are are miners really suffering valuations losses at 44? Does that seem like right to you? Like they're I'm pretty sure I have a look at the balance sheet in the income statements, but I'm pretty sure the free cash flow hasn't dropped by that much in a short amount of time. Uh, it's fascinating to in to be honest. I think that the biggest thing that we're seeing right now is that the seniors are down in some cases a lot more than the juniors. And I think this is a a tremendous opportunity. When I'm looking at most of the uh companies like Agnico, for instance, is right now I have been able to accumulate um in I think it's probably my one of my largest gold positions right now in my portfolio. Um, and um, you know, just because I agree, you know, you're not going to see a company that has uh so many verdicts when when it comes to generational uh uh mines of of that that will be, you know, producing cash flows for the next, you know, years and decades ahead from multiple fronts. And on top of it, you have one of the best teams uh in place to to uh to execute on that plan. And so >> yeah, I I think I I think that's uh uh, you know, just just that alone is I started probably accumulating when it was down 40.
40%. And uh the the the lower it goes, the more I add to my position here because I I do think that uh that is the type of of company I would like to own in the cycle. And uh and so the markets are giving you that opportunity in my my opinion.
There there's also opportunities in in high quality developer names as well uh that are down 50 60% in some cases. Uh so slightly more than the seniors. Uh but funny enough if you look at the explorers relative to the seniors uh the chart is still going up. If you look at the explorers relative to gold the chart's also going up meaning that the relative performance of the explorers which is the riskier part riskiest parts of the of the industry are actually doing better more resilient than gold prices themselves which is not a sign that you tend to see at the at the you know at you know usually a sign that that you're in the middle or in the beginning of a cycle. not not the other way around. So, you know, I would I would rank those as as important factors to consider as as as a checklist of thinking about where we are in the cycle.
>> Yeah, [clears throat] >> I I don't have this data in front of me and uh I'd have to do a lot of digging, but have you looked at the price to NAF, the price to net asset values of some of these large companies and how that's moved, that ratio has moved?
>> Oh, it has moved massively. I mean I think that the given where gold prices are uh these these companies have never I was looking at that yesterday actually uh have never been as discounted. So in some cases you're seeing prices uh um you know trade at uh in some in some of the seniors you're seeing prices now seniors trading at levels where gold prices were trading well below $3,000 an ounce. And that's not the situation we're in now. And so um and and cost hasn't really changed as much for most of these miners uh despite people saying that you know energy prices would cause a collapse in margins and all that. It's not true at all. Uh and you know
>> how would you describe this kind of move this kind of investor pullback? Uh is it yes one could call it an overreaction but something stimulated the investors the investor group to really pull money out and rotate into something else.
>> Oh, for sure. I think that the war, right, the the the war uh you know, breaking out and causing people to think that monetary policy uh uh path could change uh was certainly probably the biggest aspect of that. Also, the dollar uh which you know the normal the normal environment tends to rally during war periods and it did again. Uh was it a big rally like we used to be see in the past? No. But it was a rally that was caused and and we also all I think that the combination of the factors is important to appreciate here because we also had a such a significant steep move to the upside and most of the gold miners and gold and silver themselves that in a way it was it was only normal to see some level of of of that uh discounted uh uh you know of that of that pullback but that was exacerbated by some of these other factors I just mentioned. So uh it's a combination of things but but uh yeah I mean then you have to ask you know I think that the biggest question when you see situations like this is is you know can the Fed do anything here and really start you know hiking rates by 100 basis points or something like that. If that's your view you should probably not own gold at all like you should probably just move on to something else.
Let's touch base on energy next time. It's very volatile. Uh we'll go over energy in more detail but just broadstrokes here at $80 a barrel. Are you a buyer of energy stocks or crude oil futures if that's what you trade?
>> Uh I am more of a buyer of oil and gas. Uh look, I I I don't know if maybe I don't last time I was in your show, but uh about eight months ago, nine months ago, I was extremely uh bullish energy. Really wanted to own a big chunk of energy uh uh companies. and I sold a lot of them back when we saw oil prices going above 100 and redeployed that into copper names mostly. Um uh now I've been putting more capital work into the precious metals space and I do like the riskreward of energy here especially if you hold a large percentage of your portfolio in gold and silver and miners and copper and so forth. I think that you know these levels of where gold uh of of where energy prices are currently are becoming more and more attractive. Uh also also on the natural gas side of things too like there's some great service service businesses that are uh that are looking more and more attractive also in the US. I am not like I used to own a bunch of the stateowned companies back in Latin America a while back. I don't own them anymore. Um I'm I'm monitoring that space very closely. Um I am as well trying to form a private uh energy company which is a whole separate discussion but I think there's an interesting uh opportunity to do something we've done with the with the silver space back 5 years ago which was acquiring the fourth largest silver mine in the world. Um I think there's some similarities in terms of strategy that you can take in the energy space today. So I'm trying to you know accomplish that.
>> Okay final question. World Cup prediction, Argentina or Spain.
>> You asking a Brazilian. You're asking a Brazilian. I I [laughter] of course I'm going to say Spain.
>> What are we do? What are we doing here? [laughter]
>> Okay. That's that's crazy, David. Uh uh but uh [laughter] I mean England had one job and they couldn't do it. I can't believe it. Uh I'm joking.
>> Yeah. The prediction markets had uh had predicted France actually. That was the uh that was the highest probability for the winner this year. So prediction markets aren't always right on everything. There we go.
>> I feel like I feel like I was reborn in Spain uh at the later ages in my life here as I will be an incredibly big supporter of Spain versus Argentina and I'm sorry for my Argentine friends but
>> I uh I I completely understand. So uh anyway, thank you for that. Where can we go to follow you in Azeria Capital? they can find my work on X at Tavi Coast and also Substack if they wanted to hear more about in-depth thoughts and how I think about um investment ideas and so forth. That's where usually you'll find uh more in-depth work and more detailed ideas and uh Azour is getting ready to launch a fund in the mining space. I love the timing of all this all this steep sell off that we're seeing. This is perfect in my view and so I want to be launching a fund in the next month. I I hope to be to be ready in next few weeks. I should have the docs ready and that's the plan. So yeah,
>> congratulations Tubby. That's a big uh big milestone in your career and your life. So yeah, let's look forward to that and uh we will uh we will uh talk again when your fun launches. Also people should check out Tavi Substack. I'll put that link link below. It's um it's growing very fast. Yeah, one of the biggest uh biggest uh substacks in the space in the finance space. So congrats on your growth. Very happy for success. All right, we'll put the links down below. Make sure to follow Tavi there, Ozeria, and his Substack. And we'll speak again soon. Take care for now.