Jeffrey Christian: Correlation and Causation in the Gold Market
Tom welcomes back Jeffrey Christian Managing Partner of the CPM Group to discuss their latest report on gold and why the world is shifting towards higher gold prices.
Jeffrey discusses gold’s recent performance and why he expects inflation will keep the price up. He expects the geopolitical situation with Ukraine to largely be resolved by the second half of this year. He remains bullish on gold because the world is facing numerous issues.
Jeff discusses some of what he calls strange beliefs around gold. Many believe the price should be much higher despite having few good solid reasons for that belief. When various commodities are compared against the gold you see that gold is operating in the expected price range.
The gold market is fairly complex with Central banks being a large factor along with banks and big firms having a short-term effect on prices. Central banks tend to have no time horizon on their holdings. While retail investors often have a larger effect on price due to volume and the sheer number of participants.
Their yearbook compares and contrasts the price of gold with Fed rates and commodities and inflation rates. He expects interest rates to rise to the three percent level and that inflation will contract. He doesn’t expect rate hikes to hurt the economy.
Food prices are going to be elevated for at least a year. This is due to the conflict in Ukraine and the sanctions imposed on Russia impacting grain and fertilizer supply.
Jeff expects another recession between 2024 and 2026.
They are bullish on platinum in the long term while bearish on palladium. There seems to be a shift back to platinum in the automobile market.
Jeff discusses the Rubles drop and recovery and how they set a floor on gold for internal purchases within Russia. Much of the Ruble’s move is due to Gasprom bank purchasing rubles with Euros in the market.
Jeffrey discusses the United States auditing process for their gold holdings work. Much of that gold has been sealed in vaults and drums. The audits regularly verify these seals. Jeff argues against the idea that America’s gold has been secretly leased or rehypothecated.
Time Stamp References:
0:00 – Introduction
0:33 – Gold Yearbook Review
4:49 – Expectation Management
11:29 – Investment Drivers
15:32 – Fed Funds & Gold Price
19:23 – Fed Rate Hikes
20:55 – China & Global Economics
24:21 – CPI & Rate of Change
33:35 – Ukraine & Food Inflation
36:50 – Energy Market Imports
37:43 – Yield Curve & Recession
42:18 – Platinum Metals
45:28 – Russia’s Misconceptions
50:38 – Reserve Currencies?
54:14 – Reported Gold Holdings
1:00:13 – U.S. Gold Audits?
1:07:35 – Rehypothecation?
1:10:13 – Wrap Up
Talking Points From This Episode
- Gold’s recent performance and the drivers for gold from here.
- Inflation outlook and his thoughts on the Ukraine conflict becoming resolved.
- The Ruble’s recovery was mostly due to Gasprom’s purchasing of Rubles for Euros on the market.
- How audits of the United States gold holdings function.
Jeffrey Christian is the Managing Partner of the CPM Group. He is considered one of the most knowledgeable experts on precious metals markets, commodities in general, and financial engineering, using options for hedging and investing purposes. He is the author of Commodities Rising 2006.
Jeffrey Christian has been a prominent analyst and advisor on precious metals and commodities markets since the 1970s, with work spanning precious metals, energy markets, base metals, agricultural markets, and economic analysis. The company was founded in 1986, spinning off the Commodities Research Group from Goldman, Sachs & Co and its commodities trading arm, J. Aron & Company.
He has advised many of the world’s largest corporations and institutional investors on managing their commodities price and market exposures and providing advisory services to the World Bank, United Nations, International Monetary Fund, and numerous governments.