Ken Moraif
Hello everyone, and welcome back to the Retirement Planners of America Podcast. And of course, I am your host, Ken Moraif, and this is the podcast where we try to have more fun than a human being should be allowed to have when talking about all this boring financial stuff. And as usual, we are going to have so much fun talking, this time about gold, and it’s been in the news. It’s up 90% approximately over the last year, and it’s just going through the roof. So we want to talk about what’s causing that. Why is it happening? Should you be investing within it? You know, should we, like, sell everything and buy gold instead, or should we, you know, what’s up with all of that? And so we’re going to, we’re going to dive into all of those things, but as always, please go to our website. If anything that you see during this podcast interests you and you’d like to talk to one of our retirement planners.

It at rpoa.com so let me bring Jordan Roach into the conversation, my chief, our Chief Investment Officer, and so you know, just as a big picture thing, we titled this podcast, what’s up with gold. So I’ll just ask you that question, what’s up with gold?

Jordan Roach
Jordan, it’s a good one, and there’s a lot up with gold right now. He’s driving headlines.

Ken Moraif
Gold itself is up. Gold itself, not only is it, what’s up with gold, the gold is up. Yes, right?

Jordan Roach
And I think gold is rising as kind of geopolitical tensions have been rising and rising rising for the last few years. Ultimately, yeah, and

Ken Moraif
it seems like this whole thing started back when Russia invaded Ukraine. All of a sudden we started seeing central banks buying up gold.

Jordan Roach
Yeah, it was really interesting. I think you’re right. I think historically, there’s usually catalysts to start driving gold’s movement. And I think the broad one is geopolitical risk. And you know, we were pretty, pretty quiet for nearly a decade leading up to that, geopolitically, you know, blips, but nothing like that. So Russia invades Ukraine with February of 2022, and then you start seeing volatility tick up. Gold really start to move from there, yeah.

Ken Moraif
And you know, historically, people have always thought of gold as a as an inflation fighter. You know, gold is like you need. Gold goes up when inflation heats up. But we’ve been seeing gold inflation go down, but yet gold is going through the roof. So, you know, we’ve been saying this for years. Gold is not an inflation fighter. You know, it went up in the early 80s, at the same time that we had massive inflation. And so we had so much fear in the market that people bought gold at the same time that inflation was going up back in the early 80s. So therefore gold is an inflation fighter. But really, no, it was a fear fighter. I think

Jordan Roach
that’s right. So it’s interesting, you know, with some of our clients, right, day to day discussions that we’ve had at times is they say that is, I want it because it’s the best inflation hedge. But it’s not that simple, right? I think it’s more of a fear asset. And if there is inflation, it’s also of okay. If, if there’s inflation on there are still some currencies, fiat currencies, out there holding their value. So still, I think fiat currencies, and we saw this in the first part of 2022 there was heavy inflation, but also the US Dollar was strong, and gold started actually not going up in this meteoric rise right out of the gate. So I think it is more about geopolitical fear first, which could be led by maybe inflation concerns or war and all these things. Yeah.

Ken Moraif
So the first thing I wanted to do with what’s up with gold is, I wanted to dispel this notion that, you know, gold is this inflation fighter, and that’s why you buy gold. When there’s inflation gold, there are few, there’s little evidence that it’s an inflation fighter, other than the hyperinflation we had in the 80s. Otherwise, it’s always been when there’s a lot of fear in the system. People get scared. And what do they want? They want something they can hold on to, you know, that they can say this thing has value, and I and I, and it’s, you know, it’s real. It’s not right, you know. And so fear drives the price of gold, normally, not inflation, necessarily. Now, when you have geopolitical risk like the invasion of Russia into Ukraine, and you started thinking, Okay, what is you got? Rare earth? You got half the world’s supply of fertilizers. You know you got, when they had gas, you got all sorts of Yeah, so when they invaded Ukraine, boy, howdy, that all of a sudden scared everybody. And so that started the whole gold thing.

Jordan Roach
That’s exactly right, and we’ve seen it. We just kind of add on to that risk, yeah, and it’s kept on going after that, right? Because, you know, the last, you know, 12 months, principally, you know, you’ve always had, you know, Russia and Ukraine is still there. We’ve had flare ups in the Middle East. And we add on Venezuela.

Ken Moraif
We’ve talked to, yeah, Venezuela, yeah, Iran, yeah. So, just,

Jordan Roach
there’s a lot there that keeps pouring gasoline on this, you know, broad global fear.

Ken Moraif
So every time you would think that gold prices would like settle down, something else came along to keep it up at the highs, right? So you had Ukraine, and then you had the bombing of Iran, and are they gonna retaliate? And then you have the whole thing with Venezuela. So you have these strings. Of things that are keeping people on the edge of their seat. That’s right. And it looks like a lot of central banks have been buying gold.

Jordan Roach
Well, that’s the main thing. You know, there are, you know, me with my own dollars, I’m not going to be able to move gold. Prices can’t happen.

Ken Moraif
Oh, come on. You just got to raise it’s going

Jordan Roach
to be you got to have central banks that can throw around 10s of billions, hundreds of billions at a time, that are going to really move it right. That’s what you’ve seen. You’ve seen a few, you know, some countries that are trying to, you know, get the world to kind of shift away from the US dollar. You got China in there, and, you know, maybe in India, you have Poland, other ones. So you have these big central banks that now are starting to pour dollars into gold, and we can maybe talk about this, but because of how much liquidity there is in the world, that type of buying power comes in and quickly can shift prices.

Ken Moraif
Yeah, and if you look at the total value of gold relative to the total value of all the investment the global markets, it’s like less than 1% right?

Jordan Roach
It’s a very small fraction. So it’s, you know, you have gold that’s out there that we know is out there, above ground gold. You have the below ground stuff that we think we can get to. But if you take that relative to all the financial instruments global liquidity out there,

Ken Moraif
there’s just a tiny bit of gold, yeah. So it doesn’t take much. If you get

Jordan Roach
geopolitical fear and people start saying, you know, I want to do is shave money, you know, move money, shift it over from stocks or bonds or cash into that. It’s going to be pretty easy to move things.

Ken Moraif
It takes very little. So you have so you have the institutional buyers, I’m sorry, the the governments that start the central banks to start buying. And so that starts it off, right? The price goes up because they have a lot of buying power. So that starts going and then institutional buyers are like, Wait a second. We don’t want to miss out on this, right?

Jordan Roach
Here’s big institutional money managers go. It’s just fun. It’s easy to own stocks and bonds and all the normal stuff to what if I want to start allocating some of my pension fund, so my endowment over there, and money starts flowing that way too. Yeah.

Ken Moraif
So now you’ve got the second largest source of money, which is institutional buyers, right? And so they start buying because the other guys did. That’s exactly right. And then who’s the last who ends up usually holding the bag? Well, it’s typically retail retailers. So the retail investors, they are all like, Man, I’m missing out. This gold is going up through the roof. I need to buy gold. And so they all pile in, and they’re the ones that get left holding the bag, because next thing you know, the central banks are going to sell theirs, the institutional buyers are going to sell theirs, and the retail buyer doesn’t know what the heck’s going on. They just know it was going up so long I needed to participate.

Jordan Roach
That’s right, and that’s usually how it happens, quite frankly, across most financially, financial instruments, is the trend goes and it sets, usually started off by institutions, and then the retail is gonna come in late, and eventually the institutions are sitting on enough profitable they go, Sure, I’ll exchange some of that to you. And that’s where it gets pullbacks.

Ken Moraif
So it’s kind of a dangerous place, I would say, for most of the people watching this podcast, to say, I’m going to buy gold now, you know, what would you say to somebody who says, I want to invest in gold? You know, in terms of as a percentage of their portfolio, you know, let’s say they have, you know, $500,000 how much of that should they just say, I’m going to go buy gold with?

Jordan Roach
Well, you know, there’s several facets in this. One, you understand, are you? Are you willing? Somebody is going to willing to, like trade it, to be on top of it day to day? Or you, somebody says, look, I think I can allocate a certain point and just let it be. That’s hard to do.

Ken Moraif
But at these highs, if these, if these things that are driving the prices, that’s go away, well, that’s a then the entire run up we’ve seen will be a run back, right? It’ll, it’ll, it absolutely helps.

Jordan Roach
We don’t know where the floor is right for years. It’ll go all the way the 1000 announced forever. Where’s the floor that it was kind of 1500 2000 and right? We don’t know because of the run up, what is that floor? But that’s the problem right now. And you know how gold is performed historically, it kind of has these almost super cycles where it beats everything for a stretch of five or, you know, three to five years, and then it gets left way behind for 20 years, and then it flares up again and left behind. And so that’s the concern that we would have, is you have a flare up, yeah, we have now, and then it gets left behind as things settle down.

Ken Moraif
And it almost, you know, if you think about all the different investments, I’ll call them out there whenever they have a big move. You know, crypto, for example, whenever it has a big move, guess what happens? Everybody gets everybody’s attention, all sudden, everybody wants to invest in that. And then that investment begets more and begets more and begets more, until you reach a point where, like, Okay, this is actually not very smart anymore. And then you have a big pullback, right? And with gold. You know, what’s holding it up? What’s holding it up, it appears right now, is not the actual value of gold, but it’s the fear of all this geopolitical stuff that’s happening. And you know, hopefully that won’t last forever, hopefully we’ll get past it, and if that does, then, you know, we could see the price gold drop dramatically. So it’s a very risky. Asset to be buying right now.

Jordan Roach
It is very much. You have to consider the risk there. I mean, the interesting thing about gold right now is, you know, it’s not a one for one, but gold right now is having some of the strongest correlations to stocks that it’s seen in a while. And that’s kind of scary, because if you have your safe haven thing, meaning it’s moving the city in the same way, right the same direction, and almost to the same magnitude or more in stocks. And so when you consider that of like, well, I want this for safety. Well, if it’s moving in the same kind of way that your risky stuff is, that’s a problem.

Ken Moraif
I’ll tell you. The best thing personally that’s happened with gold moving the way it has is that my wife wanted this, like, really expensive bracelet, and now that bracelet is like, no, it’s like, ridiculous. You know? It’s like, forget it. We’re not, you’re not, okay? So not that I didn’t want to buy her the bracelet. I don’t love my wife. Everybody, please don’t, don’t infer that. So here’s, so here’s the interesting thing about gold is the there’s it, there’s a, there’s a, another asset that people have asked us a lot about, you know, which is silver, and, you know, just the whole precious metal world, right? Is that is now getting a lot of attention. And there’s a ratio between gold and silver that has been looked at for a long, long time. In other words, how much silver does it take to buy some gold? So what can you tell us about that side of it?

Jordan Roach
I mean, yes, so it’s a really good ratio to track. Because again, you know, there are things factors that cause them both to move kind of together. There is a correlation pattern, but they typically don’t move exact same times and in the same magnitude. And so historically, for years and years and years, if you look at that ratio, right, how much, basically, of silver does it take to buy an ounce of gold? You know, that was kind of in the 6570 to 80 range, forever. And then you saw that thing scale up to over 100 over 100 and then recently, you know, and it goes back down to 40, because these things sell off and shape. You know, now we can talk about even that in the last week what we’ve seen with gold and silver. But yeah, you see, you know, again, you have a certain ratio. That’s going to happen for a long, long time as things concern, but once geopolitical risk comes in there, just take it off and the ratios move right.

Ken Moraif
But if you look at the ratio, where it sits, just recently, it was at $45 which means that silver is ridiculously expensive relative to history. That’s right. So if there’s one that’s the highest risk, you know, just for those of you who are wondering about silver, we’re talking about gold, but that would be one that I would really be concerned about buying at this point, even though, you know, it has also had a significant run up, and that does invite the same dynamic where people start buying silver as well.

Jordan Roach
Yes, it’s a very interesting point, because I think that’s right. I mean, we’ve seen even a bigger magnitude of move in silver in the last 12 months than even gold. And the interesting thing about silver is, yes, it has more industrial use than gold was right then. So you need it for data centers, for manufacturing, you have a need there, but the on the so that’s a good case for it. The bad case is the how easy it is to move the gold price. It’s even more so on the silver side, because it’s world market is far smaller,

Ken Moraif
and the same geopolitical risks drive the price of silver. And right now, silver is, like, ridiculous. So let’s talk about gold and crypto currency. Okay, so, you know, one of the things that I think dynamic psychologically, that may be happening is that, you know, for many, many years, we’ve had this term the gold bugs, right? These were the crazy people that were buying gold, and, you know, they were kind of over there on the side, and everybody kind of looked at them like, those guys are crazy. They’re buying gold, you know, because they’re scared of everything. But recently, we’ve seen that because of crypto being the crazy people, right? The crazies that are buying crypto, all of a sudden gold is like, Oh, those are the rational people.

Jordan Roach
Now, it is a really interesting dynamic. I think it’s changed a little bit, that’s right. I remember reading this was years ago, not that long, but years ago where people were even talking about, is Bitcoin, the new gold? Yes, you know. And that was a huge thing coming through in there. And then we’re saying those are very two do very different types of assets, which very different drivers for growth or sell off. And so those are not a one to one, any stretch for anything statistically we can look at it, they do not move in the same ways at the same time or for the same reasons.

Ken Moraif
Yeah, and so for us, and you know, because we specialize in working with people who are, you know, over 50, who are retired or retiring soon. So our demographic, who we work with, are people who are kind of in what we call the most important decade of your entire financial life, right? It’s the five years before you retire, the five years after. So if you’re in that decade, then at this point, it seems to me, it’s kind of like, you know, when I go to Las Vegas. Us. I take money with me that I’m willing to say goodbye to, right? It’s entertainment value more so than it is. I’m going there to make some money. And so do you think that gold is a, is a, is a, it should be added to the portfolio, or is this just kind of like gaming on the side, if you wanted to do gold? Well, I think some

Jordan Roach
of this would deal with, you know, with position sizing, right? So, I mean, you did the thing historically, you’ll get this gold bug people who were, if they didn’t want to sing a little gold, it’s like, I want to turn my whole portfolio to gold. Oh, yeah. And so that’s a very

Ken Moraif
scary I’ve had those conversations as clients 25% or more in there.

Jordan Roach
So you got to think about, you know, with gold, particularly, you know, is there a position size that makes sense in a portfolio that we could, you know, effectively, know that it could go bye, bye for a few years, but maybe serve a purpose. You’d have to look at too, what is that doing in a portfolio relative to the other things you’re holding? Because you don’t want to run scenario where you’re putting things in and the correlations all kind of converge, where they’re moving up and down together. And we’ve seen some of that in the last since 2022 really, stocks, bonds and gold, and so some of the

Ken Moraif
purposes, but all you’re doing is you’re magnifying it by putting gold in there. You’re making You’re making it worse, not bad

Jordan Roach
worse, because, I mean, in the last 12 months, in lesser years, the volatility on gold, that safe haven, is quite a bit larger than stocks, are certainly on the bond side, and so you would just have to be prepared to how do you deal with that? Because for us, the way we think about our clients is we always think about first, how do I deal with the risk side? Right? Then I think about return, but I got to think about risk first, right? And that’s the big consideration.

Ken Moraif
Yeah, I kind of look at crypto and gold is basically the same thing. I think they’re both you’re gambling, you’re just betting, and they’re both commodities. I don’t think of crypto as actually a currency at this point in the game. I don’t think of it as a currency. I think of it as a commodity, just like gold. And so when you invest in it, you’re investing in a commodity. And so, you know, and therefore, it brings with it the risk that investing in commodities brings, that’s right. And as you said, if you’re going to invest in that, you need to watch it every day. You need to be really knowledgeable about what you’re doing, because otherwise, you know you could, you could lose your shirt. I think that’s right.

Jordan Roach
I mean, if you look historically, you know, if you look at stocks as a general rule and look at volatility, and volatility works both ways, right, work in your favor against you. But stocks typically are depending on the type of stock. Let’s talk about big US stocks. You know, 14 to 16% volatility year. If you go commodities and now include Bitcoin in this, I include gold, you can get 20s and more. So we’re talking 50% or more volatility than we got to deal with. And that’s a big range, right?

Ken Moraif
So if you’re adding it to your portfolio, then you got to UN ad

in the other places to compensate for this thing. It’s a wild ride. I think that’s right, and that’s not really the smartest thing, at least for our demographic. Now you know a younger, 25 or 30 year old who does all those meme stocks or whatever else, maybe, although I was just talking to a, I don’t know, I call him a young man. I think he’s like, 35 now, but he got in early with the Bitcoin. He was like, telling me, Ken, you need to get all your clients in Bitcoin. He was like, all in on Bitcoin. It was seven years ago, I think he was like, 25 or something at the time, and he’s like, This is it? This is the future. And then every time it went up, you’re like, Ken, why aren’t you putting all your clients and, you know, Bitcoin? And I was like, No, you

Jordan Roach
know, did he call you after, like, the 20% Well, one or two day pullbacks?

Ken Moraif
Well, I just, I just saw him, like, two days ago. I hadn’t talked to him in years, and I just saw him and I said, you know, are you a billionaire at this point? You know, how much money have you made? And he goes well,

not really. And I said, why? He goes well? Because, you know, I sold it and I bought it and I saw he traded it. That was a wild ride to get on. And he eventually he traded, and it didn’t work, just swapping. Yeah, and so gold is a fear fighter, the thing I want to make sure everybody gets. And so if you want to invest in gold, I guess you should look at how scared are investors, how scared is the world of what’s going on, and when confidence come back, I think we could see these, these massive gains evaporate.

So there you have it. So we entitled this What’s up with gold, and we said that you were going to have more fun than a human being should be allowed to have when talking about all this boring financial stuff. And I hope you did. I hope you enjoyed this as much as we enjoyed making it for you. And of course, like and subscribe. It helps us out tremendously. And make sure you go to our website and see all the other stuff we have there for you as well. And we’ll talk soon.