JORDAN ELISEO | from ABC Bullion

In a world of fluctuating markets and economic volatility, one asset has stood the test of time as a beacon of stability: gold. In the latest episode of our podcast, we had the pleasure of speaking with Jordan Eliseo, the general manager of ABC Bullion Australia, who brought over 25 years of experience in financial markets to our discussion on the enduring value of gold.

Jordan provided a wealth of knowledge about gold's role as a hedge against inflation and its unique position within a diversified investment portfolio. Despite the absence of income in the form of dividends, gold's solid capital growth, liquidity, and capacity to protect wealth during market downturns makes it an attractive asset for investors.

Jordan emphasized the importance of understanding gold's qualities, comparing it to other asset classes that might offer positive attributes but also come with drawbacks. For instance, while equities can offer dividends, they also carry credit risk, which gold does not.

Listeners were given a comprehensive overview of the current state of the gold market, including insights into central bank demand, which has been at record highs, and the various ways individuals can invest in gold. Jordan discussed the pros and cons of physical bullion, gold accounts, ETFs, and mining stocks, providing a clear picture for those looking to incorporate gold into their investment strategies.

One of the most intriguing parts of the episode was the discussion on currency debasement and the creation of money by governments. Jordan explained how gold has historically matched or exceeded the increase in money supply and consumer price inflation over the long term.

But why do humans value gold so much? As Jordan explains, it's something intrinsic to our nature, a value that has persisted since we first unearthed this precious metal. Despite its price oscillations, history suggests that our fascination with gold isn't waning anytime soon.

Follow Jordan on X (Twitter) @jordaneliseo

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Chloe: Shares for beginners Phil Muscatello and fin pods are authorised reps of money Sherpa. The information in this podcast is general in nature and doesn't take into account your personal situation.

Jordan: Right or wrong, humans value gold. We always have since we first unearthed it. History, I would say, overwhelmingly suggests that we will continue to value it, even if the price might oscillate on a daily basis, you know, whether we like it or not. And there are plenty of people that don't like gold and they can't get their heads around why human beings, you know, value gold is that we do.

Phil: G'day and welcome back to shares for beginners. I'm Phil Muscatello. What is gold and how does it provide a hedge against inflation? How can it take its place in your portfolio? Joining me today is Jordan Eliseo the general manager of ABC Bullion Australia. And you haven't been a guest for quite a while on the podcast, but always love having you here talking about gold. G'day, Jordan.

Jordan: Hi, Phil. Yeah, no, real pleasure to be back. Thank you for the invitation. Been a, uh, a very exciting few years in the precious metal industry. Gold price has done very well, lots of investors both in Australia and overseas, adding it to their portfolios. So definitely an exciting time in precious metals and an opportune time to reconnect and have a conversation about what's going on in the gold world.

Phil: Yeah. And you were a precious metals and market analyst with more than 25 years experience working in financial markets, but now you're the boss of a gold company.

Jordan: Yeah, well, yeah, I guess we were.

Phil: Just talking before we started rolling tape about the new responsibilities.

Jordan: Yeah, absolutely, absolutely. I mean, look, it's a huge honour to be involved in an organisation like ABC Bullion company's been around for over 50 years. It's part of Pallion Group, which is the largest precious metal services group in Australasia. We cover refining, so the actual manufacturing of gold, obviously, bullion trading, private vaulting, lots of interests in the jewellery space as well. So, yeah, huge honour to be involved in the business. And I guess, more broadly, while my background was financial markets, my interest in precious metals exposure, uh, to, as an investor myself now dates back over 20 years. I sort of first got interested in gold and silver back in around 2003. So, uh, yeah, really honored to have a, I suppose a career that has spanned, you know, both financial services and wealth management, as well as precious metals, and the combination of the two, as it were, uh, because it's really part.

Phil: Of a balanced portfolio like if you're investing, if you're. Or when you look at your superannuation statement, there is going to be some investment in bullion, isn't there? And this is really what.

Jordan: Yeah, I guess it depends which superannuation fund you're with. And look, some super funds almost might by default may have some exposure even just to gold mining companies, if not bullion directly, largely due to the fact that the ASX obviously has a number of gold producers, given Australia is one of the largest producers of gold in the world. But absolutely, again, if I go back to my background, wealth management, portfolio construction, to me, gold has some unique qualities that make it a very useful asset to hold as part of a portfolio. And if you look at various asset classes, all of them tend to have a number of positive attributes and at least one drawback, if it makes sense. So if you look at gold, you start with the drawback. There's no income, it doesn't produce a dividend or a regular cash flow. You look at the positives though it's generated extremely solid capital growth over the long run, it is exceptionally liquid, tends to be a great protector against inflation over the medium long to long term. And perhaps the most important one. It is the diversifier that tends to pay off best when you need it most. And by that I mean if you look at market history, whenever of those inevitable hiccups in the stock market and the economy come along, gold tends to be the best performing asset in those scenarios. So I think if you speak to a well balanced investor, even if their specialty might be equities, or might be fixed income or might be property, they're not hand on heart going to go, you should have all of your money in just that asset class. For me, that's exactly how I look at gold as well. I think there is an enormous body of credible research that shows that for the average investor, let's say allocations of ten to 20% in a portfolio can often make a lot of sense. Not for me to say that's appropriate for any one particular person. It deserves to be part of the conversation, just like any other asset class does.

Phil: Because it's less volatility in the price.

Jordan: Of gold, isn't there what you tend to find? And again, this is where the combination of gold with other assets becomes very powerful. It's the old thing we all learn in mathematics. Two negatives multiplied by each other is a positive. Gold and the share market have broadly similar volatility. But because they tend to move in an inverse fashion, particularly when the share market is falling. Then if you combine the two assets together, whilst they both can be volatile as a standalone asset combined, they actually have much lower volatility. And then again, if you take the long term view, which is very sensible for most investors, again, whilst gold does have some volatility along the way, you know, its long term growth has been around 9% per annum in australian dollars, broadly similar in most developed market currencies. And the beauty of gold, this is one thing that I think is important, is gold doesn't have any credit risk. So, you know, if you see a share price drop 20%, look, that may just be part of the noise of the market and it might be absolutely nothing wrong with that company, but there might actually be something very wrong with that company and it might be on its way to zero. With gold, that is absolutely not a risk because it's not a share in a company, it's not a business that you has a p and l that it needs to hit or a balance sheet. So its volatility, whilst that can be uncomfortable at times for someone with a long term view, it can either be ignored or indeed it can be seen as an opportunity. Hey, if the price has dropped, I'll buy some more. Because I know that over the duration of time, it's not a sign that gold's about to go bankrupt or go to zero, like can happen with an equity.

Phil: It doesn't have any managers who can stuff things up.

Jordan: Correct, correct. That's right. Yeah, yeah, you're exactly right. It's a simplistic way of putting it, but I love it. Yeah, absolutely.

Phil: So we're talking before we started recording about the price of gold, and I always think about it in us dollar terms, but what's the current price of gold in Aussie dollars and what's been driving the rally? If anyone listening has noticed, gold has been having a bit of a run lately.

Jordan: It has indeed. So the price in australian dollars right now is just over $3,300 per troy ounce. That's up almost exactly 10% on where it was a year ago ago. So a year ago, gold sort of kissed $3,000 an ounce in australian dollar terms for the first time. It spent a little bit of time around that area, had a bit of a pullback, but in the last couple of months it's really got a bit of a tailwind behind it and has had this nice little rally. There's a few things that are driving that. Central bank demand for gold has been at or near record highs for the last few years. So if you think of the gold market in any given year, around three to three and a half thousand tonnes of gold are, uh, produced by miners. Australia accounts for about 10% of that production. So central banks alone have been buying more than 1000 tonnes a year in the last few years. So effectively, before you even have one private investor putting a dollar in, central banks are taking a third of it off the table. If you think about it, what do.

Phil: They do with it?

Jordan: They use it as part of their foreign exchange reserves. So if you think you're a central bank, you need to be able to manage a, uh, portfolio of reserves that'll include us dollar assets, euro denominated assets, some yen, some sterling. Given the size of central bank balance sheets, one of the preconditions is that if they want to, for want of a better term, play in an asset class or hold or invest in that asset class, that asset class needs to meet two characteristics. It needs to be low credit risk and gold has zero credit risk. So it's the lowest credit risk item of all. And it needs to be a large enough market in terms of its market size and its liquidity. And when you look at it in that sense, really the asset classes that fit the bill, as it were, for example, sovereign bond market. So the US treasury market, for example, $30 trillion asset class, essentially, and the gold market as well. The gold market, if you take all the gold that's ever been mined at its current value, it's a multi trillion dollar market. And the turnover in the market is well in excess of $100 to $150 billion a day. So it's large enough and it's liquid enough for central banks, sovereign wealth funds, institutional super funds, you name it, to be able to easily deploy capital into it as well as take capital out as and when they may need to. The other things as well, we're seeing a, uh, continued strong demand from sort of western investors, particularly for bars and coins. So that includes in here, in Australia, United States, you name it. And people in, let's call it the developed west, tend to be buying gold as both a hedge against inflation, as a bit of a wealth protector, in case markets or the economy take a. And, um, then also as a source of profit in its own right, because there are periods where gold really, and silver as well, really can run quite strongly and outperform other asset classes. We're also seeing really strong demand out of Asia and particularly China. So there's quite significant problems right now. Chinese stock market, property market, concerns about the economy. There so demand for gold amongst investors in China is really strong too. So all of those factors are contributing to the current price strength that we've been seeing.

Phil: So in your opinion, do you think gold's expensive or, uh, cheap at the moment, in your own opinion?

Jordan: Obviously, that's a great question. I mean, obviously, if you look at it in nominal terms, just the dollar price right now, then you have to argue it's expensive. It's basically at or very close to all time highs in basically every developed market currency on earth, including australian dollars and us dollars, which are perhaps the two most relevant for the audience for this podcast. However, as we all know, nominal prices are only one sort of measure of value. And whether something is expensive or cheap, you know, particularly in a world where, you know, trillions of dollars of money can be created. If you were to apply that same logic, the housing markets more expensive than it's ever been, the share markets more expensive or about as expensive as ever been. Everything's expensive. So if you look at gold in relative terms, relative to the equity market, for example, then I would say it is moderately priced, certainly not as cheap as it was 20 years ago, say, relative to the equity market, but it's by no means overexpensive if you look at the sort of ratios between the two. The other point that I'd say is quite relevant for investors as well is that, you know, you often see, or I would say you almost always see, when an asset class is genuinely expensive and it's going to have a pullback. You see almost universal bullishness and optimism towards that asset class and waves and waves of buying by investors. Whilst demand for gold is pretty strong right now, we are nowhere near the euphoric levels we have seen in the past. If you look at more broadly sentiment towards gold, it's moderate, it's not exuberant. If you look at sort of media articles and what people are saying about gold, a lot of people are saying, hey, I don't understand why this thing is going up when something's genuinely expensive and a bit bubbly and probably about to top. You don't see any articles like that. You don't see anyone doubting the optimism. If I can draw a parallel, I saw something on Twitter this morning that was talking about AI, and obviously that's the huge boom right now. Nvidia is the sort of tech stock darling of the market. And there was an article about, I think it was one of the, I, uh, won't say the name, but one of the major soft drink manufacturers saying that they'd come up with a new taste for their soft drink and they said that it had been generated by AI. And someone made the quite interesting comment that where are we in the cycle when even soft drink manufacturers are trying to use AI to try and sell a carbonated beverage? When we see similar sort of euphoria around gold and every asset manager is talking about why they've got it in their portfolio, people on the street are asking how to buy it like they would tech stocks right now or whatever.

Phil: And you don't see that at the moment?

Jordan: We're not seeing that now and again. I've been in and around the gold market for, you know, more than 15 years directly and more than 20 years indirectly. There have been periods in the past, including, say, back in 2011 where the gold market was. Yeah, much frothier. People, uh, were far more optimistic, far more concerned about the share market, for example. So more likely to buy gold, and we're not seeing that kind of exuberance or froth at this stage.

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Phil: There's a number of ways of investing in gold. It can be physical gold, or you can buy an ETF or mining stocks. There's plenty of ways of accessing it. What are the differences and various, uh, advantages and disadvantages?

Jordan: Absolutely, yes. So I think there's, uh, I'd probably say there's four key ways. You touched on three of them. So there's physical bullion bars and coins, like the type that we manufacture and trade with clients at ABC bullion. There's then what you'd call gold accounts, which again, you know, we will offer something like a pooled gold or a Goldsaver account where you're not taking a physical bar away home with you, but you have bought a claim on a pool of gold and you can convert it into a physical bar that you can take home at any time. That's increasingly popular because people get the exposure to the gold. They are only for one of a better term, um, one step removed from being able to get it in their hand if they want it as well. Then, you know, you talked about ETF's, you talked about mining stocks. Maybe if I started.

Phil: Well, let's talk about that because it's all about leverage into the gold.

Jordan: That's right. Yeah. So, you know, generally when you buy a mining stock, you're buying it because you want leverage to the gold price and potentially the opportunity to earn a dividend as well. Because at the end of the day they are uh, businesses, they are uh, selling that gold for australian or us dollars. And if they do a good job, there should be some money left over for shareholders which you know, can be returned, you know, in the form of a dividend. Obviously there are period in the cycle, as it were, the market cycle where gold stocks can, you know, in fairness, very strongly outperform gold. There are also periods where they very strongly underperform gold. And of course there's some idiosyncratic risk in investing in any company, including a gold mining company. So the gold price might be doing very well indeed as it is right now. But you know, if a mining company has a problem with a permit or the location of their mine or you know, the grades of the ore that they're mining, all of those things can, you know, cause problems, the amount of.

Phil: Time it takes to even just establish a mine.

Jordan: Correct, correct. So what we tend to see, or certainly in conversations with investors is they will sort of tend to say, okay, I'm um, buying gold as part of the sort of wealth protection bracket or bucket in my portfolio, the mining stocks, they may well want exposure to gold mining equities as well, but that tends to be part of the risk bucket of the portfolio. So you know, you might own gold mining stocks instead of having exposure to energy or you know, other types of equities in the portfolio. Uh, you don't have to just own one or the other. There's a case to be made for owning both. And then lastly you obviously touched on gold ETF's. They're also very popular vehicles. I think the most obvious advantage to them is that they can be just bought via a regular brokerage account. I suppose in the interest of talking of pros and cons, the con would be typically you don't own the gold directly, you own a financial instrument. There's a handful of intermediaries that you obviously need to be doing their job.

Phil: And presumably there is a vault somewhere where the gold is.

Jordan: Yeah, I mean look, there's lots of different structures to them, so they're not all exactly the same. But yes, by and large they are, ah, backed by allocated gold, sitting with a reputable vault. And that gold will tend to have been made by an LBMA accredited, an internationally accredited gold refiner, for example, ABC refinery that manufacture our bars. That's, we're an example of an LBMA accredited refiner. So yeah, there's no right or wrong way. It's almost a little bit analogous to if you buy shares, you can buy them directly, you can buy an ETF, you can buy an actively managed fund. All of those are exposure to the equity market. All have pros and cons. It's not to say one is absolutely right and is always superior to the other choice. There's a reason why the options exist. It's because investors have preference for all of them in various capacities, as it were.

Phil: Just as a bit of a sidebar, are there synthetic gold ETF's?

Jordan: There's more than 100 listed globally. So it'd shock me if there's not at least one somewhere.

Phil: But that would be something to be for investors to be concerned. Yeah, just to keep an eye out that's not a synthetic one. And just describe that what that kind of ETF would be.

Jordan: Yeah. So it could be where rather than the ETF owning physical gold or ensuring that there's a custodian storing physical gold to back the investment, as it were, they may just, for example, have gold futures contracts, maybe another form of derivative that gives the gold price exposure, but not necessarily the one for one physical gold backing. And so again, lots of different structures out there in that market. And I guess going back to the physical gold thing. And obviously that's the market that we specialize in. It's something that we see every day with our clients. They don't just want the economic exposure that gold gives them. They want the tangibility and the security of owning the physical item as well. And that's almost something that's impossible to model in a spreadsheet and go, what is that worth to someone? Clearly it's worth quite a lot to the thousands of investors that we deal with on a weekly basis and globally, the millions of people that buy and transact in physical gold around the globe every day.

Phil: They'd have security concerns though, wouldn't they? I mean you've got to have a safe to keep this stuff in and a very, very good safe as well. Yeah.

Jordan: Again, I guess it depends on the volume of gold you're buying and you name it. And again, without wanting to use this as a, as too much of a, I suppose a product flogger, uh, session here. But you know, as an example, we obviously also offer storage for our clients. So they may buy the physical bullion, but not take it home with us. They might, you know, we've got warehouses where we can store that and charge a fee we also have a private vaulting arm to our business. So people might buy gold from us, use the private vault where they can also put jewelry and other valuables and you name it. So, yeah, certainly businesses like ours have been, you know, we've built it sort of saying we want to offer people every option they may so desire, which is not to say they have to take every option and be a client. They don't need to use us for every service we offer. But, yeah, absolutely. If you're buying gold and you physically want it, then of course security becomes a logical concern, uh, and a factor to think through. Yeah.

Phil: Which speaks to its underlying value really, doesn't it?

Jordan: Well, correct. Yeah.

Phil: What are the buying trends you're seeing at the moment? How are people allocating to gold?

Jordan: Yes, I think if you look across the gold market, there's a few very, very obvious themes that have emerged in the last few years since COVID hit. So first point I made earlier was central banks have been huge buyers. Indeed, that dates back to the GFC over 15 years ago. Now. Central banks have been net buyers every year. If anything, that buying has only accelerated. And as I said, you know, roughly 1000 tonnes a year of gold being purchased there. If you then look at the other parts of the market, obviously you've got jewellery demand. Lots of people love wearing their wealth, as it were, uh, you know, all around the world, particularly Asia, Middle east, subcontinent, you name it. And again, that demand is a little bit more pro cyclical. Right. If people are, uh, feeling better about the economy and their paycheck and all that, then obviously you feel more comfortable buying, buying jewelry, although there's an element of investment demand to the jewelry as well. Right. People are, again, as I said before, wearing their wealth. Then if you look in again, kind of western markets, the demand is going to be seen through, really that physical bar and coin space like we specialize in. And it's going to be seen in the ETF market, the physical bar and coin space. It was incredibly strong in 202-021-2022. So COVID and its immediate aftermath, obviously the big spike in inflation we saw demand is still strong there, as I was alluding to earlier, but it's not at the breakneck speed it was. The ETF market is the really interesting one, though. For most of the last three years, people have actually been selling their gold ETF's. There's been about 800 tons of gold that have come out of those in the last three years, which is about equivalent to 20% of all the holdings that were in those products at their maximum level around late 2020. So that's just started to turn again. Now money's starting to go back into that space. And that's one of the reasons why I'm quite optimistic on what the price might do from here. Uh, because there's this lack of froth more broadly in the gold space. And again, you know, if I use that ETF market as an example, despite the fact that 800 tons of gold has come out of those products in the last couple of years, the price is still pushing all time highs. So you sort of think, well, it's been able to do that. It's almost like a boxer winning a fight with one arm, um, tied behind his back. You sort of got to say, God, imagine if he gets his second arm free, what could happen here? So, yeah, those have been the things that have really come to the fore in the last couple of years. And it's why I think the gold market looks pretty healthy right now.

Phil: Uh, so what's the role of gold in a portfolio for australian investors?

Jordan: Look, I think it's pretty similar to the role for investors globally. I think gold offers four or five key benefits, or can offer four or five key benefits. One, there's the long term returns, you know, around 9% per annum. No guarantees, but there's no guarantees with any asset class. But that's what it's historically done. And in periods of uncertainty where there's share market volatility, you name it, gold tends to perform even better. So that is the second key thing. It's that ballast or that insurance in a portfolio that, you know, when the equity market tends to take a tumble, when there's a recession, gold really comes into its own. Now, that's probably the one area where it's doubly important for Australians, because in periods where share markets are falling, in periods where there's recession or recession like conditions, the australian dollar tends to take a tumble as well. So what we've found, it depends the time period exactly that you're looking at. But what we've found is that in historically periods where there's a recession, the US dollar gold price tends to go up by about 10%, the Aussie dollar gold price tends to go up by about double that, right? Because you get the currency, you get the currency almost like the double, you know, the bonus hit kind of thing, as it were. So that's where gold can become particularly valuable. World Gold Council, who are, uh, a body that do a lot of research, representing, I suppose, the case for gold, as it were. They've actually crunched the numbers on this in very statistically rigorous manner to sort of say, look for an australian investor. The recommended, or the case for gold can be even higher than in other developed market countries, in part because of that currency impact. The other one, which I think we'll talk about maybe in a little bit more detail towards the end, is the inflation component, which is kind of, you know, everyone kind of almost naturally associates gold with that. Uh, the last one though, and I think this is exceptionally important, particularly in today's day and age where a lot of people are feeling a little bit more financially pressure, more stressed with cash flow, is gold's exceptional liquidity. And so, you know, there are lots of assets that have some of gold's characteristics, you know, limited in supply diversifier. They might not follow general market trends, but if they're not liquid and you need cash, what are they really worth? Uh, whereas gold, gold can always be sold and can always be turned into cash. And so certainly that's something that we see at ABC bullion now, where the demand for gold, people buying it, putting in their portfolios is strong, but we're also seeing this two way market where for certain people that go, hey, the prices, I've done really well on my gold investment. I want to free up some cash. Maybe it's just to pay down some debt because my mortgage is now 6% interest, not 2%. Interesting. You know, gold, you can do that instantly, but you have your money in two days kind of thing. There are even certain parts of the share market where you can't do that right. You know, you might own some micro cap technology company or you know, resource company, and you know, the last traded price might be $0.20, but if you want to sell a couple hundred grand of it, you know, you're probably not getting out at $0.20 or it might take you quite some time to get filled at anywhere near that price. Gold trades, as I said earlier, trades billions of dollars globally daily. So that liquidity is a, uh, really, I think the many years I've been in the market, it is probably gold's most underrated quality, if that makes sense.

Phil: It can always go to your local pawn broker as well and get rid of it.

Jordan: Well, you probably can. You may not get the best price, you might not get the best price like you would at a more reputable bullion dealer, but I'm sure they would take it off you as well. Yeah.

Phil: Investing in shares can be fun, but the paperwork isn't my investing has been transformed since using Sharesight, the best portfolio tracking tool for any investing. My portfolios are on Sharesight, and whenever I buy or sell, the trades are, uh, automatically recorded. I can see the dividends I'm receiving, and it helps me to work out my asset allocation. Sharesight are extending a special offer to listeners of this podcast, four months free on an annual premium plan. There's a seven day free trial where you can experience the full power of Sharesight portfolio management. Go to sharesight.com sharesfor beginners and sign up now for a free trial before taking advantage of four free months. That's Sharesight.com sharesforbeginners. So, is silver worth considering? Because this is the other big precious metal, isn't it? I mean, there's about four, isn't there, really?

Jordan: Yeah, yeah, I mean, I think there's sort of some other, even sort of more small ones. But yeah, generally speaking, when people talk precious metals, gold, silver, platinum, palladium, and even there, you know, 99 point percent of the demand sits just with gold and silver, as it were. Look, silver is a really interesting metal. A couple of comments that I would make again, let's maybe start with the negative, as it were. It tends to be more volatile than gold and more volatile than the share market, for example. And it doesn't have quite the same negative correlation to the stock market when the stock market falls. So it's not as reliable a portfolio diversifier as gold has historically proved to be. However, silver's got a number of qualities that are, ah, I think incredibly beneficial. One, it's got a huge industrial demand component. So whereas gold, the demand is 90%, plus jewelry and investment only, or central banks buying it as a reserve asset for silver, more than 50% of the demand comes from industry. And that's partly why it's more volatile, right? Because it's not just kind of this investment or monetary asset, it sort of wears two hats. What that also means, though, is that in periods of high inflation, silver actually often outperforms gold to the upside. And indeed, in precious metal bull markets. And this is largely due to the fact that silver is just a smaller market in terms of its liquidity and turnover. And you name it, silver really tends to outperform to the upside. So if you look, since the 1970s, there have been five primary bull markets in precious metals. If you take all of them as an average, the average return on gold in them is about 100 120%. So gold tends to more than double the average return on silver in those markets is closer, it's above 450%. So if you're of the view that there's a good chance precious metals are in a bull market, then history would suggest silver may well provide you even more bang for your buck than gold will in such that cycle. It's just not as reliable a wealth protector, if that makes sense.

Phil: And you need some special expertise to.

Jordan: Play in that space a little bit more. Yeah, but yeah, it's a very interesting asset. I think it's got a very bright future as well.

Phil: I've become increasingly interested by speaking to many people on this podcast about learning about currency debasement. How do governments create money? What's their role in creating inflation? And how does gold take its place in this dynamic? Three questions there for all in one.

Jordan: Yeah, look, maybe I'll start at the end. So how does gold provide a hedge against inflation? Or what's its role in that sense? Simplistically, the capital growth of gold over the long run has historically matched or exceeded increases in consumer price inflation.

Phil: We're talking hundreds of years of data here.

Jordan: Absolutely. If we take the kind of, let's call it the current monetary era, which I mean, people will argue over its start date, I would say it was 71 when Nixon, well, at the time he said temporarily, but ended the convertibility of us dollars into gold. So let's call it the gold standard, in essence, what we sort of talk about, I guess, as the gold standard. Since then again, the gold price has gone up by about 9% m per annum. So it has clearly more than exceeded the increase in consumer prices. But this is the really interesting thing. If you look at what the gold price has done around 9%, it more or less tracks the increase in money supply growth over that time. So literally, the increase in money that sits in bank accounts, in government reserves, you name it. And there are different ways that it can be measured. You know, one of the more popular ones, m two, grown by about 9% since the 1970s. And so this is the interesting thing where, you know, you have to sort of almost differentiate between increasing money supply and increase inflation, because of course, not all that money supply finds its way into the price of the milk or bread you buy at Woolworths or Coles. Some of it goes into the price of the house that you want to buy in Balmain. Right? Or into the share market, or into the bond market, or indeed into the gold market. So, you know, again, what is gold's role in this? You know, in the, in the modern era, I suppose since the 1970s, gold has again matched the increase in money supplier very significantly, exceeded the increase in consumer prices. And indeed, of course, as you alluded to, you know, you can go back more than, you know, hundreds of years, you know, further if you want. And gold has always been this sort of monetary constant, whether we like it or not. And there are plenty of people that don't like gold, and they can't get their heads around why human beings, you know, value gold. Well, the reality is that we do, right? And I think it takes a certain degree of hubris and a lack of appreciation for just the way humans are built to ignore that history, if that makes sense. What I'm saying, right or wrong, humans value gold. We always have since we first unearthed it. History, I would say, overwhelmingly suggests that we will continue to value it, even if the price might oscillate on a daily basis. Back to how first parts of your question, though, about learning about currency debasement and government's role in creating inflation. That's a really interesting one. We could spend hours talking on that. There are obviously multiple schools of thought, economic schools of thought, austrian economics, modern monetary theorists, you name it. I think it's entirely logical that people, you know, more people, you said on this show, are talking about it. You know, that makes sense. Since the global financial crisis, we have been in a world of. For many years, it was zero or indeed negative interest rates. Central banks around the world have added trillions of dollars to their balance sheets, which they have used to buy financial assets, government bonds, mortgage backed securities, ETF's, even equities directly in some countries, all with a view of trying to generate a wealth effect that they hope will then be followed with an increase in the production of goods and services. If not, I'm not sure what the point of just bidding up the price of financial assets is or what, although.

Phil: That does seem to be a byproduct.

Jordan: Well, that's exactly right. And look, you know, I think we have to be cognizant of the fact that a lot of people sort of look for conspiracy in all of this sort of stuff. I don't think there's any grand conspiracy at all. I mean, you know, if we look at Reserve bank of Australia here, US Federal Reserve, the ECB, you name it, they all have explicit inflation targets and or ranges like inflation is not a bogeyman. Or, uh, again, it's very clear, like they are mandated to try and generate.

Phil: Inflation because everyone knows how bad inflation is, and we're seeing this at the moment.

Jordan: I mean, it's an interesting one, maybe your next guest that brings it up and says, you know, this is why we need 2% inflation. Just ask them why. Generally speaking, the answer will be, well, because deflation is bad. That's a strange answer, right? Like, you know, you need to do x because the opposite is positive. You know, at the risk of making a, uh, somewhat improper analogy, to me, that's like saying drinking too much alcohol is bad. Yeah, that's true. Therefore, you shouldn't be allowed to have even one drink. Right. You know, like, it's. Shouldn't have to be that binary, right? And, you know, when central banks and Ben Bernanke said this very famously, that he had a hundred percent percent confidence in his ability to control inflation, well, if that's the case, why not just aim for zero, right? But again, we could talk for hours about the role that government has in creating inflation. Currency debasement, you name it. I think what any investor and people just living their lives has realized very clearly in the last few years is that inflation is back to some degree. We are going to be living with it in one way, shape or form. And so whether it's in our daily lives and hopefully the pay rise we can get from our bosses, whether it's in the way we construct our portfolios, our assets, it is a very real threat that we need to be able to mitigate as investors. And again, uh, history would suggest that gold is one of the assets that you can turn to to try and master or even stay ahead of inflation, as it were.

Phil: Traditionally, central banks have had to work in tandem with governments in terms of keeping a lid on inflation, which we're doing to a certain extent. I believe here in Australia, in America, the government is printing more and more money all the time and seem to be working at odds with what the Federal Reserve is trying to achieve. Do you have any thoughts on that?

Jordan: Well, I guess it's a, uh, difficult one in the sense that obviously politicians in every country, they have election cycles to aim toward. And it is entirely appropriate that at certain times, fiscal stimulus will be deployed into the economy to help businesses, to help households, you name it. But of course, that can run contrary to a central bank that has an inflation mandate that might think we need to increase interest rates in order to try and clamp down on some economic activity and try and bring inflation down. That, for want of a better term, um, conflict, I think, was the term you used. I think that's just part and parcel of the economic cycle. It would obviously be a tough one for a central bank. Because ultimately, uh, the people that are in these roles are appointed by governments and ultimately answer to the government.

Phil: Even though they're in the front line, they're the ones taking, they're getting grilled.

Jordan: You know, speaking to Congress or, you know, the house or whatever. There's a degree of independence in the way that they, you know, can obviously go about things. You know, that's obviously topic of conversation in Australia right now as well. But, yeah, look, it would be a difficult job. It's very easy to sort of criticize a central banker, you know, but be a pretty difficult job. You've effectively only got a couple of levers. You've got interest rates, and you've got the ability to create money and buy financial assets and maybe a bit of a role in guiding other regulators, but that's it. And inflation and employment and overall GDP are influenced by a lot of factors that are very, uh, much outside of their control.

Phil: So if listeners want to find out anything more about ABC bullion, how can they find you?

Jordan: Yeah, look, obviously, first thing is our website, abcbullion.com dotcom open for business 24/7 as it were, in terms of people being able to create accounts, transact online, you name it. I'm, um, on social media, Twitter, @jordaneliseo You know, we've got a large team of sales and client services staff that are, uh, more than welcome to talk to anyone about investing in precious metals and talk through the products and services that we offer to, you know, help people incorporate them as part of their portfolio. Oh, yeah.

Phil: Well, so we'll put all those links into the show notes and the episode notes and especially your x account. It's not Twitter anymore, it's x.

Jordan: That's right.

Phil: Apologies, ewan, but it's a great account because you do discuss things, you know, covering all sorts of financial markets and some of the inconsistencies that arise.

Jordan: Thank you. I'll take that as a compliment.

Phil: Great to see you again, Jordan. Thanks very much for coming on.

Jordan: My pleasure, Phil. Anytime.

Chloe: Thanks for listening to shares for beginners. You can find more@sharesforbeginners.com if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

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