Kitco News in Focus with Jeremy Saffron.
SPEAKER_02Welcome back, I'm Jeremy Saffron. Gold is no longer just a retail fear trade. According to the World Gold Council, just new information this morning, central banks bought 244 tons in the first quarter of 2026, and they've now purchased more than 200 tons in 10 of the last 11 quarters. Now, that tells us something important. The institutions with the longest time horizons are increasing exposure to an asset that pays no yield and sits outside the liability structure of the financial system. Now, the question is not whether gold is old money, the question is why so many official institutions are treating it like future money. Joining me today from the UK to break down this shift and to launch his new book in the United States, The Secret History of Gold, is, of course, our friend Dominic Frisbee. Tom, welcome back to the show. Good to see you.
SPEAKER_03Well, thank you very much, Jeremy. And yes, it's a very exciting day for me, the launch of the Secret History of Gold in the US. It's done really well in the UK and uh it's it's had an incredibly favorable reception. And what I'm positive about is it's it's not just had a favorable reception from the gold bug community. It's sort of it's had broader appeal, which is one of the things I was hoping for. And yeah, but yeah, I'm very excited. And so, yeah, all you US guys, you you go out and and read it and enjoy it.
SPEAKER_02Go out and order it.
SPEAKER_03So I was looking at the uh it was interesting seeing your your note there about the central bank buying. Yeah, and there are there are two or three things, observations I make. And the firstly, the first one is uh, you know, people say gold is no longer money, it hasn't been money since 1971. It certainly officially has no role, but why then are central banks buying if it's not money? It it is, and it's like the most important reserve asset there is. And the next thing I would note about those central bank buying is who they are, which countries they are. Now you saw there Poland very prominently, and um perhaps uh this is a highly indicative um uh fact, Poland on a per capita GDP basis has now overtaken the UK. Now it's incredible to think that, you know, just in 1990, uh Poland was just emerging from the uh from behind the iron wall, pretty much penniless. And the UK, you know, with its great history, barely a hundred years ago, the most powerful empire on earth. And now on a per capita GDP, Poland, because it's hungry, it's entrepreneurial, and all the rest of it, has overtaken the UK. And what are they doing with their money? They're buying gold. What did the UK do? It sold gold right at the bottom of the market. And if ever there was a a fact that that showed the the destinies of those two nations, there it is, right there. He who has the gold makes the rules. Yeah, the other thing I would know, and by the way, it was a comedian who said that line. We always think it was some great Roman or something, it was a comedian in a in a in a in a uh uh satirical magazine. Um, coming to those other nations, you saw Guatemala buying, but Guatemala aside, and also uh Czech Republic, another nation that's that's on the up. Every other central bank that is buying is a nation on the Silk Road. China, Kyrgyzstan, Turkey, uh um Tajikistan, uh um, Kazakhstan, all the Stans. Now, these uh nations aren't necessarily enemies of the United States, but they're not the greatest friends in the world of the United States, if you like. And this central bank accumulation is something that started accelerating, it's actually been going, you can put it all the way back to 2015, but it accelerated after the US froze Russian US dollar assets. And I think nations around the world suddenly looked at their portfolios and they thought, we need to diversify. And the obvious asset to own is the asset that nobody can confiscate from you. They can take it from you, but they would have to invade you if they're going to take it from you and steal it from your central bank. But apart from invasion, they can't confiscate it through the banking system because gold is, of course, nobody else's liability. And so we're seeing this process of de-dollarization as it's known. But look at those countries that are buying gold. They're all on the silk road. They're all in the um Shanghai Cooperation Organization, as it's known, which is the biggest land mass of any trade bloc in the world, 40% of the world's surface, and it's something like 30% of its population, 20% of its GDP. But you just look need to look at gold flows in the same way that the gold has gone from the UK to Poland, it hasn't. It's actually gone from the UK to China because China was on the other side of the UK sale. But you see what I mean?
SPEAKER_02Yeah, totally.
SPEAKER_03You look at the same, there's this transfer of gold east uh from west to east, and the the countries that are buying gold are countries that are growing on the app and all the rest of it.
SPEAKER_02Yeah, no, good points. I mean, they're they're asking what survives a crisis, what what cannot be frozen, and obviously what still has value if trust breaks down. I mean, Dominic, stay on Poland just for a second, because it's not buying gold in a vacuum. It sits on NATO's eastern flank, as we kind of talked about it. It has direct historical memory of, you know, currency destruction, that geopolitical occupation. And again, Q1 reported buying about 31 tons. Um, you know, we've heard the story before. We our audience obviously understands the 2022 catalyst that triggered this wave of accumulation from the Russian sanctions to what some would say weaponizing the dollar. Uh is Poland, though, telling us that gold is no longer just a reserve asset, but a national security asset.
SPEAKER_03Well, Poland is just getting so many things right, and yes, it is. It is telling you it's a national security asset, and it's it's fiercely independent. The Poles have always been fiercely independent, and you know, they're doing things that the EU doesn't like. You know, the rest of the EU is very pro-mass migration from the third world. Poland has been resistant to it, it's kept the uh integrity of its own people, it hasn't diluted. The other thing that Poland's done in the last week or two, it announced, is uh income tax, no income tax if you have two or more kids. So, you know, it wants its own people reproducing, it doesn't want to uh replace its population uh with migrants. So it's just that all those things are uh antithetical to the EU uh and what the way that the the EU is going. And the EU doesn't like the poles, they fall out, but a bit like Hungary, you know, they're they're fiercely independent and they do their own thing. They've lived under Marxism, they know what happens. The West of Western Europe, no, hasn't been there yet.
SPEAKER_02Well, I was gonna ask you, I mean, it gets into that kind of debasement theme, and obviously we can talk about the central banks. I mean, Poland's still deeply tied to the EU, NATO, the broader dollar system. So is this really a break from the Western model, or is Poland simply using gold as kind of a hedge while staying inside the system, as we know? Both.
SPEAKER_03Yeah, yeah. Both. Yeah. I mean, you know, Poland is part of the EU, but it kept its own currency, for example. Um, the EU likes uh everyone to be under the euro. So it's it's sort of it's not it's not kind of telling the EU where to go, if you like, but it's it's it's it's performing its roles, but it's doing its own thing as well. Right. And um, you know, I just think the polls are a nation to be admired at the moment. Yeah.
unknownYeah.
SPEAKER_02I gotta ask you, I mean, because we hear the you know, the dirtiest shirts is still the US dollar. I mean, if the if the sovereign exit from the dollar is kind of systemic, I mean, why are we not seeing that corresponding aggressive dump of US Treasury that actually breaks the bond market? I mean, yesterday it the 30 year hit 5%, and we've obviously seen a lot of dumping. But I guess my question is for the gold community, because they always ask me, I mean, uh is the gold community overreading a standard diversification play here, or is it more?
SPEAKER_03Well, when you look at China, you have to realize that even though China's been reducing its holdings of US treasuries, its holdings of US dollars are still above 3 trillion, which is an enormous amount. And so it's been increasing its gold holdings, but it hasn't necessarily been dumping its dollars. And one of the themes I tackle in the book is how dramatically China has understated its gold reserves by at least half, and possibly by as much as five times even more. I mean, it's it's that huge. But why has China understated its gold holdings? Well, if China suddenly turned around and said, Oh, actually, Mr. Uncle Sam, we've got more gold than you, and you haven't audited your gold since the 1950s, and we have, and we've got more than you, that's almost a declaration of financial war. And it would, you know, lead to dramatic rises in the gold price and dramatic falls in the value of the US dollar. And China's not ready to do that. If China and the US ever go to an actual conflict, I'm sure it'll do it. But China still has three trillion US dollars. It it doesn't, it's not going to like voluntarily erode their value. Um, the Fed's doing that job for them. But so but it's still accumulating gold as well. And it just shows this transfer of wealth because it it's it's accumulating dollars and it's accumulating gold. It is accumulating wealth because broadly speaking, it is spending less money than it earns. It's earning more money than it spends, and that's how you build wealth. Yeah, fascinating.
SPEAKER_02I mean, in plain English, central banks now may not be abandoning the dollar, but they're buying insurance against being trapped inside it. I mean, that's that's the nuclear part of the China thesis. If Beijing ever revealed it had more gold than the United States, or even close to it, I mean, that would not just be a reserve update. It would be a direct challenge to the credibility of the dollar system. Here's a question. What do you think, in your mind, would force China to play that card? Is it sanctions? Is it Taiwan? Is it a treasury crisis or or you know, a broader monetary reset?
SPEAKER_03Well, the motto is we must not shine too brightly. Right. And uh I think America's uh uh China is just watching what America does, what Europe does, and it kind of doesn't need to do anything. It just they can just you know they they can destroy themselves and China can just sit by and watch. It's growing its own wealth, it's making more, it's selling more, it's it's slowly opening up its own domestic markets. But what would make China declare its gold reserves, I I still think we're a good five or ten years from that, if not more, it's it's it's stating at 2,300 and something tons the lowest amount it can state and be credible. But if you actually look at gold flows, now we know that China has mined roughly 8,000 tons this century, which is as much as America supposedly has in Fort Knox, 8,000 tons. We also know that something like close to 30,000 tons has been withdrawn from the Shanghai gold exchange. We also know that there was 4,000 tons of gold already in China in the year 2000 as jewellery and uh central bank holdings. We know that China doesn't export any, and we also know that in addition to what has gone through the Shanghai Gold Exchange, there are gold imports that have gone from Dubai, through Switzerland and through London that have been kept private, they go undeclared. The People's Bank of China, for example, likes 400-ounce bars. It doesn't like kilobars. 400-ounce bars don't go through the Shanghai Gold Exchange. So, but even if you take what's gone through the Shanghai Gold Exchange plus mining plus what was already there, you're you're at a figure 30,000, 35,000 tonnes, something like that. Some of it gets double counted because of the money laundering trade that goes through Hong Kong. So you can take a bit off for that. Some of the gold that Chinese mining has produced has gone through the Shanghai Gold Exchange as well. So you can take a little bit off of that. But you're you're still at a figure of something like 30,000 tons plus what's gone through Dubai, London, and Switzerland. And then you go, 30,000 tons of gold in China doesn't export any. 30,000 tons. America has 8,000 tons. Now, what percentage of that 30,000 tons is state-owned? Some people say more than 50%. More than 50% of Chinese mining is state-owned. So that's 15,000, more than 15,000 tons. That's twice as much as the US. Probably more likely is about a quarter. But a, you know, a quarter of 30,000, you're looking at 7.5,000, 8,000 tons, something like that, which is as much as the US has. It's an extraordinary amount. And it's just which would be four times, three, four times what it declares. So it is understating its reserves, and it's a huge story, but it's a story that everyone's turning a blind eye to for the moment. But one of these days it's really going to matter. Now, when would China declare those holdings if it ever gets into a direct conflict with the US? Because one of the first uh tools of war in a global conflict is money. Money has always been used as a tool of war. The English used money as a tool of war against the American revolutionaries. We we uh uh the Germans counterfeited loads of English pounds during World War II. The Americans confiscated Russian US dollar assets. Money is always a tool of war. I think the North used money as a tool of weapon against the Confederacy uh in the American Civil War. It just is a tool of war. The the West froze the Nazis, the Germans, out of the financial system and forcing the Germans to use gold and send gold to Switzerland. That was the only way they could buy and sell stuff. So money is a tool of war. So that's when China will declare its gold holdings if it ever gets into a conflict with the US and and and may that day never come.
SPEAKER_02Right, right. You know, I I gotta go back to the 30,000 because obviously, you know, well, I should for us, I mean separate three things. There's officially the official data, market flow evidence, and then of course your interpretation. Officially, China holds more than 2,300 tons. But let's go back to 30,000 tons. I mean, it's a big number. The challenge is ownership. I mean, how much of that can yeah, how much of it should be getting considered state controlled?
SPEAKER_03Yeah. Yeah. Sorry, Jeremy. I was just making the point, but I think you just made it anyway. I'm I'm saying there is more than 30,000 tons of gold in China. I'm not saying that the state owns 30,000 tons of gold. There are some analysts who've arrived at that number, but that but you have to go, there's 30 to 40,000 tons of gold in China. What percentage of that is owned by the state? And I did it it's it's got to be more than a fifth. It's got to be more than 20, 25%. I would say that's the minimum.
SPEAKER_02I mean, if if if let's let's let's kind of say if China's true gold position is vastly larger than reported, what would we expect to see before Beijing ever admits it? Do you think? Do you think it would be more Shanghai gold exchange withdrawals, uh, import distortions or or you know, one priced gold settlement?
SPEAKER_03Well, it went through this phase of declaring a little bit more every month. Uh for two or three years it did that, and so it kind of normalized the higher numbers. And um and then it stopped doing that and then it started again. I haven't looked recently to see what its latest policy is, but I just think China doesn't want to rock the boat, it just carries on making stuff, building its wealth. We must not shine too brightly, and when it's ready, it's ready. Um the other thing I say, you know, I've gone back through every reserve currency in the history of the world in the book. There it is.
SPEAKER_04There it is.
SPEAKER_03And there has never been a global reserve currency or an international currency that did not start out interchangeable with gold and silver. And most of them, I mean, they all used gold and silver. We don't use gold and silver. Uh there's never going to be a money because we don't use cash anymore, so we don't use physical money or barely. Um, but you know, you you start with the very first international currencies, Alexander the Great, um, or you could go back even before to the ancient Lydians and Croesus' coinage. But they were they were gold and silver. And then you go forward and you can look at the you know, the British pound or the florin or the Venezuelan ducket or uh the uh the the Spanish dollar silver um uh on which the US dollar was based, of course. And then you you come forward and the US dollar itself was into was gold and silver when it started out. They all end up, the Romans, of course, they all end up getting debased into oblivion, but they start out as good as gold and silver. And you know, China is an ambitious country, we know that. Um and it sees its place, it sees itself rightfully at the top of the world pyramid. In its head, we are the greatest people on earth. In the same way that America thinks we are the greatest people on earth. And and I'm I'm I I don't know why we think that, but the British think everyone thinks they're the greatest people on earth. But China sees its rightful place at the at the apex of the world, at the top of the world, the richest country in the world, the biggest manufacturer in the world, just as Britain used to be at the turn of the 20th century. All these things. Now, if you're gonna be all these things, your money has to be the the international, the most demanded international currency. Now, that's a status currently enjoyed by the US dollar, um, just as the US military is probably the most mighty military in the world at the moment. But eventually China's gonna be ready for its money to be top-dog. And it's likely that gold is gonna have some kind of role to play in that. Um, I don't necessarily say that that we're gonna be using gold and silver yuan uh uh i i i in in shops because I just don't think physical money is a thing of the future. But gold as some kind of reserve, some kind of backing. I'm a bit sceptical about gold standards generally. When people say we're going back to a gold standard, it's inevitable. Because in the 19th century and all the way back through history, we, as I say, we used physical gold. In the 20th century, gold standards, we didn't. Gold was withdrawn from circulation in the UK and Europe when we went back onto the gold standards in the 20s, um, and gold was withdrawn from circulation in the United States in 1932, and it was never made legal uh uh to own gold again until 1975. So gold was withdrawn from circulation, and so those gold standards were bogus. Um and so, and it's because they're bogus that they fell apart. For a gold standard to work, people have to handle gold and silver um just as, you know, it's not just a prerogative of the state or the royal family as it was in ancient Egypt. And I for the reason that we don't use digital money, the best we can hope for is a kind of payment system built on top of a gold reserve. So that's not quite the same as using gold and silver. You know, gold is the reserve, the store of wealth, and the payment system is something built on top, and in all probability it wouldn't last. But some if we go into some kind of financial crisis, and we're talking on a day when in the UK UK government bonds have reached the highest level in um since the 1990s. I mean, incredible, 5.75 um percent uh uh yield at the moment. Um if we go into some kind of bond crisis, well, that can potentially escalate into some kind of currency crisis. And if there's a big panic and it gets really bad, well, maybe um governments will be forced to use their gold holdings to back their currency. But it's it's not the same as using actual physical gold on a day-to-day basis.
SPEAKER_02That's an interesting one, uh, actually, because I mean it kind of, you know, the history also shows gold does not automatically create dominance, right? I mean, Spain had gold and still squandered its power. Britain, obviously, you're talking about that that gold discipline, then lost the empire. So what makes China, and I just want to stick with that before moving on for a second, because what makes China's gold strategy different, do you think? Is it patience? Is it production capacity, you know, control of flows, or is it the timing of this dollar weakness?
SPEAKER_03Well, China certainly has patience. Yeah. And it's, you know, the Chinese government has been telling its citizens since 2007 to buy gold. You know, it ran adverts and so on at one stage. And the gold price has never fallen below the level where it began telling its citizens to buy gold, which is quite interesting. So, you know, some people think China actually protected the gold price to stop it going below. Um so China wouldn't tell its citizens to buy gold if it didn't think gold had some kind of role to play. Um, and so yes, it's patient, it's the world's largest importer, it's the world's largest producer, and it doesn't export any. So all of these things are uh impacting China's um strategy.
unknownYeah.
SPEAKER_02Um we've got to talk about this report too. I mean, Bank of France sold 129 tons of gold held in the United States. They repurchased equivalent billion in in Europe, securing uh, I guess, a reported $15 billion profit. Now, to be careful, this may be uh technically. Reserve management rather than the political statement. But when technical moves reveal priority, I mean what does this tell us about the difference between owning gold on a ledger and controlling bullion inside your own jurisdiction?
SPEAKER_03Well, I wasn't aware of that story, actually, Jeremy. Um, but it's very telling. The um, you know, you have to hold the bullion yourself. Right. And we we obviously know Charles de Gaulle didn't trust the dollar and he started demanding bullion in exchange for dollars. And he even sent two warships to New York in the 1960s to collect the gold. Can you imagine today send France sending two warships to New York to pick up your gold? I mean, Trump wouldn't stand for it. I don't think any uh president would stand for it. But even so, that's what France did. Um it's it's interesting that it sold the gold and bought it back rather than have it shipped over. What's that about? I don't know. I would have to look into the story to find out more. But it's also interesting how that gold made its way to the Federal Reserve in the first place, and it always all goes back to World War II. And everywhere the Germans invaded, the very first thing they did on the day they invaded was to go straight to the central bank and take the gold and ship it back to Berlin. They did it in Austria, they did it in Czech, the Czechoslovakia as it was then. They tried to do it in Poland, but the Poland Polish gold was um was sent, and it was like half a day ahead of uh of the of the Nazis, and there was this wild goose chase, and the Polish gold, um, funnily enough, eventually made its way to France, but via Romania, um uh uh Beirut, Lebanon, it sort of went on this wild goose chase all through the Mediterranean, eventually ended up in France. And then when the Germans invaded France, the French sent their gold, the Polish gold, Belgian gold, which they were hoarding, they sent it out to what was then the French Empire. Um, they sent some to Canada, they sent some to um Martinique, they sent a lot of it ended up in Senegal, in Dakar, and then they sent it inlined. So that's where some of the Polish gold ended up. And the French were always reluctant to send their gold to um New York. They sent some, but they were reluctant to send a lot because they thought the Americans would confiscate it uh in exchange for the World War I debts that France still owed. I mean, what a mess. But anyway, but that's how a lot of, and and of course, the the Dutch sent their gold, the Norwegians sent their gold, the British sent their gold. We all sent it to New York to keep it safe because we were scared the Nazis were going to confiscate it. Now, invasion, like it was in World War II, it's not it's not quite the same anymore. Um, the the nature of invasion has changed. It's it's it's it's a slightly different, you know. Previously, invasion was a good war model for rulers and emperors. You conquered somewhere, then you plundered it, and then you taxed it, took control of the land, the labour, the produce, the profit. But so it that it that's all to do with the changing nature of gold. But even so, I mean, we saw um Germany and other European, I think the Dutch as well, repatriated some of their gold a few years ago. And the Americans made it amazingly difficult for them to repatriate their gold when really what's the problem? Our gold's there in your vault, stick it in the truck, drive it to the airport, and ship it and uh fly it over. But um, yes, the fact that they made it so difficult again raises questions about how much has been sold, leased out, and so on.
SPEAKER_02Yeah, yeah. It's fascinating. And you know, I was researching as well. I mean, we're we could talk about Robert Triffin, um, that Belgian-American economist. Uh, you know, he warned that the reserve currency issuer eventually faces a contradiction. I mean, the world needs its money, but supplying that money can weaken the issuer at home. Is that now the core problem for the US dollar?
SPEAKER_03Well, it's a huge issue, and Bessant, Scott Bessant obviously uh alluded to it multiple times, and JD Vance did as well. That, you know, if the goal is to reshore US industry and get US manufacturing, get the US manufacturing again, and that is the goal, and they're taking steps towards it, well, this is a long process, it takes 10 or 15 years. But one of the consequences of issuing the global reserve currency is that you need to export dollars, and so that makes running a trade deficit inevitable. And if you're it also means that other countries need to build stuff to get US dollars. So it's in uh manufacturing is incentivized abroad and it's not it's disincentivized at home, uh, whereas financialization is incentivized at home, and that would explain you know the growth of Wall Street relative to Main Street. Now Bessant said, you know, shortly after getting um uh Trump was elected, he said multiple times it's Main Street's turn, Wall Street's gonna have to take a step back for a little bit. Now, Wall Street can ignore him or whatever. But the the inevitable uh consequence of reshoring uh manufacturing to the US, which it needs to do for important strategic reasons, is it has to cede a bit of global reserve currency status. And both China and the US are happy for gold to take up that role because it's neutral. And obviously China and they've both got lots of it. So it's it's a neutral currency. And so that's the sort of process, and that that dynamic had a lot more noise maybe a year ago. Um I think Luke Groman, the analyst, is probably the guy who's articulates it best. Um, but it's a sort of it had more noise a year ago, but it's now an ongoing process.
SPEAKER_02Yeah, yeah.
SPEAKER_03And I mean some of that control looks to be to to to come back through stable coins, but again, that's a process that's going to take 10 years or something.
SPEAKER_02Yeah, that's interesting. Uh I we got so much to get to. I can tack it to you, Dom, for a long time about this. I mean, for viewers, I just want to kind of break down what you said there. The world needs dollars, so America sends dollars out. Other countries make goods to earn those dollars. That helps consumers buy cheaper goods, but it can weaken domestic manufacturing over time. So, I mean, the US obviously gets enormous benefits from the dollar system, right? Cheaper imports, that deep capital markets that you're talking about. But is the reserve currency really a tax on the American producer, or is it a subsidy for the American consumer?
SPEAKER_03It's a subsidy for the consumer, it's a tax on the consumer, and it's effectively an incentive for the foreign manufacturer, the foreign producer.
unknownYeah.
SPEAKER_03It's a double-edged sword.
SPEAKER_02We've got to talk about the stock market, because you did there briefly, right? I mean, you were talking about these capital markets and talking about how Scott Besson said we might have to take a little break here. Most people talk about AI as the whole stock market story. And you've kind of raised a different issue here, the tax base, right? I mean, modern governments depend heavily on taxing labor. And obviously, for the viewers, this matters because if governments can't tax labor the old way, they may look harder at assets, transactions, capital gains, as we've seen in other countries. Um, my question, I guess, is if AI reduces taxable human labor while government spending keeps rising, I mean, does gold become more valuable in a world where the state is looking for new taxable pools of wealth?
SPEAKER_03Well, I mean, Western Europe is ahead of you in this uh on the road to damnation, on the road to tax hell. And uh we're really looking around for anything we can tax. In in Holland, they're introducing all sorts of wealth taxes. We have wealth taxes in the UK, they just aren't called wealth taxes, so they're trying to introduce more wealth taxes. Um, and if you introduce wealth taxes, the wealthy leave. And so you're left with the unproductive rather than the productive. And where do they go? Well, one of the prime destinations is the US. And you just look at the US, and fortunately, the way your country is structured with multiple states, um, it sort of keeps the country slightly in check at the federal level because people go where taxes are lowest. And so you've seen in the US mass movement of people to places like Florida and um Texas, away from places like California and New York, and it's a simple function of the tax system. But income tax makes up my other book is about taxation, by the way, so it's one of my pet subjects. Um, but income tax makes up about 50% of global uh uh uh of government income worldwide, 50% roughly. And the nature of work is changing. Uh initially, yes, AI is is is impacting work, of course, and a lot of people are losing their jobs to AI. Um, I actually think AI makes us more productive and more abundant, so I'm not as worried as some are about it, but it's definitely gonna have an impact. For example, when driverless cars and driverless trucks come, you know, what happens to the to the many millions of people who earn their livings in the US as drivers? Well, there's gonna be some upheaval there. But um the perhaps a bigger issue is that the nature of employment is once upon a time, one person worked for one company for long periods of time, often their entire career, in a fixed place. And so that person was easy to tax. Whereas today, the fastest growing workforce in the world is the contingent worker, the freelancer, the gig economy. This isn't just a US phenomenon, it's a global phenomenon. More and more gig workers, multiple income streams, COVID normalized it, a lot of people started moonlighting and so on. And even if a gig worker is doing the same job as someone in full-time employment, it's been proven they pay lower levels of tax for doing the same job. Because the tax is not deducted at source, it's paid after the event. And people find more things to write off against it. There's more scope for error, there's more scope for non-compliance, there's more scope for fraud and so on as well. It's not just a fraud thing, it's it's all sorts of other factors. And so this dynamic is occurring, this changing nature of work, well, that's going to impact the income tax and the way that income tax is paid. And so that's gonna put a l-a-a-a-a-a-a lower impact on how much uh revenue the government is did is able to deduct from income. Now, income tax was an incredibly successful tax. People say it never existed in America between before the Revenue Act of 1942 or before 1913. And yes, that's true, but forms of income tax go all the way back to ancient Mesopotamia. The tithe where you gave a tenth of what you produce was effectively an income tax. So even though income tax by the name of income tax is a modern phenomenon, it has existed for centuries. And it's it's uh but it's it was only the tenth. And they they it was the tithe, the tenth, because we have ten fingers. And so it was an easy number to calculate, a natural number. But uh, you know, today it's 40 in the UK it's 50% by the time well, 45%, but for higher earners, but by the time you factor inflation and other taxes, it your your debt to your government ends up being more than 50%. Um so but yeah, it's gonna be harder to collect income tax from from this changing workforce. And as more and more of the workforce uh become digital nomads and leave their country and it's not clear where their jurisdiction is, tax gets even more complicated because the tax systems were built around uh the analog world, the physical world, physical borders. Whereas the digital economy is global. You know, where is Google? Is it in Ireland? Is it in America? Is it where is Starbucks? Where is it where the IP is? Is it where the shop is? You know, there's all these ways that global uh corporations sort of manipulate Apple, you know, they they they base themselves in multiple jurisdictions to pay less tax. Well, the same thing's gonna happen to workers. And what's the impact of that gonna be of this global non-domicide workforce or the freelancer going to be on government revenue? There's this is a long-term problem. It's not something that's gonna happen tomorrow, but it's a it's a process that we're going through. And but by the say early 2030s, it's gonna be a big problem for governments, not for individuals.
SPEAKER_02You you brought up you know, Western Europe, and there's a couple other places I could think of probably going through the same. The promise, you know, promise this level of benefits, healthcare, pension, migration spending, energy subsidies, bureaucracy that that its productive economy cannot pay for. But obviously the the state will fight back. They'll say this isn't confiscation, you know, they'll say it's fairness, it's solidarity, we're closing loopholes, we're taxing idle wealth or asking the wealthy to pay their fair share. A couple of questions here for that, because I mean it's a kind of a populist movement right now, but how should investors tell the difference between normal taxation and a government that's just running out of road? I mean, if governments will not cut spending and cannot generate enough real growth, isn't the next phase a hunt for trapped wealth?
SPEAKER_03Uh inevitably. And as when government revenue gets prejudiced, when it's it comes under threat, they become increasingly aggressive in their collection of taxes. So it's happened, it's just the way the the way the world has always gone. And so, and and and what's quite interesting is they will always use the moral argument to justify the collection of those taxes. And even look at the words they use. Duty, for example. You know, that word, it is your duty to pay taxes. Well, the word is interchangeable with taxation, and in fact, the censor in ancient Rome uh was responsible for the moral welfare of the country, and he was the magistrate responsible for speech and moral welfare, but he was also responsible for the collection of taxes. And you know, we have censorship and censor and census, but these are all words associated with taxation as well. Um, so yes, we're going to see the more aggressive collection of taxes. You'll see all sorts of, you know, we have to have taxes on cigarettes because cigarettes are bad for you. We have to have taxes on uh oil and gas because oil and gas is bad for the environment. We have to have subsidies for wind farms because wind farms are good for the environment, they're good for the planet. Um we have to have subsidies for uh these poor people because they're poor people and we need to help them. You will you'll always see this moral argument used to benefit whatever action the government wants to take.
SPEAKER_02Well said. Um, I guess watch the language when governments start calling new taxes a moral duty. They're often preparing the public to what, accept a bigger claim on private savings, property, investment, wealth. You know, listen, the optimists are paying your fair share.
SPEAKER_03They always say that your fair share. The rich have to shoulder their fair share.
SPEAKER_02Yeah, yeah. I mean, listen, the optimist, uh maybe not me in this discussion, but the optimistic case is that AI raises productivity. It's going to expand the tax base. Why is that not your base case?
SPEAKER_03Oh, I I think AI dramatically raises productivity. I'm I'm just a I use myself as an example, and I'm just a small business. Um, you know, I've got my writing business and things associated with it and my speaking and so on, but I use AI like mad. And I mean, you know, it's it's saved me a fortune in legal fees, it saved me, I use it as uh for editing, I use it to uh uh help me um uh write titles, SEO summaries. I just use it in a million different ways, and it has made me so much more productive. Um but the risk is if you start using it as a writer, if I start using it to write copy, I am in trouble because people are developing a nose. I can smell AI written copy a mile off, and I just don't bother reading it now. I and similarly, AI generated videos, I just have I don't like watching them. And so I and I think a lot of people feel the same way about it. So, but in any case, it's still made me more productive, and it's gonna make the whole world more productive, and in fact, it's gonna make the state more efficient, if only if if because people who work for the state will start getting AI to write its copy for it, for example, its instruction manuals. The the NHS, our health service, can't even write an appointment letter and make it make sense. You know, if just get ChatGBT to write it, it'll be much better than anything you come up with.
SPEAKER_02Our time is almost 40 minutes, and I wish we had more. We do, so I'm gonna keep this going, but I I wanted to, I was so on to that tax discussion, but I gotta move on. I I gotta bring on the digital dollar discussion a little bit in collateral because you brought it up before. And I definitely don't want to turn this into a crypto conversation. I want to keep it on collateral because again, according to the first quarter report I just read in Bloomberg, I mean, Tether bought another six tons of gold, bringing their reserve stockpile to nearly $20 billion in Switzerland. I mean, why does a digital dollar company want physical bullion on the balance sheet?
SPEAKER_03I wish I understood. But six tons, that's that's not an insignificant number. Tether is just enormous. And uh, I mean, it's just the most incredible success story, that company. And um, it's just at every step of the way, it has defied its critics, and it's just grown and grown and grown. And um it's it's it looks like it's gonna continue to grow. And yeah, it's buying that gold because it's got it's earned so much money, it doesn't know what to do with it.
SPEAKER_04Yeah.
SPEAKER_03And uh, but it's it's it's all part of its its strategy, same way it's it's buying the the the treasuries and and it keeps the interest, and people who own own the um the dollars, they just use the dollars, they don't get the interest. The tether gets the interest, and so it's just brilliant. Um, you know, scalping tiny percentages, but at the scale they're doing it, it's just the most incredibly profitable company. But yeah, it is highly significant that they're buying gold.
SPEAKER_02Yeah, yeah. And I should say, I mean, they obviously hold treasuries and make money inside the fiat system too. So I mean it could be just a sound money statement, or is it simply you know, smart balance sheet diversification at this point?
SPEAKER_03I I I guess so. I I don't know. You'll have to ask them that, Jeremy, but but it's good for gold. I know that much. Well, good news is we uh we are we are we are gonna have them on the show, so I will ask that.
SPEAKER_02And I just want to do a quick reset because if you're just joining us, we're speaking with Dominic Frisbee, he's the author of The Secret History of Gold. We've been discussing why central banks are maintaining this 200 uh ton quarterly baseline. Uh it's it's it's shred through it all, seems to be trust. Who owns the asset, where is it stored, and whether it can be assessed in a crisis. Um, Louis, bring up that spot gold chart because it's trading right now around $4,500, $4,600 an ounce. Uh, you recently told your readers here, Dom, to kind of adopt that dolce far niente portfolio, which is essentially the sweetness of doing nothing. We talked about it there with China. I mean, the the mainstream counter is straightforward. Gold pays no yield. So, I mean, what is your answer to investors who say that the gold trade is already priced in too much monetary stress?
SPEAKER_03Well, actually, uh I if you can bring that chart back up, Jeremy, or you can ask your producer to, we can just talk about it very briefly. Um, gold had an incredible run-up in 2025, and you can see it peaking there in um uh late January at uh $5,600 an ounce. And ever since then, it's been it's made a sequence of uh lower highs, but it hasn't actually made lower lows. And my outlook for gold is you know, it it's not going to go up forever. It goes up for a bit, and then it goes sideways for a bit, and sometimes it goes down for a bit, and sometimes it goes sideways for a bit. But after the year we had in 2025, it's inevitable that it goes sideways for a bit. I think we're in a structural bull market. My target uh is 10,000 by the end of the decade. Um, but if you look back at the bull market, the last bull market we had in the noughties, um, gold made a peak in 2006, didn't make new highs until after 2008. Uh it went sideways for uh for and and it went it it it it touched new highs and then it collapsed in 2008, and then it then it you know went nuts again from 2008 through to 2011. And so I I just think we've got a range tree trade for a year or so to consolidate the gains of last year. And what we're seeing now, it's it's declining on one side, but it's it's not making lower lows. And I just think we range range trade and go sideways, and it's a frustrating consolidation. Um, and but you know, particularly a lot of a lot of my readers are British, so I'm I you know the importance of holding a currency, uh you know, not holding the national currency is more important than ever. But you know, the the pound declined by a huge amount uh in 2016. So even though it was a terrible year for gold, for UK uh holders of gold actually did very well because the pound was such a mess in the second half of the of that decade. So I I tell my readers, Dolce Foniente, the sweetness of doing nothing, just just hold it because you don't know when the next rocket launch is going to be. And if you haven't got a seat on the plane, you miss it. You've just you've just got to hold it. Um this is a a sentence I use, but 10 Of your net worth in gold and hope it doesn't go up. And the gold miners, they don't need I mean, it's great for gold miners if gold's at five and a half thousand. But if if a year ago you just said that gold's going to range trade between four and five thousand, they'd have been overjoyed. They all they if they're not making money now with gold above four thousand, then you know, you need to take a long hard look at the deposit and the management and the extraction methods and so on. You know, miners are a lot more economical now than they were a year ago with gold in the low 3000s. So the miners should continue to do well, but more generally speaking, we're in a period of consolidation and it'll probably last another 12 months or so. And then suddenly, when everyone's lost interest, that's when it'll suddenly come good again.
SPEAKER_02Yeah, that's interesting. I mean, uh, you know, uh I guess we should talk about silver too. Uh it's uh sitting around $73 today an ounce. Is is it confirming the gold thesis or or is it now a much more speculative trade, you think?
SPEAKER_03Well, silver, I'm I love silver, but I'm also a realist. And I'm very wary of saying, you know, I was selling silver, not all of it, but I was just selling a little bit when it went to $50. Uh, because $50 is just such a historical line of resistance, the 2011 high, the 1980 high. And I just thought it's such an obvious. So, but you know, I still had held on. And but if you'd said to people a year ago, silver's going to be $73 and people are going to be despairing, you'd be like, what? But silver's never not been above $50 ever. You know, it's trading in 50% above its all-time highs. So that silver's at $73, silver miners should be making a pot of money. Um, and you know, silver is a strategic metal. I don't I see silver as a speculative vehicle holding the metal. Gold is a store of value. Silver historically was always a medium of exchange. It was never used as a store of value. Central banks, if they held silver, it was to issue currency. They didn't have silver in the vaults in the way that they do gold in the vaults. And so silver doesn't have that store of value role that gold does. And but it it still rises and falls as gold rises and falls. And and in the later stages of a bull market, silver overtakes gold and goes absolutely bananas. And silver miners go even more bananas, and and we saw that from about November, December last year. So I like silver, and I think the fact that it's $73, we should all be excited about it. And it's not, you know, a lot of people are despairing. Oh, silver's only $73, it was $115 before. Well, yeah, but it was an incredible spike and and there was a frenzy about it. But, you know, if if silver was consolidating at $30, it could easily be consolidating at $30 now or $25. That was the levels it was consolidating before. But $73 is the consolidation level. So that's an incredible positive. You know, it's consolidating at $73. It's consolidating 50% above its all-time highs of $50. That's just fantastic. And so I think that bodes very well for the future. But just if ever a metal had a capacity to disappoint, it's silver. So be wary about getting too excited about it. You know, it's it's it's volatile, and if it can disappoint you, it will. But all the same, you know, look where it is.
SPEAKER_02All right, Tom, let's uh, you know, let's leave it uh if somebody believes the gold thesis, which is the clean expression. What is kind of that cleanest expression today? I mean, is it physical bullion at these price levels? Is it royalty companies? Is it major producers, juniors? I mean, a lot of people are annoyed with miners' volatility right now.
SPEAKER_03Well, you know, I I I've I I've just lived through one of the worst bear markets in mining in all recorded history. And so uh um I you know, I'm I'm still maybe my my confirmation bias is planted in a different place. And obviously the miners aren't going up now like they were six months ago uh or or three or four months ago, so that's a disappointment. But they're nothing like as awful as they were um, you know, in 2022, 2023. They were horrible in 2011 to 2015, horrible, horrible. You know, they all just lost all of their value. And now, you know, companies are trading with market caps, you know, uh not so long ago they would have a market cap below 10 million, five million in cash, and nobody was buying them. Now they've got market caps of 50 million and less than five million in cash, and everyone thinks they're offering good value. Well, you know, you know, perspective is everything. So, but what is the ideal portfolio? It depends who you are, how old you are, what your risk appetite is, what your goals are. If you're merely trying to protect what you already have, then gold bullion is the way. And if you're trying to grow what you have, then go and speculate in mining companies, but be prepared to um you know lose everything because that can happen, but you can also make 10 or 50 times your money if you get lucky. Yeah, well said. The more you do your research, the luckier you tend to get.
SPEAKER_02Yeah, yeah. Research.
SPEAKER_03And the better you time your entry points as well.
SPEAKER_02Let's talk about the secret history of gold for a second, because obviously that's I mean, it launches today in the US. We've already gone over that. You argued though gold has, you know, minimal industrial use it is almost useless in ordinary terms. But I gotta ask, I mean, is gold monetary because it's useful or because it is useless enough not to be consumed? I mean, does the current central bank kind of buying spree prove that history never really went away?
SPEAKER_03Yes. Uh nothing is as useful and as useless at the same time, is the Peter Bernstein quote about gold, and it sums it up very well. Gold was the first metal human beings used. We used it 50,000 years ago. There's evidence in Paleolithic caves in Spain of gold usage. If you look at if you Google what was the first metal human beings used, it always says copper, but we were only using copper 6,000 years ago. Use of gold predates the the um Bronze Age, it predates use of metal as tools by tens of thousands of years. And what did we use gold for? Well, we didn't use make we used it, we put it round our neck with shells and and and and stones, we decorated ourselves with it, we gave it out as a reward, as a prize, as an expression of gratitude. In other words, we you so it had a sort of function as a tool of barter, maybe as well. But we used it for precisely the same thing we do to today, to store wealth and to display wealth. Its use is totally unchanged. It's money, not necessarily medium of exchange money, but money, store of wealth money. It's the purest form of wealth there is. It is nature's money, it is nature's wealth, God's money. And in fact, the little bit of gold that you might have around your neck or round your ring is not just the first metal human beings used. It predates the earth, it predates the solar system. And in all that time, it hasn't changed. Because gold doesn't change, it doesn't tarnish, it doesn't corrode, it just stays inert, exactly the same as it always was. And so it's just this incredible metal that predates humankind and will be around long after humankind has has kicked the bucket. And it like 6% of annual gold um demand is from industry. Uh and I suppose you could say jewelry is an industry, but we'll ignore jewelry. But from things like use in outer space, use in electronics, use in dentistry, and so on. But in the grand scheme of things, it's minimal that usage. The overwhelming demand for gold is to store and display wealth, and it is a store and display of wealth because it is useless. So it's it's very uselessness that makes it useful. We were using it as money before we had a word for money, before we could even speak.
SPEAKER_02Yeah, well said. All right, Dominic, uh, thank you. Thanks for providing such a comprehensive look at the history and I guess future of Sound Money here. I mean, uh interesting discussion to say the least. Let me ask you, just before I let you go on one thing. I mean, let's look past this immediate market cycle. Um 50 years from now, how will financial historians kind of judge this decade's massive sovereign rush into physical assets?
SPEAKER_03I think I think there will be in I suppose 50 years is a good time frame. I think f in 50 years' time we will look back at what happened to money between 1970 and today, for that 50-year period, and really it goes back to the two world wars, and uh we will be asking ourselves, what were people thinking? And uh, you know, the future of gold is the same as its past. We will always use it, we will always want it, it will inspire us to do the most incredible things, the bravest things, the most inventive, the most innovative, but also the most terrible things, because it is wealth, and that is the primary driver of human action. After sex and food, the need to reproduce and eat and survive, the need for wealth is the primary driver of human action, and that is the need for gold, because gold is wealth.
SPEAKER_02Nicely said, Nicely said. All right, the secret history of gold available now in the United States. Uh, already out in Europe, congratulations. Uh, wishing you success. Thanks for this, man. Thank you. Appreciate your time. All right, and for our viewers, you can read Dominic's latest market insights over at theflyingfrisbee.com. Thanks for joining us today. We have extensive coverage planned all week long here at Kitco News, so please hit that subscribe button. I'm Jeremy Saffron. Thanks for watching.
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