Can the Gold Bull Keep Up This Pace?

Mike Maharrey: Greetings. I'm Mike Maharrey, a reporter and analyst here at Money Metals, and I'm joined here once again by my good friend David Morgan. He is the publisher of the Morgan Report and the author of the Silver Manifesto and an all around awesome guy and a fine analyst. How you doing, David?

David Morgan: Mike, we're doing well, thank you.

Mike Maharrey: Well, it's always great to have you on and there's certainly no lack of subject matter to talk about. I want to start with last week, which was obviously a really wild ride for investors, and I just want to start and get your general impression and ask you what surprised you about how things unfolded last week when we had the trade war kick off and then we had the stock market sell off, and then we had Trump, I guess kind of reversing course. I'm not even sure. What kind of surprised you about this, or did anything?

David Morgan: I think what surprised me was that the metals reacted negatively. That wasn't such a surprise. What the surprise was how quickly they bounced back.

That was a surprise to me. Normally when you're in these type of situations and everything gets hit and hit hard, gold sympathizes, usually it's the only good asset when everything's going south. So fund managers primarily will sell gold because it's something in the green and cover a margin call. But this time gold took it off, it went down very slightly, bounced back a few days later was making another new high and silver got clobbered. I mean, silver lost like 14% within a couple of days, but it came back stronger than I expected. I go, oh boy, we have to wade through more overhead resistance and on, and it's not all the way back to where gold is, but it it's bounced back strongly. So that was actually a surprise, which says, because I always try to stay objective. I can't be, I'm very biased toward honest money, sound money, precious metals. But nonetheless, I try not to let my emotions guide my decisions. And with seeing the silver market do that much, it's signaling strongly that gold and silver certainly have a long ways to go. And a little late to the interview, I apologize publicly, but I was reading John Hathaway's interview on Sprott money and just boggles my mind that how little gold is in the financial system when you're looking at money managers and asset allocation. And for the last, from 2017 on, he did the study. So from 2017 to the current day inclusive, it's a very small percentage that people have even 5% gold exposure.

Mike Maharrey: Yeah, yeah, I've read that too in other sources.

David Morgan: So that's it. That's my surprise.

Mike Maharrey: Y eah, yeah. I'm kind of with you how fast it bounced back and how much you kind of expect it to hit a bottom and then rebound and correct back. But to see it go up and then all of a sudden talking about new highs, that kind of surprised me a little bit. So if you listening to the mainstream analyst, everybody's talking about tariffs, the entire focus is on tariffs. It's all about tariffs. I read today that some 60% of CEOs say they're worried about a recession because of the tariffs. So it's tariff, tariff, tariff. And obviously this is playing out in a much broader economic environment, and I'm curious what you think people might be missing that is underlying all of this that is not necessarily about the tariffs, because I don't think it is just tariffs. And I have a feeling you probably agree with that.

David Morgan: I do agree with that. I mean, if you look at some of the best thinkers on true freedom, true independence, true sovereignty, you look at what does that consist of? And basically you go back to the Jeffersonian era, basically what it meant was that you were a Renaissance man, meaning you knew master of done skills of everything. So you were agrarian in those days and you grew your own food, made your own clothes. Also, you were not dependent on any outside source. So you cannot set up into a state or a nation state and say, well, if we are all encompassing and we produce all the energy we need, all the food we need, all the clothing we need, all the housing we need. From that standpoint, from a nation state standpoint, you're independent.

And America has become extremely dependent on China. One couple that most people know. One is the rare earth elements, and without the rare earth elements, you really don't have a lot of Teslas or windmills or solar panels, solar panel, a lot of these things. The other one is medical medicine. A lot of the pharmaceuticals are produced in China, and the last one just blows my mind. It is a national security issue, and it seems my opinion, whenever there's a deep state problem or whatever, and we should get the information is in the free market, it's suppressed because of national security.

And in my opinion, they use that cover quite often. Well, it's a national security issue, therefore you can't get the freedom information request. I digress slightly to say this. We have stuff that is in our military that comes from China alone.

Mike Maharrey: Sure.

David Morgan: Is that insane or what?

Mike Maharrey: Yeah, yeah.

David Morgan: I mean that is absolute insanity. So the big, big picture is that China depends on us to buy their goods and without us buying it, then China's in dire straits. So the bigger picture is forget the tariffs, just look at trade overall. And if we're not trading, then we're lowering our standard of living worldwide. And I've been saying that for a number of years that the world economy is contracting not expanding. So you have a contracting goods and services, tariffs or no tariffs, and you have an increasing money supply, which is the classic hyperinflationary startup makeup, and China's wants to keep the trade going, but there's two huge egos involved here. One out of the current administration and Xi Ginping has basically decimated his, what we would call the cabinet in our political system in the communist China regime, gotten rid of people that actually had experience, put in as what we refer to in the slang is his bros, his friends and his colleagues that have no experience in warfare, logistics, international trade diplomacy and all this. So, he's running the show with a bunch of yes men under him, which spells in my view, a more likelihood of a disastrous decision or decisions that will impact both sides. So, it is bigger than the tariffs. And not to sound like an apologist for Trump because I'm not really that fond of the man, but the idea that the tariffs are responsible for this and this, and this really isn't responsible thinking in my view, because we were going to get here anyway. No doubt in my mind. I mean I've been saying this for how many years, 20 years. It's just that this was kind of a trigger. So, then that begs the question, was it deliberate or not? Was this like a setup to get this rolling in this direction where we had to admit that America's been living beyond its means for decades by printing pieces of paper, getting goods and services from other countries, and then having them recycle that paper in the treasury market and pretend that it was savings jigs up.

I think the tariffs is more or less a trigger for it.

Mike Maharrey: Yeah, I wrote an article I guess last week and was just trying to point out the fact that we've created this effectively a bubble economy that's floating around waiting for a pen, and tariffs very well may be the pen, but I've been kind of arguing that even if they managed to negotiate around this and settle this aspect of it down, there's still a bubble and it's still waiting for a pin and there's a pin out there somewhere.

David Morgan: Well, I agree. I think the tariff is the pin, and once you pop the balloon, you can't pump it back up. As you know,

So, whether or not these things get reduced or there's certain exemptions and let's say the kiss and makeup as a metaphor and everybody's more or less happier with the result than they are right now, it will not change the dynamic. The dynamic is what I said earlier, and this is a contraction in the economy and that doesn't spell increased living lifestyle for everybody. That creates the opposite.

Mike Maharrey: One of the things that I thought was kind of interesting, I was looking at the VIX, the volatility index, the other day, and you can see these big spikes of volatility in recent history. There was one in 2008, obviously, and then during the pandemic, and then we just had a spike, didn't quite reach the level of the pandemic, but it got pretty close. I think it got up into the upper fifties and it was in the seventies during the pandemic area. I think that given the way Trump operates his strategy, his negotiating tactics, I think we can continue to expect a lot of volatility because he just creates uncertainty. We don't one day we're having tariffs and then we have a 90 day reprieve. And this is just kind of modus operandi. How would you suggest that an investor navigates this extreme level of volatility that we're seeing right now, and I would argue we're likely to see for the next four years?

David Morgan: Yeah, it's very difficult one. It's quite emotional, and if you've read Art of the Deal, I mean, this is my metaphor, and you don't have to agree with it, but one negotiation technique is I'm going to negotiate something with you. So, we walk up and we're within arms distance. The first thing I do is slap you in the face, and then I back off. I didn't really mean it, but this is the kind of the methodology that Trump does, and people don't really know it or see it for what it is. It's his style you might call it. But to answer your question, what do you do? Well, first of all, you look at the big trends and the big trends are stocks up and gold neutral up until the last six months or so, and now we've got a big shift, and I mean a big one. So you've got equities going lower, gold going up, so you've got to pay attention to the main trend. Even if you don't like gold, that's irrelevant to being an objective investor. You've got to go, the trend is your friend. The trend is asset allocation is changing, and that's what this article I mentioned earlier from John Hathaway. But if you're not on board now, you're going to wish you had been because $3,000 gold may look cheap in two years.

The other one is to keep your emotions in check and dollar cost average. You don't have to get all in and all out. Oh, I'm getting out of stocks, now I get into gold, and then three months later, gold's gotten under $3,000 for whatever reason, which it could, and stocks are almost at a new high, and you just kick yourself.

So, you set up a plan where I'm going to lower my stock exposure by 20% a year and increase my commodities exposure by 20% a year or something like that, do that over a couple of years or do it over a year or whatever. But you don't need to make a decision and be a hundred percent right on the day you make that decision. You want to use your ability to work with the trends, and that means they're going to ebb and flow up and down, but let's get on board with the major trend, which is stuff we don't need and stuff we do need. That's basically a lot of stuff that look at the car market. I mean, a lot of things. So anyway, I won't draw it on. That's the idea. Stay relaxed as you can. Even though the volatility. Volatility just as to me, it's an indicator of the emotional state of the market and everyone's panicking. That's the time to stand aside, take a deep breath and evaluate.

Mike Maharrey: Right? Yeah, I agree completely. It's so easy to get panicked to knee jerk, and it's always wise to avoid that. One of the conventional wisdoms, I think, and I was hearing a lot of this as we were kind of running up to the tariffs, and that was the notion that it would probably lead to dollar strength and treasury strength. And over the last few days we've seen the exact opposite. We've seen extreme dollar weakness and we've seen a big sell off in the bond market. In fact, really the only safe haven that was standing at the end of the last week was gold. You had the dollar and treasuries both selling off. Does that surprise you first off? And then second off, what do you think is kind of creating this contrarian situation that a lot of people, I don't think expected?

David Morgan: Why it doesn't surprise me? Because I've expected this at some point. If you look at extra's pyramid, and I was one of the first to bring it up, a lot of people have forgotten about it. I'm that old, but I was at that dinner after speaker's meeting, I brought up extra's pyramid to one of my friends in the newsletter business j Taylor, and he never heard of it, but it's made its rounds. In fact, that article by John Hathaway talks about the extra pyramid. So basically, if you don't trust a dollar today, why would you trust one 10 years out or 30 years out? And I think the markets, it knows that, but it hasn't manifested that until this last week really. I mean, there's been instances.

And gold is superior to everything, and that goes right along the extra pyramid as the liquidity event takes place and you need to have real money or what's considered real money quickly, then things that have low value or high risk disappear and things that have guaranteed stability get bought, and that's gold and silver. So I'm not surprised in what did it mean was your second part of the question. It means what I said a moment ago to me, and that is that the allocation shift is taking place. I said it I think our last interview where the run to gold has begun, and I didn't get a lot of pushback. He talking about he is a gold bug or whatever, and I said,

Look, The run to gold starts in the stealth mode and the smart money moves in when no one wants it. And that's been the central banks the last couple of years that started the gun. That was the gun that was a gun going off. So you don't see him, the race is way down there and you're at the finish line. You can't even see 'em so far down there

Now, they're starting to appear. Now they're coming up and you can see them and say, you know what? Maybe gold isn't such a bad idea and maybe the dollar isn't going to be king of the hill forever.

Mike Maharrey: Yeah, it's interesting to look at Russia. They look really smart when you look at retrospect. 10, 15 years ago, they were the biggest gold buying central bank. They started buying even proceeding the buying that we've seen of late. And that has played out very well for them through the course of the war with the sanctions. And it has really created a lifeline for their economy because it is real money and it can be used anywhere even when their dollar assets and their Euro assets are frozen. And I think it's interesting just to kind of see how that played out, not justifying their actions. I'm not trying to hold Russia up as this great nation state. It's obviously got its problems, but obviously they were pretty smart in loading up on real money before getting themselves into a situation where their assets were going to be cut off.

David Morgan: Yeah. I'm going to say something controversial that probably will hope they get you more views. I'm not saying I agree with it totally, but it certainly made me stop and think, and this was probably not 10 years ago, but maybe 6, 7, 8 years ago, and I give credit where credit, I cannot remember who made the statement, but it just did kind of set me back on my heels. The statement was that Russia's becoming United States and the United States is becoming Russia.

And you think about all of the loss of freedom that we've experienced over the last decade. And again, I'm not a big proponent of Russia. I'm not in love with Putin, but you look at their economy and it looks like he really does care for his people. Maybe that's why imagination, I've never been to Russia. I got very close when I was in Mongolia, but regardless, it just made me think, geez, here's a country that's known communist and control and people are not free and all these problems. And basically they've, what you might say westernized, not us westernized, but classic western ideology from the time of the Greeks. And you look at the amount of freedom that's was taken away. So I don't dwell on it, but I thought it was interesting to put in that context because who would've thought, and when I grew up, that would be, you could even make a statement. Yeah.

Mike Maharrey: Yeah. It's interesting. I think people of our age have a little bit different perspective than youngsters because we recognize just how different the Russia of today is from the Soviet Union that we grew up worrying about dropping bombs on our heads. For me, it's kind of weird because I always thought in the nineties like, wow, what a shift. This is a great opportunity we can have develop a good relationship with this other power across the scene. It unfortunately just didn't work out that way.

David Morgan: Yeah, I have to say, I just want to get this in. I agree. I mean it's like, come on. There's one thing I want for everyone. It's freedom. With freedom, you have responsibility. I mean, honest to goodness. My dad served in the Korean War. I missed the Vietnam War by just a few numbers. That was the last year they drafted my number was high enough. I didn't go. But anyway, I'm just reiterating what you said, Michael, but honest to goodness, we think of all the amount of capital. It's not only money, but physical labor and people involved in a war effort. What good does it do? And I'll say one more thing, I was on record, I'll repeat it. All wars are bankers of wars. That is a movie, a documentary by a gentleman out of Hawaii. I forget his name at the moment, senior moment. But you can look it up. I think it's for free. It might even be on YouTube. All wars or Bankers War. He made it worse. Makes a very good case for that.

Mike Maharrey: Yeah, yeah, absolutely. I want to touch on silver real quick. We've seen the gold silver ratio. It was over a hundred to one. I think it might be just a tick below, but we're still in that a hundred to one range, which is extremely high from a historical standpoint. But I was talking to this the other day and he said to me, Mike, he said, I think this is the new normal. We're going to see this big spread and we're not going to see it snap back as maybe we have in the past. Maybe 80 to one might be the new normal. How would you respond to somebody who thinks that maybe we've had this fundamental shift where we have a new normal with a much wider spread between gold and silver?

David Morgan: Well, first let me say, I cannot say he's wrong. I don't know the future. I'll also say that some of the well better known stalwarts in my genre in the financial newsletter business that focus on resources and metals, one of them has kind of made the same statement, but I disagree. I think that the money metals, first of all, you look at the correlation, correlation, gold silver is around 85%. Now, it may not be that high lately, but it's probably still above 80. And there are very few things that are correlated that high.

So, you look, well, gold does this because it's industrial metal. Then it does that because it's a monetary metal. The silver never asks if it is or isn't. Whatever it is, it's just bought or sold. And it trends with gold when there's recession, it trends with gold when there's an inflation. It trends with gold most of the time. So think that's argument number one. Argument number two. Can I share my screen with you? Yeah. I'm going to see your request, and this is a graph from Matt Watson who I was introduced to by the Silver Institute. And what you can see here is the silver demand for low case. Now, we all know that we've had a silver deficit for the last few years. Some say four, some say five. It's averaged about 200 million ounces a year. But what's important on this graph is over here at the 1 billion ounce level, that's what we mine and recycle in a year. And you can see it kind of ups and downs. And he basically shows it going lower to the right, which makes sense at least at this point in time because the grades are getting lower and lower.

David Morgan: So, there's less and less silver per ton coming to the surface, and the recycling is kind of stalled out as well. So I think that's a valid assumption for at least the 10 years, maybe not the 25 years he has on this graph. But what you see is from current day onward, we have to eat the above ground supply of silver to meet supply and demand. They have to meet somehow. And if you're not mining enough, then you got to get it from where. Well, you don't get it from thin air like the money supply,

Mike Maharrey: Right? You can't print it!

David Morgan: You have to get it from the stockpile of silver that's held by institutions through the ETFs and individual investors, such as you and I, well, if you go out, let's go 10 years to 2035, and you look at the number from there to there, you're looking at almost 500 million ounces of silver in that one year as a deficit. Well, the above ground silver supply held by the registered category and the banks probably is no more than 2 billion ounces. So you're looking at maybe two or three years and you've in theory, eaten up all of it. So now what do you do? Where's that come from? There is no above gown supply. Well, there always will be, but let's say the transparent above gown supply is disappeared. Okay, let's say it that way. So everything that's in the ETFs, everything that's on the Comex, everything that's on the LBMA is gone in theory again. So now the rest has to come from people, the stackers. We don't know how much is there maybe another 2 billion, maybe three, maybe one. We don't really know.

But what this says, and this is a conjecture this is looking for, but is the low case. I mean, look at the high case. It accelerates this curve I'm pointing at right here. And there's one thing I disagree with him. So let's talk a little bit about it. All the dark green hair is solar. So, he's not showing a huge increase in solar. In fact, he shows it in the latter years, kind of tapering off does show automotive going up gradually. It shows other industrial, basically it's a steady state. I'd argue it's going to continue. It might be going up slightly, but with silver batteries and other things that silver will be used for, I think that's conservative jewelry is a constant, all agree with that. Silverware is just as little orange a constant. I agree with. That's a very small part of the market. It's 4%. But here's why I have a big discrepancy. I want to give you the question. I'm going to flip the interview. He's looking at a steady state investment demand for silver all the way through. I say hogwash,

I say, as the gold market accelerates and gold's too pricey for people. The words ‘gold’ and ‘silver’ in the Bible correlates about 85% of the time, very seldom, it’s gold only. And then there's this little silver only. It's usually gold and silver. But regardless of them being tied together, I didn't think that we'll see gold get too expensive for a lot of people that wake up late and say, “I’ve got to protect my savings. I can't afford gold. My savings account will buy me two ounces of gold and I can buy silver.” In fact, it's pretty cheap at a gold silver ratio. So my point is that this could be the curve could come down to the left, meaning because of increased investment demand, we will see this theoretical depletion of the above ground supply actually take place sooner than projected by this curve. Dennis is the low case in the high case. It shows that. And that's it. The last thing I want to say, Mike, is in 2020, he shows the investment demand here. I dunno what that number is, 200 million ounces, not true. In 2020, the total investment demand was 500 million ounces. 320 million ounces was in the investment category institutions, and 200 million was a silver stackers, which is basically 200 million. So bear that in mind that as he shows it here, is it really true, at least in that year, that gray bar should have been much, much higher, higher than that, than it was. So now the question is, knowing what I just showed you, what do you think the gold silver ratio, is it going to be a new paradigm or is it going to come back to something more like 70-to-1 50-to-1 30-to-1?

Mike Maharrey: Yeah. Well, I've been saying all along that I think that it's going to revert back to the mean. I mean, for one thing, things just tend to do that. I mean, we have averages for a reason, and I'm kind of looking at the same thing you are in terms of the investment aspect of it. I think it's definitely going to pick up for the reason that you mentioned it's an alternative to gold. As gold gets more and more expensive. And I'll give you an anecdotal story. I was just talking to a guy last week, a friend of mine who he's like, I've never really gotten into precious metals. I've got my 401k, but I see all of this chaos and I can't afford gold. What do you think about silver? So he was already kind of in that process being somebody who was looking into precious metals for the first time. And I'm certain that he is probably indicative of a lot of folks out there. And just looking at the history of it, as you mentioned, gold and silver, both are fundamentally monetary metals, and we see that correlation over time. And I don't see any reason why all of a sudden that would cease to exist. It could. As you mentioned, I don't have a crystal ball, but I'm inclined to agree with you that this is a,

David Morgan: Well, the main problem with silver as a monetary metal is that the banks do not associate silver's monetary metal. And of course they do gold. And as I said, they've been buying gold quite a bit the last couple of years. And over time, they're always buying gold. Well, they have. I mean, the England sold all of its gold. Canada sold all of its gold. I mean, it's very foolish, my view. But the point is that silver's has never been a monetary metal in the banking system for a very, very long time. And if it were, and they did a 16 to one or 30 to one, there's not enough silver out there to bring that ratio. No, there's no way.

So, it would have to be revalued at something more like a 10-to-1 kind of a ratio or whatever.

And then its value is money. But right now it's so cheap and it's kind of that way because of many reasons. Some is the way the price is derived through the derivatives market. In others, there are no bank holdings. And the other one is that no one really pays attention to it. And that I think is deliberate because both gold and silver are really suppressed from the Wall Street perspective, stocks and bonds. And no one wants to talk about precious.

Mike Maharrey: Well, I have a feeling people are going to be talking about precious metals a lot more as we move forward into the future just by virtue of what's going on with the dollar. And so yeah, definitely. Well, I'm going to let you get out on this. I want you to let folks know where they can follow your work, where they can find the Morgan report and how they can get your valuable insights on a regular basis.

David Morgan: Well, the best thing is go to the landing page, TheMorganReport.com, and you can sign it for a free newsletter right there on that front page. Then there's icons in the upper right, there's of course the membership portal, but next to that is the YouTube channel, our LinkedIn channel, our Twitter feed. The Twitter feed's the only place I'm not shadow banned. I post every day on Twitter. Usually I just posted that Hathaway article I keep referring to.

There's a lot of good information passed back and forth on X or Twitter, whatever you want to call it. Second thing I’d like to mention, Mike, is I think I mentioned it last time, and that's my documentary's been filmed. It's been finalized, the SilverSunrise.TV, site has a lot of trailers out there to look at. We have a lot of people that are pretty well known. G. Edward Griffin is one. Ellen Brown, who wrote Web of Debt, and she's for state banking over federal banking. It's a full topic in itself. So, I'll leave it at that, those two websites, the morgan player.com and SilverSunrise.TV.

Mike Maharrey: Excellent. Well, I really do appreciate your insight and time. You always bring a very valuable perspective, and I know folks always love when you come on, so appreciate you being on, and I'm sure we'll get you on here down the road as things continue to unfold. But we do appreciate very much the work you're doing, and again, thank you for your time.

David Morgan: My pleasure. Thank you.