Episode 319: From AI to Bullion: What Gold Tells Us About Market Risks in 2026
In this episode of the International Risk Podcast, Dominic Bowen and Russ Mould discuss why gold has returned to the centre of global finance amid rising geopolitical risk, sanctions, and record government debt.
Find out more about what is driving gold’s surge beyond $4,000 an ounce, from central bank buying and reserve diversification to inflation fears and market concentration in US equities.
The conversation also addresses whether gold truly functions as a haven, how it compares with equities, bonds, and AI-driven assets, and why valuation discipline still matters in late-cycle markets.
Finally, they explore what could end the gold rally, the risks embedded in private credit and leverage, and the market signals that investors and CFOs should be watching closely.
Russ Mould is Investment Director at AJ Bell and one of the UK’s most respected market commentators. With over three decades of experience, he began his career as a fund manager at Scottish Equitable before spending more than a decade at UBS Investment Bank as a technology equity analyst during the dot-com era. He later became editor of Shares Magazine before joining AJ Bell, where he plays a central role in investment strategy, client communication, and media engagement. Russ is widely known for his clear, valuation-led approach to markets and his ability to connect macroeconomic risk with practical investment decisions.
The International Risk Podcast brings you conversations with global experts, frontline practitioners, and senior decision-makers who are shaping how we understand and respond to international risk. From geopolitical volatility and organised crime, to cybersecurity threats and hybrid warfare, each episode explores the forces transforming our world and what smart leaders must do to navigate them. Whether you’re a board member, policymaker, or risk professional, The International Risk Podcastdelivers actionable insights, sharp analysis, and real-world stories that matter.
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Dominic Bowen is the host of The International Risk Podcast and Europe’s leading expert on international risk and crisis management. As Head of Strategic Advisory and Partner at one of Europe’s leading risk management consulting firms, Dominic advises CEOs, boards, and senior executives across the continent on how to prepare for uncertainty and act with intent. He has spent decades working in war zones, advising multinational companies, and supporting Europe’s business leaders. Trusted for his clarity, calmness under pressure, and ability to turn volatility into competitive advantage, Dominic equips today’s leaders with the insight and confidence to navigate disruption and deliver sustained strategic advantage.
Transcript
00:00: Russ Mould: With gold manners having lagged, gold so badly there may be still some things to look at there, even if you know having done the numbers last night, you’re still looking at the major gold miners trading at three to three and a half times book value which doesn’t sound like bargain basement territory but equally given that gold’s at four thousand dollars and you’re all in sustained cost of production is eighteen hundred your profits and your book value are potentially going to grow quite quickly if all of the things being equal.
00:22: Elisa Garbil: Welcome back to the International Risk Podcast, where we discuss the latest world news and significant events that impact businesses and organisations worldwide.
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01:31: Dominic: Hi, I’m Dominic Bowen, and I’m the host of the International Risk Podcast, where we discuss the topics that matter. We’ve heard your feedback and your requests for more episodes. So the International Risk Podcast is now being released three times per week. I really appreciate you listening, and thanks for your interest. And today we’re going to discuss gold, which is back at the center of asset allocation debates, because of a range of different international risks. Now, gold broke $4,000 an ounce in October and remains near record levels. The drivers are visible. There’s heavy central bank buying, there’s a resurgence of ETF inflows, and there’s strong participation from several nation states, all against a backdrop of sanctions risks and roughly $300 Russian billion dollars of fresh frozen Russian assets. Today, we’ll test whether this is some sort of froth or whether this is a durable change in reserve management and portfolio construction. And with us to discuss this today is Russ Mould. He’s the investment director at AJ Bell. Russ, welcome to the International Risk Podcast.
02:30: Russ Mould: Thank you very much, Dominic. It’s a pleasure to be here to try and help.
02:32: Dominic Bowen: And whereabouts you based today, Russ?
02:34: Russ Mould: I’m sitting here in Brighton on the south coast of England on a bit of a grey autumnal day. But if I fancied it, I could probably walk to the sea in about 20 minutes from here. So get a bit of fresh air later on if I need it.
02:44: Dominic Bowen: I would take the sea any day of the week. So that sounds like a lovely spot to be, Russ.
02:48: Russ Mould: It is. It’s beautiful.
02:50: Dominic Bowen: Very good. Now, gold has been a symbol of wealth, and it’s been a symbol of power for millennia. And in 2025, it seems to be no different. But we’re competing today with digital currencies and artificial intelligence. It’s really dominating the headlines. Why do you think gold still holds such a powerful place in global finance today?
03:08: Russ Mould: I think for a lot of people it is still seen as it’s been, money, as you said, since time immemorial. So there is always that element to it. And I think that’s the first thing to remember. The second is that you know there is that memory of it being a brilliant investment in the 1970s when everything else basically went wrong. And there are you could argue, there are some uncanny echoes between where we are now and where we were then, geopolitically, financially, and economically. So I think they’re probably the two biggest reasons. Although there will be some people who will still to this day say, you know, they’ll adhere to the barbarous relic, that it’s just not relevant in a modern society. And I think that’s because either they embrace digital versions or they go back to the Buffett argument of it offers no yield, it has limited industrial use. We dig it out of the ground, put it in a safe, and leave it there. So there is still a large school of thought that says not interested. There are other things I can do with my money.
03:52: Dominic Bowen: And we’ve seen gold prices hit record highs again this year. So certainly gold isn’t going away, whichever school of thought you subscribe to. We’ve seen these heightened US trade frictions, the announcements of 100% tariffs again on Chinese goods back and forth with the Trump administration. We’ve seen restrictions on Chinese rare earth exports. We’ve seen you know significant market uncertainty, and partly this has driven investors towards gold. What do you see as the main forces driving this? Is it geopolitical tension? Is it inflation risk? Is it the central banks or is it just pure investment sentiment?
04:21: Russ Mould: I think you know there are lots of blogs out there, and there are lots of arguments arguing that the US weaponized the dollar when it began to seize Russian assets and ban Russia from SWIFT and international payment mechanisms. And I think that did persuade some monetary authorities to run for cover and seek alternatives to the US dollar. Equally, countries like China had been looking to diversify their dollar exposure anyway. And because there was sat an awful lot of US treasuries and they could see a wave of treasuries coming their way as American debt galloped higher. And I think that’s been another key factor. And actually, you know, you’ve been able to draw a chart, and I’ve done it myself, whereby you look at the US annual interest bill and basically draw the gold price against it, and the two pretty much lock up their goals now. Accelerate a little bit higher. So think geopolitics has had a huge part in that. And then that debt issue, a lot of investors whether they held treasuries or fixed income instruments or or equities we’re looking at how are they going to solve this because if some because if it can’t go on forever there has to be a an end game at some stage and i think in their darkest hours was a lot of investors wealth managers that you know we we talk to still fear that the way if if you look at the reinhardt and rogoff theory of how do you get out of this sort of debt position it’s either You know, default, no. Inflation, well, maybe. Grow out of it, the best possible solution, but very difficult to do. Or you start a war. And so people are kind of leaning towards the, well, they probably have to inflate their way out of it or do something extremely unusual to get out of it, which could mean more printing, more monetary debasement. So there is an element of the debasement trade in there for the real hardcore gold believers, I think.
05:36: Dominic Bowen: And Investors often call it that “safe haven”. And I wonder how accurate that term really is. I mean, how does gold perform when compared to other assets like equity, bond, or real estate in times of uncertainty? And we certainly are in this persistent period of uncertainty.
05:50: Russ Mould: Yeah. I mean, in the 70s, it’s when gold shone, if you’ll pardon the expression, because in real terms, it outperformed everything. When you had two massive inflationary spikes, Nixon smashed up the Bretton Woods standard and took America off the gold standard. And that was when gold really did come into its own and perhaps now gather some of that luster that it still has in the minds of investors to this day. Equally, I guess, in a worst-case scenario, I was always taught as a very junior fund manager when I started in 1991 and then as an analyst in an Investment Bank later, that during a crisis, you know, all correlations go to one, in that people will just sell anything that they can lay their hands on. And and you have seen that even in this gold bull run you know in 2020 2021 when everything felt like it was going wrong there was a big sell-off in gold because the people you know there was some profits to be had and people could could trade relatively easily day one say so I think that is still a danger is that if there were to be a major shakedown of some kind there’s a lot of profits to be had being sat on by lot of people in gold right now they may look to liquidate. But that’s your danger. But equally, the 70s, it shone, and it has seen us through the last, you could argue, 20 odd years of two big phan two big bubbles bursting geopolitical unrest. It’s seen investors through that really pretty nicely, thank you very much.
06:51: Dominic Bowen: And I wonder if that’s part of the reason that central banks, especially in emerging markets like China, Turkey, and India, have been buying more and more gold in recent years. You know, Russ, what’s the strategy behind that? And how is it reshaping global finance as emerging markets are buying more gold?
07:07: Russ Mould: Yeah, I think that will be, know, do we want to own? I mean, we know that the dollar is the world’s reserve asset, whether and that’s whether you like it or not. And it’s a system that’s generally speaking worked, you know, really pretty well for the last 70, 80 odd years. But when you have an administration now that can be seen as somewhat capricious in the way that it conducts itself, you know whether it’s you know by social media posts or by some fairly brute force negotiations. And equally, fans of that will say, well, like they’re getting results, so what? But I think in those respects, it’s not necessarily the best way of attracting capital, you could argue. And when America is piling up debt and is going to be selling an awful lot of treasuries, one way, shape, or form, I think there will be people looking at, well, you know, supply goes up, price goes down, I need to diversify. So I think there are countries out there that are taking… A view on gold for several different reasons, but an increased weariness of the dollar and overexposure to the dollar does seem to be a big part of their thinking.
07:50: Dominic Bowen: Interestingly, you mentioned the reserve currencies. I mean, we’re seeing this soaring government debt, and the repayments on US debt are just absolutely at a phenomenal level now. And major economies are trying to push rates lower, even as inflation remains elevated in some markets. And I think this creates a challenging landscape for some businesses. And we’re seeing increased volatility and weakened confidence in some of the fiat currencies. And I think it’s compelling investors and businesses to look for alternatives. And with equities not paying much more than government bonds right now, you know, when that extra return is so thin, are we seeing the business community move cash reserves into gold in the same way developing economies are?
08:28: Russ Mould: We’ve definitely seen it from our customers, who are individuals or clients who are wealth managers and financial advisors; they’ve definitely been asking more questions about gold this year and looking more closely, whether that’s through ETFs, funds of gold mining and precious metal companies. And in the case of perhaps the more risk-tolerant private individuals, some of them have looked at specific individual mining companies, which, but let’s face it, have done poorly relative to gold overall. I know if you look at the GDX Vanek Vectors gold miners ETF and the GDXJ, the junior gold miners vectors ETF, I think they’ve they’re up 80 to 100% this year, even after the recent pullback. But if you run their share prices relative to the gold price, gold has massively outperformed them. And those gold mining baskets have really only just hit record highs now, when, and they’re basically at the levels that gold was within in 2011 when gold was at $1,800 an ounce. So you could argue in some ways the miners have got the potential to be substantially more profitable now than they were then, even allowing for inflation and other challenges that they themselves occasionally have to face. So I think that is definitely catching investors’ eye, looking at perhaps, all right, have I missed gold to a degree? Well, possibly not. If you look at what’s happening with some of the debt, the risk there is of inflation, and the government’s looking to try and get their way out of this debt mess, in that way. But also with gold manners having lagged gold so badly there may be still some things to look at there even if you know having done the numbers last night because I think in spreadsheets having been a trained analyst for a very long time you’re still looking at the major gold miners trading at three to three and a half times book value which doesn’t sound like bargain basement territory but equally given if gold’s at four thousand dollars and you’re all in sustained cost of production is eighteen hundred your profits and your book value are potentially going to grow quite quickly if all of the things being equal.
09:57: Dominic Bowen: Yeah, it’s very interesting. And this interplay between government debt, inflation, interest rate policy, and where we’ve seen, you know, it’s almost a sitcom watching the interplay between the US s Federal Reserve and the Trump administration. But it does fuel uncertainty, and it does shape capital allocation, and it amplifies both the risks and opportunities, like you just said in your Excel sheets. And I think we see this across the business landscape. So what are the key indicators that you think chief financial officers should be monitoring right now? So when CFOs are considering their company’s cash reserves, their investments, what are some of the indicators you think they should be looking at?
10:30: Russ Mould: I think they’ll continue to look at inflation very clearly. And they’ll be looking at some of the leading indicators on that. What’s coming through in producer price inflation, I think, will be a key factor there. But they will be looking at central banks and how they vote. You do get that sense that, you know, the Federal Reserve has got two mandates, which are inflation and employment. Most central banks have one, which is inflation. You do get the sense that central banks feel… more willing to take a risk with inflation to keep the growth show on the road because I think, given Western indebtedness, they just can’t afford disinflation or certainly a Japanese-style deflationary spiral that would be crushing for Western growth and equity valuations. And so they need that growth in some way, shape, or form. So you can see why they would be inclined to take that chance. I think that’s something that will keep chief investment officers, private individuals, and financial advisors on their toes. And I think they’ll be looking at that. but So if you’re going through the bull cases for gold, inflation is, that you could argue one of them. Government debt is clearly another one on how central banks are trying to manage those at the same time so they’ll be some of your key indicators if you want to do the positive view we do in theory have something akin to a peace deal in the Middle East if we were to get something akin to a peace deal in eastern europe then the geopolitical element you could argue may have lessened a little bit so that might make people a little bit more relaxed so they will be watching some of the big political headlines as well but i think inflation government debt and how central banks are perhaps corralled into helping with that debt by using, frankly, financial repression. If you listen to Russell Napier and and and and and some of those fantastic writers, you know, that that is a theme that they’ve been running with for a very long time. And that probably isn’t great for fixed-income investors. And it means you’re looking for another, or have, and therefore gold might be the alternative, particularly if yields are being suppressed and inflation, they’re taking a little bit of a chance with it, maybe.
11:58: Dominic Bowen: Russ, you talk about yields, and the 10 largest companies in the S&P 500 currently account for about 40% of the index by weight, which is just huge. And I think this underscores that concentration of a handful of tech and AI-driven stocks like NVIDIA, Microsoft, Amazon, Meta, Alphabet, Broadcom, Tesla. And at the same time, if we look more broadly, it’s just over half of the S&P 500 stocks are above their 200-day moving average. Now, if we look back historically, there are similarities between previous periods of heightened investor expectations and potential bubble risks. almost feel like the B word is a bad word to be saying these days. But we saw similarities in the early 2000s during the tech boom. Does this concentration and breadth mix look like an AI-fueled bubble to you? Is this something that worries you or concerns you and your clients?
12:45: Russ Mould: I’m paid to worry, Dominic. So yeah, in that respect, I’m always thinking of that. But as somebody who started as a fund manager in 1991 in an equity bear market, that’s probably slightly coloured my perception, if the truth be told. So I’ve always been, you know, protect the downside first, worry about the upside second. But that’s how Buffett says you should do it anyway. I’m in good company. But yeah, you’re always wary of using the B word because the more you talk about it, the less likely it is to blow up. But having been an equity analyst at an investment bank covering tech stocks in the late 1990s, I’m coming out in slightly cold sweats now because I remember that there are some echoes with where we are now, between now and then. And the team I was on, led by a smashing chap called Gavin White, we went bearish on tech stocks in, don’t know, June, July 1999. I’m saying this is all bonkers. You’ve got really high concentration risk, evaluations are really stretched, there’s a capex bubble brewing here that just cuts into a capex bust really quickly. And we knew we were sticking our necks out, but we didn’t really expect the Nasdaq to then double in the next six months and make us look spectacularly foolish. All right, we then looked smart for the next two and a half years, but clinging on through those six months, which was nine months, was really pretty difficult. And that’s the danger with calling bubbles. But I think there are some uncanny echoes now in terms of valuation, concentration risk, and companies being rewarded for spending money. You’re almost getting, you know, looking at some of the OpenAI agreements recently, which are fascinating, but funding for them is unclear. We remember joking back in 1998, 1999, 2000 about how come we’re trading on price to press release. Well, you know, you’re seeing something a little bit akin to that now. So yeah, well, I am nervous, definitely. But if I could tell you when it would end, believe me, I would, but I can’t. All you can do as an investor is calibrate, you know, risk according to your own personal risk parameters. And and and that’s all you can do. But yeah, fighting momentum is a hard thing to do. It takes a lot of courage and you you must not have fear of missing out and i personally all right i’m not allowed to run my own money because i’m doing things like this so i don’t want your listeners to think i’m being a smart aleck by buying something and talking about it on here but i have no fear of missing out and my guy is given a very clear mandate which is a not lose it and b beat inflation and the rest of it will generally take care of itself so i have no fear of missing out but i think some uncanny echoes do make me uncomfortable and not just my experienceYou can see in the 70s with the Nifty Fifty, the late 60s with the GoGo tech stocks in the US. These episodes are great fun while they run, but they get quite tricky as they end.
14:48: Dominic Bowen: Yeah, no, it’s a really, really valid point. I thought it was quite interesting, some of the things you said just then. So how do you tell the difference? As you said, you know, you’re paid to worry. I’m a risk advisor. I’m a strategic advisor. People must say you worry a lot, but I actually spend more time looking at the opportunity and encourage my clients to look at the opportunity and pursue the opportunity. But to do it within a framework, that means you talked about not losing it and beating inflation. I think we might use a similar framework we might use from a risk management point of view. So I’m wondering about this sort of risk indicators, and that’s really what drives a lot of my work and the advice I give to clients about what the key risk indicators are to your business, whether you’re opening up a mine in Pakistan, whether you’re looking at deploying resources to Ukraine. So how do you tell the difference between a healthy AI investment cycle and an overheated story? You know, what are the risk indicators that you monitor?
15:35: Russ Mould: I mean, I think I’ll be looking at how these projects are funded, which in the case of OpenAI remains still uncertain. I’m not knocking Sam Altman. I hope, I mean, I think AI will be the most amazing contributor to the global economy, just as the internet was in 98, you know, everybody was getting excited about the internet and 3G mobile telephony in the late 1990s. And they delivered everything that everybody thought they would and more by a multiple. And I think that AI is perfectly capable of doing the same thing. I don’t want people to think that I’m a Luddite or that I’m bearish on AI. I just look at equity valuations relative to cash flow and the balance between potential upside and potential downside. And that’s where its valuation is my ultimate leading light. Now, OpenAI is a private company, but they’re telling their story. And it’s pretty clear that they’re burning cash at a pretty rapid rate right now. So putting an equity valuation on that is very, very hard. And it’s a substantial act of faith. And I think there are just safer things that you can do with your money looking at valuations and i think if if there is an accident coming valuation is is still going to be your guide and you look for companies that have got strong balance sheets management that have seen a cycle or two scalable business models and of and a sensible valuation and they will probably help provide you with some protection it might not be perfect but again It will get you, you know, as as we managed it just as that technology team 25, 30 years ago, we did manage to get from A to B and come through the trouble and came out the other side all the stronger. And as an investor, that’s what you’re looking to achieve as a CIO, IFA. And I think if you can help your clients sleep soundly in their beds, knowing they’re going to get through any rough patch that comes through, you’ve done your job, and valuation is your key starting point.
16:55: Dominic Bowen: Yeah, I’ll unpack that with you a little bit more, but I just want to remind our listeners that the International Risk Podcast is also on YouTube now. so if you heard it So if you prefer to watch your podcasts, search for the International Risk Podcast on YouTube now. And please remember to subscribe and like our content on YouTube. This makes a huge difference to our success. But Russ, you talked about a few really interesting things just then. And from a portfolio point of view, so where does gold fit today? You referred to Buffett earlier on. And of course, now we’ve got things like cryptocurrency that, you know, only add to the complexity. Is gold a hedge? Is it a speculative bet? Or do you see gold as a genuine store of value in 2025?
17:32: Russ Mould: Again, I think investors have got their own different perceptions, but mine is that it still acts as a store of value. And again, I don’t influence my advisor because there’ there’s no point having a dog and barking yourself. But I think possibly slightly inspired by Dylan Grice, wherever he’s now, Edelweiss Capital or something, and one or two other writers out there. He kind of runs a four-port portfolio of equity income. Fixed income in theory, but there’s not a lot in there. And there’s kind of infrastructure there, like proxies in there, like infrastructure. A bit of cash for optionality. Some trend following funds are just like a crash insurance policy. And then plenty of precious metals, actually. So it’s kind of a four- five port portfolio that’s rebalanced. And it’s doing its job. Certainly touching wood so far. I don’t check the only check the statement once a year to make sure he’s not run off with it, and he’s stuck to the mandate. But so far it’s doing its job, and gold is a key part of that. So for me, from my investment perspective, it’s doing what i what i want it what I would like it to do for my personal strategy, target returns, time horizon, and appetite for risk. Other people will have their own particular perspectives on that. And some of you go on as a bit of the sex, drugs, rock and roll of their portfolio, where you know there is leverage into the upside if things go really well. So it’s a matter of personal perspective. But for me, it’s fitting the bill as a store of value at a time when Western government debt is a major problem. And there seems to be, there have to be some fairly creative ways to get out of it, I think it’s fair to say.
18:41: Dominic Bowen: And every gold boom seems to end with some sort of a correction, whether it’s the 70s and 80s or the 2011s. How should investors think about timing? And what are the biggest risks right now when we look at the macro?
18:55: Russ Mould: The gold price chart did go pretty vertical this year, which in itself makes you slightly uncomfortable. So yeah, you would expect there to be a pullback. And again, as somebody who thinks in spreadsheets, preparing for this last night, I walked through all the numbers, but I sat and looked at the three big bull runs in gold that we’ve had since 71. And in 71 to 80, there were three pullbacks of more than 20 percent, so three bear markets. From 2003 to 10, there were two pullbacks of more than 20 percent. And we’ve had one in this bull run in 2015. So they are out there, and you do have to be patient and careful. And bull markets like bear markets will inflict pain. You know Bull will try to throw you off if you sit on it. And and and and that’s what bull markets will do. They will test your faith. So I think there will be lumps and bumps, but equally, given how well gold did in the last two or three months, a pullback you would view as being perfectly natural and probably relatively healthy, all things being equal. So I wouldn’t be too stressed about that. But if you’re looking at what could make people move on from gold, because in the end, you know everything has its as it’s time. I’ve come across a piece from Jeffries, and one or two others have done similar things. And they’ve looked at to try and value. How do you value? We’ve talked about valuation as being a key issue. How do you value gold when it generates no cash? That’s why Buffett just, you know, puts it in the filing cabinet. So Jeffries has looked at, OK, well, let’s compare. If we don’t worry about gold’s cash flows, let’s worry about how affordable it is. How easy is it for people to buy it? So that’s kind of flipping it around slightly. And they look at the gold price as a percentage of U.S. household income. And they were arguing that, you know, basically now, I think, and in the last peak, it was about, you know, gold topped out about 6.5% of US annual household income. Sorry, 9%. Topped out at 9%. So gold topped out at 9% of US household income, according to Jefferies. This time it’s trading at, between 6, 7 right now. So applying that methodology, you can argue on a gold’s affordability basis, gold is still affordable for the wider investor and therefore has still got potential to go up. What would make people turn away from it? Well, what’s got them interested in it? Geopolitical risks or peace solutions would be helpful. Inflation back in its tin would be helpful. Some solution to the government that doesn’t involve mass monetization and so on would also be helpful. So those are the things that you’re looking for people to lose interest in gold because that’s what stoked their interest in the first place.
20:43: Dominic Bowen: You mentioned earlier on about Russia and i wasn in with, and I wonder with the freezing of Russian assets, totaling about 300 billion euros by some estimates. Has this materially changed how reserve managers think about custody risk and the risk of losing assets, especially with increasing sanctions around the world?
21:00:Russ Mould: I think it depends upon which jurisdiction you hail from, but from those who feel that they aren’t necessarily on best terms with the United States, and I think that’s probably correct. It’s not a question I’ve had from our customers or clients over here, but by any means, I think that they’ve looked at it more as a dollar. I think that their issue was more. I’ve had a fantastic run in my US equities. I’ve now got very high exposure because I am exposed to seven companies that are 40% of the index, and that index is 60%, 70% of global equities. So I’m hugely exposed to seven companies, one currency, dare one say one president, in some ways, given that he’s on the news. And every time you open up a newspaper or switch on a radio or a podcast, his name’s being mentioned. So yeah, we have to be cognizant of that. You didn’t get that with President Biden. So I think from a wealth manager or CIO perspective, it’s more dollar and concentration risk. from a sovereign exposure. Yeah, I think they’ve looked at that and genuinely felt concerned and feel, well, if they can do it to them, then frankly, they can do it to anybody.
21:50: Dominic Bowen: And I think that’s prompted some of the discussion with BRICS countries and central banks, notably India, China, and Russia, have significantly increased their gold reserves throughout 2025. And this is obviously part of that diversification away from US dollar reserves and building some level of currency independence. As other countries continue to talk about diversifying away from the US dollar, do you think gold will regain its political and strategic importance, not just as an investment, but as part of a new global monetary balance?
22:19: Russ Mould: That’s a really good question. Whether we would go as far as to say that the dollar will lose its status as the global currency, as the global reserve asset, I think that’s a big ask, just because at the moment you just haven’t got the liquidity or the fungibility in the alternatives, or to some degree even the trust, I won’t say. Though I’m sure there are some people out there who aren’t, again, entirely trustful of dollar assets for whatever reason, either it’s their political preferences or their exposures, they’re just concerned about how overexposed they may be. It’s a question that’s not going to go away. And I think for me, geopolitical point of view, you know I’m not as big as Brzezinski or any great strategic thinker, but I would be wary as an American policymaker not to concoct a situation whereby Brazil, Russia, India, China get closer together, I would be, particularly India and China, that’s something I would be very keen to avoid from a geopolitical point of view. And I think you’ve now got plane routes opening between India and China for the first time in several years. And I think there are plans for more of those. So that sort of thing does suggest that from a foreign policy point of view, you need to proceed with some degree of caution. I’m sure that’s again something that CIOs will perhaps be thinking about in the you know, the very darkest moments, what does that mean? And I think one thing it would mean is you know you do need to seriously think about your emerging market allocation because and going to an Albury Capital Management Emerging Market Seminary in London earlier this summer when Louis Gave was there, you know his stat that was 69 of the world’s biggest 100 cities by population within four hours flight of Hong Kong, you can kind of feel, get a strong sense for where the economic growth of the future might be coming from and that’s something that as any company’s chief executive board, CIO, you really can’t not think about that. That’s a long-term issue that we all need to be very, very aware of and address, and probably try to embrace.
23:45:Dominic Bowen: It’s a very interesting statistic. And when we look towards the future and we try to predict where things are going, what do you think gold’s role will be over the next decade? Do you think it’s going to remain this timeless refuge or as cryptocurrencies and stablecoins become more and more dominant? Do you think it’s going to be less financialized and become more volatile? What do you think gold’s role will be?
24:06: Russ Mould: Yeah, I was born in 1969. There have been two big bear markets and three big bull markets in gold. So at some stage, you would expect the music to change and the mood music to change because things don’t last forever. And again, looking at that, looking at gold’s affordability relative to your household disposable income, there might be a level at which you start to feel that’s a little bit worrying. And also gold relative to other commodities. You know, that’s one way in which you can do it. And again, doing the spreadsheet last night, gold’s currently 60 times, you know, 60 times the average price of oil when the long-term average is 18. It’s currently 80 times the price of silver when the long-term average is 60. So gold, relative to other commodities, looks a little bit expensive, you can argue. But the more Western governments play with fire with inflation, the more they continue to pile up debt, the more inclined people who were worried about those scenarios will be to look for a haven in gold. I think, therefore, you could still argue that looking at that scenario would still have a major place to play. And I think until gold potters feel that those situations are changing, I think they’ll probably stay with a pretty loyal allocation.
24:58: Dominic Bowen: And when you look around the world, Russ, what are the international risks that concern you the most?
25:02: Russ Mould: I think the one thing that, I mean, I look at things with a very narrow perspective of equity of financial market prices, particularly equities, but bonds, commodities, currencies. The one thing that I think is not really expected by pretty much anybody right now is a major economic slowdown or recession. And that would then have a massive knock-on effect upon corporate profits, corporate cash flows, and and and making some giddy-stretch valuations look really quite uncomfortable. And that’s what happened in 2000. Was it in the end, yes, the internet did everything that everybody thought it would do, and we’ve all been very grateful for that, but it just didn’t happen as quickly as people thought at the time. And that fixed asset boom became a fixed asset bust, and it switched around really, really quickly. So that’s the one thing that I would worry about. And therefore, I spend a lot of my time looking at some of my preferred indicators for what could, if anything, be going wrong. And a couple of those, I look at the Dow Jones transports all the time, and the Philadelphia Semiconductor Index all the time. And if they start to roll over, I start to get a little bit cold and clammy. The transports have rolled over. The Sox index, not yet, partly because it’s got Nvidia in it. So that’s possibly now lost a little bit of its value, maybe, but I never like to say things are different this time. So those, again, let Mr. Market do the heavy lifting for me because it’s a lot smarter than I am. Those are certainly two of the things I look for. Dr. Copper is another one of the coppers at the moment, doing quite well. So it’s not an entirely straightforward picture, but anything that smells really strongly of slowdown would be very troublesome, potentially.
26:14: Dominic Bowen: And you mentioned those two indicators that you monitor. Why do you think that they’re particularly important?
26:19: Russ Mould: Yeah, and the Dow Jones Transport, it’s Robert Ray’s Dow Theory. Mean, he wrote about it in 1932, and it works. So something that can stand the test of 90 years is pretty good in my book. And the argument is, if the transports are doing well, then the industrials have got to be doing well. So if the Dow Jones Transport performs, the Dow Jones Industrials performs, I know the mix has changed and all the rest of it, but in the end, it still works. The argument being, if the economy is strong, goods are sold, shelves are emptied, Goods have to be reshipped to replenish the shelves. So, trucking, airlines, ships, and rail are doing well. The obverse holds. If things aren’t selling, the shelves stay full, the goods don’t have to be manufactured and reshipped. So the transports will do badly. And at the moment, the transports rolled over last November. And that’s not necessarily a great sign. Sox, the Philadelphia Semiconductor Index. Silicon chips are a $600 billion a year global industry. And silicon chips are in everything from this laptop I’m staring at right now to my mobile phone, to my car, to my fridge, to my smart meter. They are everywhere. So again, there the Sox is a great guide for global economic activity because of the ubiquity of silicon chips. And also, silicon chip stocks are momentum jockey stocks. They thrive off upgrades. They recoil from downgrades. So again, they’ll give you a good feel for appetite for risk across the wider market. If there’s one thing I’m looking for this time that I probably didn’t look for before, it’s all these issues about private credit, private equity. So if, you know, and I’m looking at, is this where there’s, a you know, Jamie Dimon’s comment about more than one cockroach the other week. So i’m kind of looking at that and looking at the share price of things like RS management, which is a big private credit provider, or the S&P Global List Private Equity Index. And they have rolled over. So again, if you know if you read Richard bookstabers book, a demon of our own design, and it’s, it’s somewhere right there on my shoulder, he says that any bull market will founder upon, well feed off, and then founder upon three things: complexity, opacity, and leverage. And I would suggest that private credit ticks all three boxes pretty comprehensively. So that’s probably why I’m, again, with my worry wart hat on, probably doing a little bit of digging around there as best I can. But by definition, private credit is private. So, there’s an element of opacity there before we even start.
28:11: Dominic Bowen: I think the private credit market is certainly a very interesting one and an increasingly important part of the market. But as you said, and very opaque by its very name, private, makes it which makes it hard to fully get your head around.
28:20: Russ Mould: By definition. Yeah, correct.
28:21Dominic Bowen: Well, Ross, thank you very much for coming on the International Risk Podcast today. Really interesting conversation and very insightful.
28:24: Russ Mould: It’s been great fun.
28:26: Dominic Bowen: Well, that was a great conversation with Russ Mould. His long experience in capital markets began in 1991, and today he is AJ Bell’s investment director. I really appreciated hearing his thoughts on gold and how it shifts according to geopolitical trends and, of course, the international risk landscape.
Please go to the International Risk Podcast website and subscribe to our mailing list to ensure that you get our bi-weekly newsletter in your inbox every week. This episode was produced and coordinated by Melanie Meimoun. I’m Dominic Bowen, your host.
Thanks very much for listening. We’ll speak again in the next couple of days.
29:03: Elisa Garbil: Thank you for listening to this episode of the International Risk Podcast. For more episodes and articles, visit theinternationalriskpodcast.com, follow us on LinkedIn, Bluesky, and Instagram for the latest updates, and to ask your questions to our host, Dominic Bowen. See you next time!