3 ways to value gold as the metal continues record run

00:07 Speaker A

Gold continues to shine as the precious metal approaches 4,000 in a record setting run. For a closer look at commodities, let’s welcome in here Robert Minter, director of ETF Investments strategy at Aberdeen Investments.

00:16 Speaker A

Uh Bob, it is good to see you. So, maybe take a step back and help us explain this this run we’ve seen in gold. What is driving this, Bob? You know, is this Central Bank buying, rate cuts, safe haven, what do you think?

00:31 Robert Minter

Well, it’s a little bit of the uh of all the above, but 75% of the move we’ve had so far really has been from Central Banks. And that’s key in figuring what uh in when we plan for what’s what’s ahead. And uh the investor class, which is separate of course from the Central Banks, Central banks are long-term buyers and the investor class tends to be more fickle.

00:58 Robert Minter

Uh in June, we saw an impending upside in that investor demand because uh the Fed really needed to cut rates closer down to the two-year Treasury yield. The two-year Treasury yields typically where you see Fed funds rates and then the Fed of course adjusts above or below that depending on whether they want to tighten conditions or losing conditions.

01:21 Speaker A

What I’m sorry, go ahead Bob. Finish your thought.

01:24 Robert Minter

Sure. So that’s actually what happened is uh the Fed’s eventually signaled lower rates and so that led to a little buying demand on the investor side for gold.

01:34 Speaker A

What about the government shutdown, Bob? What if any impact do you think that could be having?

01:42 Robert Minter

So, I actually think that the government shutdown is less of a driver than uh I would say maybe some some miscues on interference with the Federal Reserve. You typically, if the executive branch doesn’t quite agree with the Federal Reserve policy, you tend to send your your Treasury secretary over to have a little discussion and say, well, this is the data that I see. How come you don’t see it the same way and compare data sources.

02:11 Robert Minter

Um, they actually both have been in the same camp, which is they’ve been relying on the BLS data, which has been, you know, really low survey results. I think less than 30% of the surveys that are sent out are actually returned and which is a dramatic drop. So they’re having to fill in the gaps and that means that there’s really large revisions that are happening. So it means both President Trump and Chairman Powe are making decisions based off of bad data. So

02:27 Robert Minter

um but what we think is adding to this demand for gold is, you typically don’t see this kind of interference from the executive branch on to the the policy branch of the Federal Reserve.

02:41 Speaker A

I’m curious, Bob, what what do ETF flows? What have they been looking like? Did you see a pickup in in September?

02:47 Robert Minter

We saw a pickup in September, and we saw a pickup last year in June ahead of the September, the first September cuts. So, uh and it certainly has has gone north from there so far this year um after it became very clear that the Fed was going to need to cut.

03:04 Speaker A

So what is your target for gold, Bob? Uh, what are you looking for near to intermediate term?

03:10 Robert Minter

Well, we we keep blowing through targets. So it’s it’s a revolving door target a little bit. And so uh we had a 4,000 target. We’re we’re really close to hitting that. And so we could see 4200 by the end of the first or second quarter of 2026. And I think maybe a better tell is don’t try and get too cute with this and try and pick a top. Use something like a 100-day moving average for gold. It’s it’s signnaled uh really good support levels and if you break the 100-day moving average, then maybe reconsider, take a little off the table, but for now it’s uh it’s all systems go.

03:51 Speaker A

All systems go. Having said that, Bob, if I pressed you, I said, okay, but what are some what are some near-term risks for gold investors they should think about? What would you say?

04:02 Robert Minter

That’s that’s actually a really great question and we’ve been looking at it from that point of view too. The most negative thing that could happen is something would deter these central banks from their continued support and continued long-term demand. And so what the it’s important to understand the their motivation in in these long-term purchases and that’s the absolute explosion of government debt across the world.

04:29 Robert Minter

And we went back, typically three ways you can value gold. One is with the uh inverse real yield. So like take a 10-year tips yield, invert it. That points to gold at like $1,000 an ounce. That’s not going to happen because of the second way you can value gold, which is using the all-in sustaining costs of the miners. It’s obviously a spectrum, but it averages out to between $15 and $1,600 an ounce. Clearly, we’re way over that, which means gold miners are have some really great margins.

05:01 Robert Minter

The third way is to go back to and I in this case I used 1998 and looked at the increase in uh US government debt and the increase in the gold price. And both of them are up about 1,000% since then. So then I went and looked at the explosion of the balance sheets in the developed markets, the the Bank of Japan, the PBOC, um obviously the Fed and the ECB, and they’re all up about 1,000% too.

05:37 Robert Minter

So it raises the question which a lot of consumers have sympathy with, which is is it that is it that gold is more valuable or is it that the currency we’re valuing these metals in is just worth less?