Yahoo Finance

Gold prices hovering around record highs with growing concerns about a slowing economy, maybe even a recession. Many investors are looking to gold as that traditional safe haven. We're navigating how to play the precious metal with the Yahoo Finance playbook. Joining us now Chris Mancini, associate portfolio manager of the Gobelli Gold Fund at Gobelli Funds. Um, thanks for being here, Chris.

Yeah, thanks.

And so, in your, um, world, you invest in gold through the gold miners. So talk to us about the value proposition of doing it that way versus gold itself and sort of how you think through which miners to look at.

Right. So what the gold miners give you is they give you income, um, and they give you, uh, they give you leverage to the price of gold. And so, and they also give you growth. So what happens is a gold mining company, they generate revenue, they mine the gold, they have some costs, they generate free cash flow with that free cash flow, they can either pay a dividend, um, buy back stock, or they can they can build another mine. So what you're getting with a gold mining company, um, is gold exposure to gold plus that income and potentially the growth in the income.

Do you think gold is going to keep going up from here? And does gold have to keep going up in order for the prices of the miners to keep going up?

Well, that's a good question. I mean, um, I do think that the price of gold is going to keep going up. I mean, that's a that's a big long discussion about, you know, big macro issues, but I do think that things by and large are unsettled now with the tariffs and the trade war. The economy, like you said, is slowing. So I think that we might have, um, some more monetary easing from the Fed, which I think would be good for gold. Um, but in terms of whether or not the gold price needs to go up for the miners to do well, um, I think that we're at a point right now where the miners have really underperformed the gold price over the past five years or so. And they're generating lots of free cash flow. So I think that even if the gold price stays here, the miners have a really good chance of of having a good run.

Chris, I have a I have a question because it seems a little bit different this time why gold keeps making new highs. It was always a a refuge in times of uncertainty, inflation fears, all this sort of thing. But it seems to be very different this time that there's real demand from the central banks. You know, so you could talk a little bit about that because it seems to started when we put the kabash on the Russian Central Bank and people said, oh, treasuries may not be so safe after all and this is this is what we're seeing.

Right. Yeah. Exactly. Yes, exactly. So right after, um, Russia invaded Ukraine, Russia had around 500 billion dollars of US treasuries and also euro denominated bonds. And when Russia invaded Ukraine, the US and the the European countries like Germany and France said, um, said, we're essentially, you know, we're not going to pay you back. At the end of the day. So so so we borrowed money, the United States and European countries borrowed money from Russia. Russia gave us the money, we gave them the treasury bills and we said to them, we're not paying you back. So we essentially confiscated their dollar reserves. And so lots of other countries now who have these big dollar and euro denominated reserve, mostly dollar reserves, woke up at that moment, especially China and said, well, wait a second, you know, the way you guys have the have the option not to pay us back, like, that doesn't sound so good. And, uh, and so they are selling some of their dollars, some of their US treasury, you know, dollar-based treasuries and buying gold because gold, you know, they can't, it's in a vault, you know, it can't be.

And and is that a genie that can be put back in the bottle? In other words, you know, there's now talk about potentially having some kind of ceasefire or peace agreement between Russia and Ukraine. If sanctions are lifted on Russia,

Yeah. Yeah. does that change that calculus?

I mean, I'd I I guess it depends on what what's part of the deal. So if, as part of the deal, we say to them, okay, we're we're going to give you your treasuries back. Maybe it does change the dynamic a little bit. But I I don't I don't think, first of all, I think that that's unlikely. And second of all, um, even if it does happen, I think China is like sufficiently scared. And I think that that other countries are sufficiently scared to to say, you know, might be prudent to, um, to put some in in in gold instead of dollars.

The implications for this are pretty serious, it sounds like, particularly since we have such big needs coming up. And also, how how does it tie into, and this is outside of immediate investment opportunity, but even even to our being the world's reserve currency. How do you see this long-term, the possible impacts?

Yeah. I think that they're significant impacts. I mean, I think right now, if you buy anything or sell anything, you know, if you're a foreign country, not a US country, it's it all settles in dollars. And that's because we're the, you know, the US dollar is the is the foreign is is the reserve currency of choice or I guess of default. And so when you start seeing these cracks in the system, um, and countries perhaps saying, I don't want to use dollars anymore because I don't trust it. I don't trust that I'm going to be able to to hold these and they might get confiscated for me. Um, the tariffs, I think also play into that in terms of, okay, this country's placing huge tariffs on us, maybe we don't want this to be the currency that we need to hold. When that when when when those those cracks start to enter, then you start to look for alternatives. And I think that the that the the primary alternative to that would be gold, uh, because it doesn't have any of those issues of of being able to be like needing to be paid back essentially, you own it. Um, and and it's a, you know, again, all for thousands of years, it's why it's been the currency of choice. So I think that that's why we're we're starting to kind of see that maybe like the path of least resistance is gold going up from here.