Barron's Streetwise – "Can You Dig It?"

Release Date: April 18, 2025
Host: Jack Howe
Guests: Daniel Major (UBS), Russ Kostrich (BlackRock), Chris Looney (RBC Capital), Jomana Selehin (Vanguard), Alexis Moore (Producer)

Episode Overview

This episode of Barron's Streetwise dives deep into today’s gold frenzy, exploring why gold prices are “going nuts,” and what that means for investors in both the metal and gold mining stocks. Host Jack Howe is joined by specialists in the metals and investment space to discuss gold’s historic outperformance, central bank demand, the mysterious allure of gold, and whether mining stocks finally represent a compelling bargain. The team also touches briefly on portfolio strategy, including the classic 60:40 mix, and how to personalize your asset allocation for today’s world.

Key Discussion Points & Insights

1. Gold’s Meteoric Rise: What's Driving It?

(03:00–09:45)

• Gold soared 23% YTD, trading at $3,233/oz — outperforming stocks, bonds, even Bitcoin.
• Jack Howe: "Gold is an unthinking metal, right? It's not supposed to outperform over decades the most clever businesses in America." (03:33)
• The current rally is not a short-term blip: Over 20 years, the gold ETF (SPDR Gold Shares) outperformed the S&P 500 ETF (+598% vs +590%).
• Historically, gold's supply is mostly fixed—demand, especially since 2022, is the real mover.
  • Central Bank Buying: Especially China and other nations looking to reduce dollar exposure amid geopolitics and sanctions.
  • Broader Trend: Dollar share of global reserves fell from 70% (2000) to 57% (Q1 2025).
  • Individual Buying: After lagging, ETF inflows are now rising globally, especially in China.
• Global Portfolio Impact: ~$4T held by central banks, $5T by private investors = 3.5% of all world financial assets (a record allocation).
• The surge is viewed as a "debasement trade"—nervousness about US deficits, geopolitics, tariffs.

2. Gold in Historical and Chemical Context

(05:33–07:55, 12:58–15:13)

• Fun facts segment on the ancient and almost inevitable choice of gold as money:
  • First reliable gold coins: Lydia, 550 BC.
  • Ancient myths: “Gold in Jerusalem as common as stone” (Old Testament) — obviously hyperbole given gold’s rarity.
  • Mali’s King Mansa Musa crashed Egypt’s economy with gold in 1324.
  • The Aztecs’ word for gold: “Teo cuitlatl” = "God excrement".
• Jack Howe: "We talk about golden eras and gold medals and the golden rule, the historical association between gold and wealth or excellence is so deep that it might seem that the metal has a mystical hold on humanity. But it's not the least bit mystical. It's a matter of chemical inevitability." (07:59)
• Why Gold (Chemically)?: Only a handful of elements could plausibly serve as money—gold and silver were the prime candidates; gold wins for rarity and non-tarnishing nature.

3. Gold as a Portfolio Hedge: Limits and Lessons

(09:45–11:40, 17:42–18:01)

• Jack Howe & Russ Kostrich (BlackRock): Gold is a “risk mitigant” over the long term, not a precise short-term inflation or crash hedge.
  • Russ Kostrich: "It's not a great near-term inflation hedge... if rates are going up and they're going up in a way that's faster than inflation so real rates are going up, Gold doesn't do well because it's an asset class that has no cash flow." (09:49)
  • Example: In 2022, inflation hit a 40-year high, but gold didn’t rally — rising rates offset any “hedge” effect.
• Gold May Drop in a Market Panic: During sharp market downturns (e.g., "Tariff Liberation Day" - U.S. stocks down 11% in 3 days), investors sold gold to cover losses elsewhere, pushing gold down ~5%.
  • Chris Looney (RBC): “This is not an uncommon scenario... When investors were losing elsewhere in their portfolio, gold was sold as well to cover those losses." (11:11)
• Recommended Allocation:
  • Russ Kostrich: "It's not at all crazy that you might have somewhere between... 2 and 4%... funded from those other asset classes in gold." (17:42)
  • Jack’s take: Gold is not "necessary" but 2–4% is fine for peace of mind.

4. How to Own Gold: Coins, Bars, and ETFs

(18:02–20:02)

• Physical Gold:
  • Popular coins: Canadian Maple Leaf (24k), South African Krugerrand (22k, copper alloy), American Eagle (22k, some silver/copper).
  • "Bullion" coins are for metal value; “proof” for collectibles.
  • Physical gold involves 2–4% markups, plus insurance and storage.
• ETFs:
  • Cheaper, more convenient alternatives.
  • Jack likes iShares Gold Trust (0.25% fee) or Gold Trust Micro (0.09% fee).
• Broader Commodity Indexes may provide a better general inflation hedge for everyday expenses.
• Stocks as Inflation Beaters: Over long periods, equities outstrip gold.

5. Gold Mining Stocks: Undervalued and Catching Up?

(20:03–26:44)

• Miners have recently underperformed the gold price due to:
  • Missed production/execution guidance.
  • Cost rises offsetting revenue.
  • Dilution from M&A, value-destructive deals.
• Cost to Mine: Varies from ~$1,250–$2,000/oz; average around $1,500 (Daniel Major, 21:20).
  • At $3,000+/oz spot prices, margins are extremely high.
• Reason for Discounts:
  • Market has “derated” miners — lower valuation multiples outweighing earnings growth.
  • This may be changing as earnings forecasts rise and execution stabilizes.
• Daniel Major (UBS):
  • "This is what's attractive about the gold space right now. It's trading on a discounted multiple in comparison to its history. I think the companies are probably more realistic in the guidance they've set... I think we're going to see further upward revisions to consensus earnings." (21:55)
• Stock Picks (25:07–26:44):
  • Newmont Mining (NEM): Down 26% (past 3 yrs), trades at 13x earnings. Execution issues/M&A in past, now returning cash via buybacks.
  • Barrick Gold (GOLD): Down 10%, trades at 10x earnings. Regional hiccups (esp. Mali), now with 30% production growth outlook.
  • Endeavour Mining: Up 34%, trades at 9x earnings. West Africa-focused (higher jurisdiction risk), strong free cash flow (20% yield at current prices).
  • Daniel Major: "Companies not just that are good, but that are getting better... as the bull market evolves... likely to be rewarded by the market." (24:57)

6. Revisiting Portfolio Construction: The 60:40 Model

(11:55, 28:53–29:34)

• Jomana Selehin (Vanguard):
  • 60:40 is more about balance than strict ratios.
  • Portfolios should be personalized, “tilted” based on investors’ needs and changing markets.
  • Flexibility in allocation is key in today’s environment.

Notable Quotes & Memorable Moments

• Jack Howe: “Gold is really the envy of stock and bond investors and bitcoin holders right now.” (01:26)
• Jack Howe (on history): "Ancient Egyptians called gold the flesh of the gods.” (05:33)
• Jack Howe (humor): “I'm against [pennies]. And I say that people who are for them should be forced to carry them in their mouths.” (15:51)
• Russ Kostrich: “What gold does do a good job in a portfolio. It's longer term. It does a good job as a risk mitigant.” (10:29)
• Daniel Major (on mining stocks): "I firmly believe the opportunity set... is pivoting the preference to some of the companies that are trading on discounted multiples because of those issues, but are more likely to be rewarded by the market if they are reliable in executing against those." (24:17)
• Alexis Moore (on Mansa Musa’s gold): “It's kind of baller.” (07:21)

Timestamps for Key Segments

• Gold's Wild Ride and Macro Drivers: 03:00–09:45
• Gold in History and Myth: 05:33–07:55
• Gold's Limits as an Inflation/Crash Hedge: 09:45–11:40
• Physical Gold, Coins, ETFs: 18:02–20:02
• Gold Mining Companies Discussion: 20:03–26:44
• The 60:40 Portfolio and Personalization: 28:53–29:34

Takeaways

• Gold’s rally reflects global unease: central bank diversification, political risks, inflation fears.
• Historically, gold is more a long-term risk mitigant than a near-term hedge.
• Physical gold is expensive to hold; ETFs offer a low-fee alternative.
• Gold miners may be undervalued if management can rebuild trust through better execution.
• Classic portfolio models like 60:40 are evolving—focus on balance and personalization, not strict ratios.

For listeners wondering:

• Should I buy gold? 2–4% allocation is reasonable but not vital; keep costs low.
• Are mining stocks a better deal? Possibly—they’re at low multiples with rising earnings, but choose reliable, improving operators.
• Should you abandon stocks for gold? Absolutely not—stocks are far better long-term inflation fighters.