Merryn Talks Money — "Why the Price of Gold Reflects a Long-Term Shift"

Host: Merryn Somerset Webb, Bloomberg
Guest: John Reade, Senior Market Strategist, World Gold Council
Date: February 2, 2026

Episode Overview

In this episode, Merryn Somerset Webb sits down with John Reade, a leading gold industry expert from the World Gold Council, to unpack gold’s dramatic price surge—up over 20% this year and smashing the $5,000/oz level for the first time. The conversation explores the shifting drivers of gold demand across the globe, why traditional safe havens may be losing their luster, and gold’s evolving role in diversified portfolios. With both analytical rigor and humor, they examine valuation controversies, compare physical vs. digital assets, and address listener questions about practical gold allocation.

Key Discussion Points & Insights

1. What’s Behind Gold’s Explosive Rally?

[02:43 - 04:13]

• Gold’s current bull run began over three years ago but its drivers have changed over time:
  • Central Bank Buying: Sparked by the 2022 Russian invasion of Ukraine and subsequent Western sanctions, many central banks grew wary of holding reserves in potentially sanctionable Western assets.

    “It really made many central banks around the world think, hmm, am I really happy having such a large proportion of our foreign exchange reserves invested in the Western financial system, which could be sanctioned at the stroke of a pen?” – John, [03:19]

  • Emerging Market Investment: As economic strength shifted east, investment and jewelry demand, particularly from China and India, added another wave.
  • Western FOMO and Policy Fears: More recently, Western investors have piled in, driven by US political developments, interest rate cuts, and momentum buying.

    “Western investors could deploy an awful lot of capital at a very short space of time. We’ve seen that to a degree over the last nine months.” – John, [09:17]

2. The Role of Central Banks (and China)

[04:13 - 06:30]

• Central banks remain key buyers, but not the sole force.
• Discussion on conjecture around China’s gold reserves and the (unlikely) prospect of a gold-backed currency.

  “The only reason you back a currency is out of weakness, not out of strength.” – John, [05:32]

• Central banks provide a “backstop,” cushioning gold’s price from sharp declines.

3. Gold Demand in China and India: Demographic and Economic Influences

[06:30 - 08:59]

• Chinese investors’ shift from real estate to gold, with property markets languishing and fewer new households forming.
• Jewelry vs. investment demand:
  • China’s declining demographics could weaken jewelry demand, making investment more crucial.
  • India offers a demographic “dividend” with robust upcoming jewelry demand through at least 2040.

4. Western Investor Psychology: Sentiment, FOMO, Geopolitics

[08:59 - 10:41]

• Western investors have recently “joined the bandwagon”—fueled by US policy uncertainties and fear of missing out (FOMO), creating a momentum-driven trade.

  “This is to a large extent a momentum trade at the moment.” – John, [09:34]

• Some parallels drawn to recent surges in silver and speculative behavior.

5. How to Value Gold?

[10:41 - 15:32]

• Merryn and John discuss the challenge of valuing a yield-less asset.
• Relative ratios: gold vs. US stock market cap, gold dinners at the Savoy Grill— all ultimately unsatisfactory.

  “It doesn’t fit into conventional valuation frameworks... it’s impossible, like everything else, to forecast where it’s going in the short term.” – John, [12:23]

• World Gold Council’s "GLITTER" model estimates long-term real returns of US CPI + 2-3% annually (~4-5% nominal), compared to the outsized recent surge.
• High returns likely not sustainable long-term, despite bullish momentum.

6. What Is a “Sensible” Portfolio Allocation to Gold?

[18:05 - 22:38]

• It depends on portfolio composition (riskier = higher allocation).
• Historically, 4% (bond-heavy) up to 10-12% (equity-heavy) is optimal; recent arguments (e.g., Morgan Stanley) for as much as 20% given 60/40 breakdown.

  “Maybe that historic 5 to 10% allocation for gold is looking a bit low.” – John, [20:24]

7. Safe Haven Status: Is Gold the New Bonds?

[22:38 - 23:59]

• With bonds and the US dollar less reliable as safe havens, gold is increasingly filling that role for global investors.

  “Gold’s benefiting at their [bonds and dollar’s] expense to a degree.” – John, [23:00]

8. The Shift to Physical Assets

[23:29 - 25:31]

• Broader pivot from digital/software assets to physical commodities (including gold, silver, copper).
• Caution around industrial metals as their prices self-correct via substitution and supply, though supply constraints are more acute now due to long lead times for new mines.

9. Silver: Mania or Opportunity?

[26:57 - 28:56]

• Silver has surged past previous highs ($110/oz), but John voices skepticism, citing extreme demand, speculative fever, and soaring scrap supply flooding the market.

  “I’m looking at the silver price with disbelief at the moment and waiting at least for a decent correction.” – John, [28:01]

10. How to Hold Gold: Physical, ETFs, or Miners?

[28:25 - 32:32]

• Physical gold offers “insurance” against collapse, but carries bid/ask spreads and storage risk.
• ETFs offer clean financial exposure with minimal friction.
• Mining stocks add extra company/geography/political risk—can outperform in bull runs but much riskier.
• Hiding gold at home is not without risk (and leads to some anecdotes!).

  “[Physical premium is] part of the insurance policy you’re having to pay for this Armageddon.” – John, [30:08]

11. Gold & Political Sentiment

[32:32 - 35:10]

• Sentiment shift: gold no longer just a “right wing metal” in the West; now also seen as a hedge by “left wing” investors worried about the dollar and US political instability.
• US coin/bar demand still skews Republican/male/older; in India and emerging markets, gold is a truly mainstream wealth tool (especially for women).

12. Rebalancing After Major Gains

[35:10 - 37:19]

• What if gold is now a huge portion of your portfolio?
• John advocates scaling exposure back to original targets, not betting your farm (“the best way to invest is an appropriately diversified portfolio”).
• For those with zero exposure, now is still a reasonable time to consider an allocation (notwithstanding current price).

  “Every portfolio that we’ve looked at would have benefited, past tense, from having gold in that portfolio over the last five, 10, 20, or since 1971, when we came off the gold standard.” – John, [37:19]

13. Is Bitcoin ‘Digital Gold’?

[37:43 - 39:38]

• John is unequivocal: bitcoin is not digital gold and behaves more like a tech stock, increasing portfolio risk rather than diversifying it.

  “If you’ve added bitcoin to your portfolio, you’ve increased your effective equity exposure. And in fact, what you’ve really done is you’ve increased your effective tech exposure.” – John, [38:14]

• Gold remains unique for its size, lack of true substitutes, and thousands of years of trust.

Notable Quotes & Memorable Moments

• On central bank buying:
  “It really made many central banks around the world think, hmm, am I really happy having such a large proportion of our foreign exchange reserves invested in the Western financial system, which could be sanctioned at the stroke of a pen?” – John, [03:19]
• On value of gold:
  “It doesn’t fit into conventional valuation frameworks, as you say, it doesn’t produce a yield or a dividend. So you can’t do a discounted cash flow on it.” – John, [12:23]
• On FOMO-driven Western demand:
  “This is to a large extent a momentum trade at the moment.” – John, [09:34]
• On overexposure:
  “Gold has a role in a portfolio. It shouldn’t be your entire portfolio. Then you are just basically betting your farm on one asset class.” – John, [36:34]
• On physical gold anecdotes:
  “He said, ‘I’ve got 1500 Krugerrands buried in my ranch, but I can’t remember where I put them. So every spring I go out there with my metal detector trying to work out where they are.’” – John, [32:14]
• On Bitcoin:
  “Bitcoin and other digital assets are... they are tech stocks, effectively, or at least they perform like tech stocks.” – John, [38:14]

Important Timestamps

• [02:43] What’s driving gold’s rally?
• [04:13] Central bank buying & China
• [06:30] Demographics and gold demand in China & India
• [08:59] Western investor momentum and geopolitics
• [10:41] How do you value gold?
• [18:16] Sensible gold allocation in a portfolio
• [22:38] Bonds out, gold in as a safe haven
• [26:57] Silver’s surge – mania vs. fundamentals
• [28:56] The case for physical gold, ETFs, and miners
• [32:32] Gold as a hedge for different political worldviews
• [35:17] Rebalancing after big gains
• [37:43] Is Bitcoin “digital gold”?

Final Takeaways

• Gold’s price is reflecting deep, structural, and psychological shifts in the global financial system: central bank reserve policy, geopolitics, shifting demographics, investor distrust in bonds and the dollar, and even political sentiment.
• Historical allocations (5–10%) may be shifting higher as traditional portfolios lose their efficacy.
• Gold is not “digital bitcoin,” nor is bitcoin “digital gold.”
• Panic buying and retail surges in silver may signal a speculative blow-off.
• Physical gold is for disaster insurance; ETFs suit most investors.
• Diversification, not maximalism, remains the key principle — even in this new golden era.

For more, visit goldhub.com.