Tavi Costa, Portfolio Manager at Crescat Capital, shares his insights on the gold market's current dynamics and macroeconomic influences. He discusses how emerging market central banks, particularly in China and Russia, are boosting gold purchases. Costa highlights the role of gold in addressing global debt imbalances and how higher prices could enhance U.S. Treasury reserves. He believes mining stocks are set to thrive due to rising infrastructure needs, and notes the promising valuation of silver in light of its gold ratio. Meanwhile, he tackles the U.S. dollar's structural downtrend affecting global markets.
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insights INSIGHT
Gold's Macro Drivers
Gold's rise reflects major global debt imbalances, not just technical trading conditions.
Large central banks, especially in emerging markets, are accumulating gold to stabilize monetary systems.
insights INSIGHT
Gold's Role in Debt Management
Higher gold prices enable the U.S. Treasury to buy back debt without explicit QE by increasing collateral value.
This mechanism helps suppress interest rates and manage the debt load more effectively.
insights INSIGHT
Gold Backing vs. U.S. Debt
U.S. gold reserves back just 2% of debt now versus 40% pre-WWII, signaling potential for massive gold price increase.
A revaluation akin to historical levels could value gold at $20,000 to $50,000 per ounce.
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Tom welcomes back Tavi Costa, Portfolio Manager at Crescat Capital, to discuss the current state of gold, silver, mining stocks, and broader economic trends. Costa emphasizes that despite technical indicators suggesting overbought conditions in gold, the underlying macroeconomic factors point to continued strength in precious metals.
He highlights the role of central banks, particularly in emerging markets like China, Russia, and Turkey, which have been significant buyers of gold. Costa argues that gold's revaluation is driven by global debt imbalances, de-globalization trends, and countries seeking to stabilize their monetary systems. He also explains how higher gold prices can increase the U.S. Treasury’s cash reserves, enabling buybacks of Treasuries without quantitative easing, which he believes will be a critical tool for managing debt.
Costa is bullish on mining stocks, noting they are historically undervalued relative to U.S. equities and have outperformed over the past decade. He suggests that as global infrastructure needs grow and supply chains shift, mining companies will play a crucial role in meeting demand for essential commodities. Additionally, he points out the attractive valuations of silver, given its high gold-to-silver ratio, which he believes could lead to significant price appreciation.
The discussion also touches on the U.S. dollar’s structural downtrend, driven by high debt levels and interest payment burdens, and how this impacts emerging markets positively. Costa predicts that lower yields on short-term Treasuries will benefit miners and other sectors. He concludes by advocating for increased exposure to energy stocks due to geopolitical tensions and rising oil prices.
Time Stamp References:0:00 - Introductions0:38 - Technical Bear Signals?5:54 - Monetizing U.S. Assets11:08 - Gold Re-Valuation Chart15:00 - Tariffs & Fed Policy20:08 - Dollar Struct Downtrend26:10 - Mining Stock Value31:30 - A Correction Coming?35:33 - GS Ratio Imbalances40:09 - Gaining Metal Exposure43:43 - Education & Sentiment47:00 - Mkt. Rotation & Wrap Up
Guest Links:X: https://x.com/tavicostaX: https://x.com/crescat_capitalWebsite: https://crescat.net
Otavio ("Tavi") Costa is a Member and Portfolio Manager at Crescat Capital and has been with the firm since 2013. He built Crescat's macro model that identifies the current stage of the U.S. economic cycle through a combination of 16 factors.
His research is regularly featured in financial publications such as Bloomberg, The Wall Street Journal, CCN, Financial Post, The Globe and Mail, Real Vision, and Reuters. Tavi is a native of São Paulo, Brazil, and fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and international business at Braservice, a large logistics company in Brazil.
Tavi graduated cum laude from Lindenwood University in St. Louis with a B.A. degree in Business Administration with an emphasis in Finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University.
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