Being Short Your Government: The Real Case for Gold & Silver

**Ned Naylor-Leyland** (0:00)
This is about being short the behavior of your government. I mean, if you think they're going to be disciplined, they're going to look after you, and they're going to raise rates above inflation and give you a real return on your cash, then don't do it.
But if you, like me, are less confident that that's the case, that the history of money tends to suggest one thing, which is you're better off owning gold and or silver versus your local currency. By the way, the producers have never been cheaper than they are today ever. So while they have gone up, there has been actually been negative flow to the space over that time frame, as amazing as that may seem to you. So these are the most profitable companies in the world. Fifty percent free cash flow margin is making probably double, and in some cases triple the free cash that tech is making. I think the Trump-Fort Knox thing is related.

**Wilfred Frost** (0:53)
So expand on that for me.

**Ned Naylor-Leyland** (0:56)
Well, I mean, those of us in the gold community think that quite a long time ago, the gold was moved elsewhere anyway, and that Fort Knox is a bit of a shell game. There's not much going on there, hasn't been for a long time. So should he go there and open it up and be proven right, which I'm sure President Trump would quite like to be proven right, seems to be one of his favorite things, then you would have the condition that the ECB warned about in their research note, and I've been inferring, which is people go, but wait a minute, where's my gold? And if you're a rich oligarch, and you ring up your Swiss banker and go, where's my gold? And they go, what do you mean? You have a sequence of events there which results in a much higher gold price.

**Wilfred Frost** (1:38)
Welcome to The Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders, and politicians in the world, giving you, our listeners, the edge. The Master Investor Podcast is sponsored by Elsec, Interactive Brokers, the World Gold Council, and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show notes.
My guest today, Ned Naylor-Leyland, is the manager of the Jupiter Gold and Silver Strategy, which sits with nearly $3 billion of assets under management. And just last week, he won the Investment Week Fund Manager of the Year Award for precious metals funds.
Ned has been consistently bullish on both gold and silver for a long time, not just popping his head up now as both metals shine bright. Ned, it is a delight to welcome you to the podcast, and congrats on the award last week.

**Ned Naylor-Leyland** (2:48)
Well, thank you very much. It's always nice to be recognized, but moving on swiftly from the award, thank you for having me on.

**Wilfred Frost** (2:55)
Very convenient timing. This has been set up for ages. I didn't know the awards were last week, so it's really worked out well that we have this manager of the year with us, freshly crowned.
Let's get into the very simple specifics, first of all. What is the long-term case for gold?

**Ned Naylor-Leyland** (3:13)
So the unfortunate thing, Wilf, is this topic is not well explained to investors. Gold is the risk-free.
The system always has been, but things change dramatically in the 70s and 80s. But I would tend to say more importantly, when Volcker took rates to 20%, we entered a system where US treasuries became the risk-free of the financial system formally, while gold operates in parallel alongside that. But the true answer to your question is, it's going to maintain your purchasing power. So the case for gold is, you want to save and not lose purchasing power, you own physical gold. That's what that's for. That's why central banks have huge amounts of it, because intuitively the public recognize what gold is. They don't necessarily know how to explain it. But the central banks know exactly what it is, which is the true history of the system.

**Wilfred Frost** (4:07)
Has that always been the case for gold? Or I guess put another way, has that particular case to protect your purchasing power gotten a lot stronger in the last couple of decades?

**Ned Naylor-Leyland** (4:16)
I know, it's always been.
That's why there's that phrase, an ounce of gold buys you a handmade suit and a handmade pair of shoes. It always has done. It's the thing that's measuring everything else. Now, of course, what that also means is that if you're thinking about the gold price and you're watching it going up, and by the way, I still do that on my screen, but that's just not how it works. Gold is measuring the loss of purchasing power of your local currency. I know that's not something new. I mean, that's always been the case.