Christian Brenner has detected a paradigm shift. Gold is increasingly being used as a hard asset, like cash, as a backup to protect against IT failures and cybercrime, says the Chairman and CEO of precious metals dealer Philoro in an interview with finews.asia.
Christian Brenner, gold performed surprisingly well in 2023. Has it now peaked after the recent price rises?
Interest rates have risen at a record pace over the last 18 months. Remarkably, the price of gold has been rising in this environment. I see only one direction for the price of gold in the coming year: «upwards.»
Expected interest rate cuts by central banks, especially the US Federal Reserve under the leadership of Jerome Powell are giving gold a boost. If gold’s arch-enemy, interest rates, are lowered, we expect prices to rise.
Has the speculation of interest rate cuts not been priced in yet?
Markets often react to what is said, not necessarily to what is done, and this alone can be a real booster to the gold price. It’s now no longer when we will see a new all-time high, but how high this will be. And this is where the experts have widely varying opinions.
«The Year of the Dragon is just around the corner in China – a very special year in Asia»
Conservative augurs are talking of 2,400 to 2,500 dollars per ounce. But there is also speculation it could top 3,000 dollars. My prediction is that we’ll see significant all-time highs for gold.
What other factors point to a higher gold price?
The geopolitical environment remains very uncertain, with the Russia-Ukraine war and the Middle East conflict. I also think a paradigm shift is taking place.
Gold is increasingly being used as a hard asset, like cash, as a backup to protect against IT failures and cybercrime. Gold does not always have to simply be seen as a product for a crisis either. The Year of the Dragon is just around the corner in China – a very special year in Asia. And this is when Asians like to buy gold.
Gold is close to an all-time high – how should I proceed as a buyer?
It’s a good idea to buy at regular intervals. This balances out price fluctuations and an average entry price is formed over time. The exact timing of entry isn’t the most crucial factor.
«Gold investors shouldn’t dwell too much on the current price»
What do you mean by that?
Gold is the fire insurance for the financial experiments of central banks. When I buy a new apartment or a new car, I don’t give much thought as to whether I need insurance or not. I must have a policy.
So gold investors shouldn’t dwell too much on the current price, but invest regularly with a fixed savings rate. I always recommend smaller denominations such as the Swiss Goldvreneli or the Vienna Philharmonic, which are very popular investment products. You can’t get it wrong with that.
What’s the best way for investors to invest in gold in the long term? With physical gold, ETFs, certificates or shares in gold mining companies?
You can’t really compare the products. Shares in gold miners are not correlated with the price of gold per se. It’s really about the company’s performance. There can be massive differences between exchange-traded index funds.
Are they 100 percent backed by gold? Physical delivery is also not always so easy when I need the gold. Banks sometimes have very different terms and conditions.
«More confidence in the markets is needed for investment demand for gold ETFs to improve»
Diversifying a gold portfolio with ETFs and gold mining stocks is a good option as these investment products can be traded more easily and quickly. But you should always keep a portion in physical gold bars, especially as there is no counterparty risk involved.
Measured in terms of gold ETFs, investor demand has fallen this year. Why?
Demand has already been steadily falling over the past year. In a market environment in which shares have suffered losses, you often get margin calls, which is why we like using financial instruments that are highly liquid and have held up or performed well.
And that’s when gold comes in. In other words, I may liquidate my gold positions as I was able to make at least modest profits. More confidence in markets is needed for investment demand for gold ETFs to pick up again.
One of the main drivers in the price of gold was renewed strong net purchases by central banks. What is the origin of this buying sentiment?
The central banks’ rush for gold was primarily driven by the BRIC countries Brazil, Russia, India, and China. In general, countries with large dollar reserves have realized that if they mess with the Americans, it might not be long before their dollar reserves are frozen overnight, as Russia’s example shows.
These countries have increasingly shifted from the dollar to gold for hedging. But European countries like Poland have also bought up a lot of gold.
«The franc is the world’s most gold-backed currency»
Will this trend continue next year?
Yes, central banks are still steadily reducing their currency reserves. De-dollarization is taking place with new coalitions forming on the world political stage. Large countries like China, India and Brazil are joining forces and maybe even working on launching their currency, which they would like to partially back with gold.
How important are currency fluctuations on the price of gold and trading in it?
They are very important as gold is traded internationally in dollars. If the dollar drops, the price of gold usually rises. Typically, the US currency and the yellow precious metal move in opposite directions.
A weaker greenback makes the dollar itself less attractive as a safe haven currency and gold more appealing to foreign investors. Incidentally, the Swiss franc is the world’s most gold-backed currency, which is maybe part of the reason why the franc is so strong against the euro and the dollar.
In general, precious metals often attract public criticism from a sustainability standpoint. What has improved from an environmental perspective recently?
You’ll always have black sheep, but a lot has happened in the gold industry in recent decades. However, the gold industry is poor at effectively marketing these positive developments. One example of a very important criterion for sustainability is certification from the London Bullion Market Association (LBMA).
«We can operate at half the margin of banks»
This stands for the strictest and highest quality requirements, including the environmental guidelines of the mines and the production conditions for gold bars. If you buy a bar from Swiss refiners such as Valcambi and Argor-Heraeus, you can be sure that it’s a bar of high integrity.
How is Philoro’s collaboration with Swiss banks playing out?
Banks are increasingly receptive to collaborations in the gold trade. We have an efficient and well-functioning IT infrastructure that allows us to operate at lower costs.
We don’t have to add ten or twelve percent to the Goldvreneli to cover our product costs. We can simply operate at half the margin of the banks, partly as we don’t have the same HR infrastructure and are also specialized traders. This makes us an attractive cooperation partner.
A range of Philoro gold products has been available in some larger post offices and online in the Postshop since October. How is the new collaboration with Swiss Post going?
I’ve never encountered such excellent project planning as I have with the Post. It has set up its team to deal exclusively with precious metals. We’re still in the pilot phase. Points of sale are initially limited to six to eight branches, so there is still plenty of room for growth. Things are already going very well online.
The collaboration with Swiss Post was unexpected, as was the launch of the Gold crypto Vreneli. What surprises are in store for us next year?
We always have at least two aces up our sleeve. Next year, there will be a new release of the Phygital Asset Coin, which combines the benefits of blockchain technology with the real value of gold. In collaboration with the Swiss Ice Hockey Federation, I can already reveal that a new product will be launched on the market.
This is planned for April or May 2024.
Christian Brenner was born in Vienna in 1979 and studied journalism and communication sciences. He has been the CEO of Philoro Schweiz, a privately owned family business within Philoro Holding, since 2017. He is also a member of the board of directors of Philoro Global Trading, Philoro North America, and Philoro International Holding. He was previously managing director of Philoro Edelmetalle GmbH in Germany from 2011 to 2021.
