How does a $4.2B gold fund manager see the gold market?
At a time when markets are being whipsawed by geopolitical shocks, rising real interest rates, and growing doubts about fiscal sustainability, one question looms large: what is gold really telling us about the world right now?
In this episode, we sit down with Axel Merk, CIO of Merk Investments, to unpack the forces driving gold’s historic run and what may come next. From the unintended consequences of tariffs and the limits of central bank policy, to global fragmentation, rising defense spending, and the long-term trajectory of U.S. debt, Axel connects the dots across macro, markets, and monetary systems.
The result is a clear-eyed conversation about why gold remains a constant in an increasingly uncertain world—and what that means for investors navigating the road ahead.
Watch the interview now.
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Follow Axel Merk on X: @AxelMerk
Transcript
What’s really going on in the gold market?
Axel Merk
One of the reasons why the US is the financial center of the world is because as much as we complain about the nuances, it’s a far more robust system than anywhere else. And you build that trust over decades. Does it mean you can damage the system? Absolutely, you can do that, right? But the alternative is not that suddenly everything is going to originate from the UK or whatever it is. No, the alternative is that there are going to be fewer deals made, there’s going to be less wealth and less growth.
We reached a new era where the US cannot police the world anymore or doesn’t want to. And so we have crises popping up. And what we see in Iran is a symptom of that. But keep in mind also that the market is getting used to things. And when you’re faced with a supply shock, governments come up with the oddest ideas.
And it’s those second-round things that tend to be helpful to precious metals. So let the Iran shock move to more of a chronic issue, and there’s going to be government there to help. And it doesn’t really matter whether it’s Democrats or Republicans, they’ll mess things up in a way that’s going to be beneficial to the price of gold.
Monetary Metals
Welcome back to the Gold Exchange Podcast. My name is Ben Edelstein. I’m joined by our good friend, Axel Merk. He’s the CIO and founder of Merk Investments that has over $4.2 billion in assets under management. He joins the show today to talk about all things gold and macro. Axel, welcome back to the show.
Axel Merk
Great to be with you.
Monetary Metals
All right. Let’s ask the $35 trillion question. What’s going on with the gold market? Obviously, we’ve had a crazy run in 2024, a crazy run in 2025, a great start to 2026. And yet with this kind of breakout in the Iran war, there’s been an all-time high in gold prices. We’ve come off of that. Where do we stand in the gold market today?
Axel Merk
30,000 or 35,000 feet. Just checking on how detailed I should be. Because when you use the word crazy and gold, the first thing I like to remind people is gold hasn’t changed. Gold is the constant here. It’s the world that might be crazy, but not gold. Right. Just to keep that in perspective. And I’m sure you’ve heard a gazillion reasons why the price of gold was rallying last year. Let me just pinpoint a few items that maybe not everybody is mentioning. One of them that’s been understated is that tariffs don’t just impede the flow of goods, but the flip side of that is currency.
The flow of money is being impeded. It means this wonderful machinery we call the exorbitant privilege is impeded. And it’s not broken, but it means domestic borrowing costs are higher. And instead of cutting expenses, we apply pressure to the central bank. So that’s one of the drivers that’s not mentioned so much. But one of the things that historically is part of gold is the speculator. And for several years, the speculator was busy with meme stocks and SPACs and crypto.
And about a year ago, the speculator came back because, hey, what great thing is there other than a good run? And clearly, we had some of these speculators use leverage. And when you have volatility surge, be that because of an Iran invasion or whatever it might be, there is deleveraging taking place, which is a headwind to the price of gold. The Iran war is a supply shock. And the one thing we know about the supply shock is that what’s economically prudent is usually political suicide. And that’s why we had tariffs put in the 1970s, we had checks written in the pandemic.
But for the time being, with some exceptions, there are minor things that have been happening. Central banks have been reasonably disciplined and there hasn’t been too much muddling in the economy. And so in the meantime, the market forces played out. And the key reason I believe the price of gold is at headwinds is because real interest rates have moved higher. Basically, oil prices move higher, caused long-term rates to go up, but inflation expectations, long-term inflation expectations didn’t move higher.
And before I lose your audience because I talk about long-term inflation expectations and people tell me nobody has a clue what inflation will be in the long run, that is absolutely right, except there are market measures. And at least historically speaking, the price of gold is often, not always, correlated with it. If you think about it, this brick we call gold, this barbaric relic, if you get compensated for holding cash, if there’s a high real yield, why do you hold gold?
But if governments debase their currency, then having something constant might be worthwhile. And so in the short term, as this crisis unfolded, it’s considered a shock by the market. Lots of metrics we go into the market, and you may disagree, but the market says this is short term. And so for the time being, real-time rates up, including longer-term ones, and that everything else is a headwind. And that’s part of the reason why there has been this correlation with the risk of war. So that was a long ramble. Now I’ll let you answer.
Why the Fed matters less than it used to
Monetary Metals
I want to ask you quickly about this idea that the Fed is going to be central in some ways to this trade-off between people holding cash and a yield from cash. And of course, people holding gold as an asset class. How important do you think is the Fed when it comes to all of this, as they hold the Fed funds rate either steady, they raise rates, they lower rates? How important should investors really weigh the Fed when it comes to their portfolio decisions?
Axel Merk
Well, until about a year ago, I would have said absolutely very much. The good news is the Fed is much less relevant right now. Now, of course, they could throw a curveball. But I’d like to caution a few things. If you’ve listened to the news in recent weeks, the Fed is not— I mean, we had a Fed meeting, but the Fed has not been the main driver of the news. That’s a good thing. Also, we obviously are supposed to at least have a transition at the Fed.
But one of the things that I don’t think people have noticed, Powell, Jeremy Powell, has been ever more talking like Kevin Warsh. He is presenting the Fed on a silver platter. And I’d like to point to a few things. One of them is in December, Powell started talking about the productivity boom. That’s coming straight from Kevin Warsh, right? And then, of course, right now, there’s a lot wrong with the communication strategy. And I’ve been critical of the Fed not revising its communication strategy. Glad that Kevin Warsh is supposed to come in.
So last press conference, Powell was asked, hey, what about this great idea about overhauling communications, what happened with it? And he said, not much. And then he expanded that he tried, but he couldn’t get his buddies on board, which is signaling to Kevin Warsh, good luck with that. Now, there are of course folks like Steve Miran who says, “hey, this is short term, we got to play for the long run.” And if there are second round effects, then we do something. The rest of the folks at the Fed say, well, if you wait that long, it might be too long. If you look at what’s priced into the market, it prices in just about nothing.
And that’s probably about right. The Fed just doesn’t know what to do with this. It’s a debating club. They don’t have a strategy. And so they’re not going to do much. At the same time, Kevin Warsh, I think he’s very, very lucky that he’s on the sidelines right now because there is really no good answer for any central bank right now.
Monetary Metals
And when Kevin Warsh does come off the sidelines and is on the Fed, how important do you think he’s actually going to be? Because obviously he’s just one member of many. Do you think people are overindexing on the power of a new Fed chair? Because in many ways, people are worried he’ll be a Trump lackey. He’ll just do whatever Trump says. But he also has to fight internally with the people at the Fed and the other board members. How important do you think Fed Warsh is actually going to be?
Axel Merk
So I’ve known and followed Kevin Warsh for over a decade, and first I’d like to point out that he’s been very consistent. Now he’s been a tad more vocal about some of the things he said, but I don’t think he’s going to be hugely different in terms of the actual rates that will be in the market. Where he will be hugely influential is behind the scenes, and I think that’s at least as important because it takes the Fed out of politics as much as it’s possible.
One of the reasons why the Fed has been drawn into politics is because it’s the Fed’s own doing. In the financial crisis, the Federal Reserve started buying mortgage-backed securities. Well, mortgage-backed securities, that’s a credit allocation, that’s fiscal policy. Monetary policy is when you care about the amount of credit, when you care about interest rates. But when you start allocating credit to a specific sector, that is fiscal turf. And that’s been one of the most benign things that the Fed has done. Obviously, during the pandemic, they wrote checks to businesses directly. And so the thing that Kevin Warsh can do is take the Fed back to basics, do less.
One of the things that is important is communication strategy. I hope he has never mentioned that explicitly. He said that he’ll go back to targeting interest rates with Treasury operations rather than paying interest on reserves. He wants to shrink the balance sheet. That’s how you do it. There, I’m not sure whether he can convince his fellows on the board. But the one thing he can tell people is to stop speaking at every occasion that there is.
Now, clearly, especially the Fed presidents, They don’t report to the Fed Chair. So technically, they can do whatever they want. But the tone is set at the top. And I’m pretty sure if you have a stern talk from the top, at least on the margins, in France. So for folks like me who care about the little details, it’s going to be important. For the outside world, not so sure they notice all that much difference. If we get the Iran war behind us, yes, we might see some more assertive cuts because it’s going to want to give a chance to the productivity gains.
Deficits and the real long-term driver for gold
Monetary Metals
Now I want to ask you about not just monetary policy, but fiscal policy. How important do you think is the connection between the Fed and this kind of fiscal policy? Obviously, if they’re at odds, that’s one thing. If they’re working together, that’s a whole nother thing. Of course, you mentioned that in ways leadership comes from the top. Do you think that the fiscal strategy of the current Trump administration is at odds with the Fed? Powell has recently said he sees the US debt as unsustainable. Do you think they’re working together or working against each other?
Axel Merk
Well, they were working against each other when it came to the Fed managing the duration of its balance sheet versus Treasury doing its things. You got to look at it as a consolidated balance sheet. Kevin Warsh wants to work with Treasury to fix that. I think that will happen. Obviously, that will not fix the sustainability of the deficit. I think it’s very notable that Powell speaks up about the debt sustainability. The last Fed chair who really did this actively was Alan Greenspan. Bernanke, Yellen, Powell maybe touched on it, but they never talked about it. Maybe it’s because Powell has a foot out of the door.
Maybe it’s because he has a more confrontational tone. But we know from the folks next door, from Mario Draghi at the European Central Bank when he was there, that a central bank will do whatever it takes to help finance the government, right? And so, but what Kevin Warsh has said is that the Fed was literally egging on the fiscal side of spending too much by keeping rates ultra low. So that you can step away from. Yes, I mean, one of the reasons why I do believe that the folks holding gold, that includes me, don’t have to worry about too much in the long run is because the deficits are unsustainable.
I’ve told people I’ll sell all my gold when fiscal discipline comes back to Congress, upon which I get this chuckle, that’s never going to happen. So it’s a— lots of things happen in the short term. The new budget that was proposed doesn’t have entitlement reform in it, right? I mean, it cuts back domestic spending, non-defense spending, but there is no real reform and there’s no real drive on either the political left or right to do it. Quite the contrary, right?
The world is waking up that we need massive investments in defense. And a world where people are going to charge a toll, be that for the Strait of Hormuz or plenty of other waterways in the world, that’s a more expensive world to deal in. And that’s been in the works for several years now.
Monetary Metals
All right, Axel, let me push back. We have some critics. They say, yes, you guys are dooming about the debt and inflation and all these problems. But there’s so much wealth in America that all we have to do is institute a very small wealth tax on these millionaires and billionaires. And all of a sudden our fiscal problems go away. Axel Merk, what say you?
Axel Merk
I listened to a very interesting speech from several years ago from the grandfather of monetary policy. He said that the folks who are actually budget hawks are helping on the unsustainable deficit side. And the reason why that is the case is that the moment we push back on the deficits, we only give room for another spending program. The only way we can fix things is by imposing spending limits on government that they simply can’t spend more.
Maybe have a constitutional amendment that government can’t spend more resources because they’ll always find another thing to tax somewhere. And obviously, to your specific point, when you tax wealth, in any significant amount, wealth is mobile, right? Wealth would go away. People will move to other jurisdictions and the like. So I would say that’s never worked. We see the flight out of New York, right? I talk to you from California where there has been a flight. Of course, you do also have the economic engine that counters that.
You have the natural, quote unquote, greed of people, a good thing I might add, that counters that somewhat. But if you tax people too much, they’ll start cheating and they’ll start to think of ways of earning less, and that might include producing less. I mean, there’s only one life, you might as well enjoy it. You might just not work for the government entirely. And I’m looking at the calendar a week before the tax day. I am in the fortunate situation that I pay a small fortune in taxes, but there’s a limit to how much people actually want to, want to, want to be able to pay on that.
Dollar alternatives and global fragmentation
Monetary Metals
What do you think about these potential competitors, not only to the US as a jurisdiction, but also the US currency and US assets? Obviously you’ve got the Middle East, places like Dubai, UAE, who have seen inflows of capital because of their type of culture when it comes to wealth preservation. But also, what about places like Europe, Canada, Do you think that this kind of TINA, there is no alternative, is true, that really the US is just the dominant player by a long shot? Or do you think that these other jurisdictions actually have a shot at competing for global wealth?
Axel Merk
Regarding alternatives, people always say, oh, the US is the game in town because there’s no alternative. The alternative is that there is no alternative, and that means a global fragmentation. There does not need to be a global anchor currency. You can have a splitting. It’s a less efficient way of doing business, right? There is much less economic activity in that process.
But that is the alternative. The alternative is not that the European Union with all its bureaucracy takes over. Obviously, Iran is trying to price oil in renminbi. That will hurt the US, but it’s not going to somehow put China on a huge pedestal. I remember, but it was 25 years ago, it was somewhere in Europe, I think in Germany, there were some executives that lied. I called up the regulator there.
And the feedback I got is, oh, they’ll check whether there was some insider trading. They could care less whether there was any market manipulation otherwise. And I mentioned that is one of the reasons why the US is the financial center of the world is because as much as we complain about the nuances, it’s a far more robust system than anywhere else. And you built that trust over decades.
Does it mean you can damage that system? Absolutely, you can do that, right? But the alternative is not that suddenly everything is going to originate from the UK or whatever it is. No, the alternative is that there are going to be fewer deals made. There’s going to be less, less wealth and less, less growth.
Monetary Metals
In this world where there’s economic fragmentation, there’s maybe less globalization, maybe less cross-border trust. Where does gold sit there? Obviously, we’ve heard reports that the Iranians in the Strait of Hormuz have been either asking for Chinese currency or even gold, some asset that is outside kind of US controls. Where do you see gold in a world of more fragmentation and less economic coordination?
Axel Merk
Well, it’s a less efficient world. It’s a world where everything is a bit more expensive to get done, which means more deficits. If you think about the Strait of Hormuz, right, in a very good case scenario, the Strait of Hormuz is going to open up and there’s not going to be no payments due to pass. But let’s take a scenario where Iran can impose its will and charge a fee and maybe even other waterways, people are going to start a fee as well.
Well, the oil will be flowing. It will be more expensive, potentially providing an incentive, I guess, to diversify. But the Pax Americana we had since World War II had as a side effect that globalization was enabled because global seas were, quote unquote, safe. And several years ago, and I don’t know whether to start with Ukraine, we reached a new era where the US cannot police the world anymore or doesn’t want to. And so we have crises popping up. And what we see in Iran is a symptom of that. But that’s not going to be the last crisis we’ll be facing.
And so if you’re a government, it means you’ve got to put more money into defense. The one thing to watch for, since you’re asking this about gold, is will people, will countries make a choice between guns and butter? Will they cut welfare spending in order to finance those challenges ahead? And the budget that’s proposed in the US now for the coming year will cut spending across the board. Well, let’s see what the compromise deals with whenever you compromise, usually means
you spend more money. In Europe that has dramatic catching up to do, I don’t see a discussion that they’re going to cut the welfare state. And so countries have learned that you can buy votes by giving benefits. At the same time, they’re going to need to spend a lot of money. And so to me, that means deficits are not exactly going to come onto a sustainable path. And yes, we might get higher taxes to offset that. But the challenges are rather enormous. And, and so I don’t see the political will to come on a sustainable path. And in that world, I see gold have as good a role as ever.
Monetary Metals
All right. Let’s get some more pushback. We’ve got some AI folks and they say, Axel, we know you know a lot about AI. Isn’t this the solution? Yes, prices will be higher because of this end of a globalization trend. But with the power of AI, businesses will become more lean. We won’t need 500 people spread across 50 countries to make an iPhone. We’ll use the power of AI to really make lean supply chains, maybe more domestically. And of course, this will boost the economy. We’ll see disinflation, and we won’t need gold as much. What say you?
Axel Merk
So let me answer a different question first. In 2011, Marc Andreessen came out with a speech that software is eating the world. And what he’s referring to is that you have this low barrier to entry, high margin business going to take over everything. That happened to be at the peak of the gold market we had at the time. Fast forward to AI. AI is a very high barrier to entry business with huge investments. The margins are very unknown.
And I mentioned that in the context of gold mining, in particular, where you have high barriers to entry, very intensive costs you need to do, but very high margins, even with the pullback we’ve seen in the price of gold. And the reason I mentioned that is that suddenly, not just gold mining, but lots of industrial activity has become— it’s become a level playing field, that assets will be allocated based on the opportunity. And so on the gold mining side, I think as far as the current theme of AI is concerned, it’s a much more level playing field as to where you want to allocate the money.
Beyond that, I’m in the camp that any new technology is ultimately good for growth. Yes, there will be people that are displaced. Yes, governments will try to fix it and probably make it worse along the way. But I don’t think that we as human beings are wired to be at the beach and roll our thumbs. It’s not good for us. And so we will find a way to keep ourselves busy and probably have a job along the way. But yes, I mean, it may well increase the so-called K-shaped economy that those who can manage the technology will be much better off.
But at the same time, there are certain things AI can’t do. And there’s a lot of movement to move into that direction with jobs that are a little bit more hands-on where AI cannot help. So I think it’s one of these things that, yes, huge transformation is underway. The thing to remember is that the amount of resources put into AI are astounding. It’s similar to when the railway network was built. And so it will have a profound impact. And some of those businesses will fail.
But the question is, will it be systemic at that stage so the Fed has to come in and rescue us? Or will it be more like the 2000 bust, where there is a dot-com bust and equities go down? But at the same time, at that stage, at least, gold doesn’t surge because if speculators lose money, that’s really not a problem. It’s when levered financial institutions lose money. That’s when central banks step in. Because remember, the primary mandate of central banks is to keep the banking system alive. And then down the road, it’s inflation and, and maybe employment.
Gold miners, silver, and risk profiles
Monetary Metals
And let’s talk a little bit about the mining sector compared to just gold bullion. Why do you think
there’s been in the past a disconnect between the prices of gold and the mining sector? And do you think there’s going to be more of a convergence going forward where gold and miners kind of move in a similar pattern? Or do you think that really there’s just a convergence? They’re different businesses, they’re different assets.
Axel Merk
Well, there’s certainly been correlation, right? Except, of course, gold miners haven’t rallied, even though they have had amazing rallies. They have, by all means. If the price of gold would go down 30% from here, the gold miners would still be very profitable. I think people in the gold mining sector have been burned many, many times. And so that’s part of the reason why a lot of people have left. The moves to ETFs don’t help the gold mining sector because ETFs are not suitable for funding mining companies. It doesn’t work well. Market makers can’t hedge that. So it’s good for established industries.
But in industry, gold mining, where the lifecycle of a mine is fairly short, and then yes, they have to find more. But there are very few large mining companies, lots and lots of small ones. There is private sector capital. The one thing that did happen last year is that you had in mid-sized mining companies, you suddenly had portfolio managers show up of mainstream portfolios. So there is a step in that direction. I happen to think there’s a lot of catching up to do.
If I look at the market and see expensive software and see mining, I think a lot of mining is cheap. I’m not giving investment advice here, but even though we’ve had these amazing run-ups, I’m— now, that said, if precious metals were to plunge, there is a correlation, right? And so those miners would presumably also suffer. But yes, they have been conservatively valued as far as I’m concerned. The analysts in that field, they don’t like to go to the market price of gold.
And if you think about it, from a business point of view, as a mining executive, you wouldn’t want somebody to run a mine relying on $5,000 an ounce gold because they’d have to shut down the mine if the price of gold were to come down. Right. And so it’s one of the better problems to have that these mining companies have not realized their full potential.
Monetary Metals
What do you think about the difference between gold and silver going forward? Obviously, gold has a more monetary play. Silver has a monetary and industrial play. In a world where, you know, there’s monetary fragmentation and maybe also industrial fragmentation, where do you see the story for gold and silver going forward as different asset classes?
Axel Merk
Yes, so maybe I should then fully answer your previous question first. So the difference between gold and gold miners is in the risk profile, of course, as well. The gold price of gold has a volatility around that of the S&P 500 with some surges.
The gold mining side is more volatile. And then depending on where in the mining sector, the juniors can be extremely volatile. Part of the reason I often talk about gold more so than silver is that the dynamics are just much simpler.
As you point out, in silver, you have industrial dynamics. And so it just makes it far more complex. And it is more volatile as well. Right. As a hoarder, as a saver. One of the nice things about gold is the density of the gold that you can have almost $5,000 worth of value in an ounce. And so the big vaults, they actually don’t like silver because there’s so much volume of it. It’s far more complicated to handle. And it’s one of the reasons why central banks like it.
But as we have seen also, even though the price of gold has been volatile, the price of silver has been amazingly volatile on top of that. And we have all these disruptions around the world, impacts the price of silver. It’s a different investment thesis. And one of the things I mean, I happen to invest both in gold mostly and in gold miners, including— I also like to invest in silver miners and other precious metals miners. But, there are often distinct investors that invest in gold, invest in silver, and invest in the miners.
One of the reasons why the miners have not had as much enthusiasm is the miners historically attract the speculator even more so than the metal. And many of those folks moved over to crypto. But hey, silver is volatile, so that tends to attract the speculator as well. So you have more of the speculator in there. The speculator mostly— nothing against speculators, but they do contribute to volatility.
And so it’s more the type of investment profile. I have a lot of gold and gold miners. And so I can’t give investment advice, but I tell people don’t have more than you’re comfortable with, with the volatility of the price of whatever you have. And so I have substantial exposure, and I keep my silver exposure limited in part because it’s just more volatile than I’m comfortable with. And I have a very high risk tolerance otherwise.
Tokenized gold and the next generation of investors
Monetary Metals
I want to ask you a little bit about demographics and investors. Obviously, this kind of newer, younger generation, they might be interested in tokens and crypto and Bitcoin and maybe an older generation more interested in gold or silver or real assets. How do you think that’s going to matter going forward? Do you think that there’s going to be some capitulation of the younger investors into gold and silver and real assets, maybe tokenized gold? Or do you really think it’s going to be the other way around where older investors go, hey, I’m not really sure what a token is or crypto is, but sounds like I’m going to have to do some research?
Axel Merk
It’s going to be all of the above. Tokenized gold is going to be an answer, right? I mean, what matters going forward and has always mattered, but it matters in a crisis, is the small print. I wonder how many of your viewers know what the price of gold even refers to. And the price of gold is that of an ounce of a London bar in London.
And it doesn’t matter during normal times, but take tariffs a year ago, and suddenly people were trying to scramble getting gold from London to the US. And people realized there’s a difference between— I mean, people buying coins know that there’s a premium. But when you have tokenized gold, is it a warehouse receipt, or is it a balance sheet claim? Who is behind it and so forth, right? And so those little things shouldn’t matter, but they will in the crisis.
And so we take great care focusing on those details when, when we deal in gold. But it’s going to be all of the above, right? Some people will be more comfortable with one thing or the other. People complain about the legacy world, but there’s a reason why there is so much red tape in the legacy world, right? Over the decades, if not centuries, more and more red tape was piled on top of one another of things out of good intentions. And rest assured, that’s going to happen on the tokenized world as well. The
regulators will try to help, right? And the reason why it takes a while to transfer currency from A to B is in part because of the checks and balances that come in the way. And of course, if you do it electronically, you can do it instantaneously, but then some genius will come along the way and think about maybe we should slow this process down a little bit to prevent fraud or prevent this and that. And that’s how these things come about. Now, obviously, you can sidestep all of that and have an ounce of gold and do your own private transaction on the side if that’s what you choose to do.
Monetary Metals
I do want to ask you about this kind of regional nature happening where you’d said, well, you know, a bar of gold in London might be priced differently than a bar of gold in Switzerland or a bar of gold in the United States, as well as mining assets. It might matter if it’s nearshoring, that a mine is in Mexico or South America versus in China or in Poland. How important do you think is this geographical question going to be going forward, specifically to gold and the mining space?
Axel Merk
Well, geography has always been important in mining. I just like to caution, there is no simple answer. Because a few years ago, Western Africa was a good place to invest in. Hasn’t been as great of late. Mexico wasn’t so great. It’s been improving.
These days, if you need certain chemicals or tools or machinery in your mining process, it might be difficult. In Australia, they have a diesel shortage. You can really— the way you have to deal with that is with diversification because you really never know what’s going to happen next.
Now, if you happen to be so brilliant and know what the next geopolitical risk is going to be tomorrow. By all means, you can plan for it. We spend a lot of time trying to figure this out. But at the end of the day, it’s diversification that helps you. You want to— there’s a good reason why a lot of the mining companies are incorporated in Canada and Australia is because they have jurisdictions that are mature for that. There are obviously some in the US as well.
But the US has geopolitical risk, right? You don’t know what the regulatory environment is going to be tomorrow. So there is no safe haven from that point of view. As far as the metal is concerned, part of the reason
I mentioned this move from London to the US, as I’m sure you discussed with some other guests, right? When there was a fear of tariffs and people never thought they would be permanent, but it might be temporary, the gold was— the London bars were shipped to Switzerland. They were refined into kilobars. And the COMEX, they only take kilobars and 100-ounce bars.
And what the bullion banks in London were worried about is they had some of their bullion at the Bank of England. And the Bank of England has an arcane way of accounting for their gold. The typical vault has your gold of a client on a pallet. And if you sell the gold from one client to the other, you take the gold from one bar and put it on the other.
From one pallet and put it on the other pallet. What the Bank of England does is they have all this gold. And if Party A sells to Party B, they enter into the computer system that this bar now belongs to somebody else, which is perfectly fine, except if somebody suddenly wants to have 100 tons of gold out of that vault, they say, oh my God, it’s going to take me several weeks to find all the gold. Right? Because that’s where the bar is and here and there.
And the bottleneck never caused real problems. You would have noticed that an increased bid-ask spread in the market. But that’s why you want to look at those details, understand the microstructure so that when you deal in these markets, you know where the risks are.
Deglobalization, China, and what would actually kill gold
Monetary Metals
I want to get into a lightning round with you, Axel. I’ll ask you questions from all over the map. You can answer as short or as long as you want. You also have your right as an American to pass on any that you don’t want to.
Axel Merk
Give it a shot.
Monetary Metals
All right. First question for you. Do you think deglobalization is permanent? Or in other words, do you think we’ve hit a peak in globalization and from here on in we’ll be seeing deglobalization?
Axel Merk
We see a fragmentation, a deglobalization. I would not use the word permanent, but, but yes, there has been a deglobalization. That trend is continuing. Yes.
Monetary Metals
Let’s talk about—
Axel Merk
By the way, to just add to that, some people say it’s a reglobalization because you change the
plumbing, right? The European Union started a free trade deal with Latin America. China is really trying to make buddies with everybody. So it’s not a linear process, but overall I would say it’s a fragmentation.
Monetary Metals
How likely would you say is a US-China financial decoupling? So US says, hey, we’re going to do nearshoring, we’re going to get kind of away financially from China. How likely do you think that is to happen? And how likely do you think it is to happen successfully?
Axel Merk
Well, it’s been on the way, right? I mean, the trade has been disrupted. Obviously, there’s always going to be some trade. And you have, of course, to the extent that the Chinese are selling more to Europe now. So they’re getting the joy of all the flood of the cheap goods. And we’re just re-engineering that. Keep in mind, businesses drive this. Ultimately, they want to make a buck and they’ll find new ways of selling to American consumers. But, yes, the recycling of treasuries is impacted from China. That’s correct. Yes.
Monetary Metals
What do you think is the nation that you think is the most underrated in 2026 when it comes to gold specifically?
Axel Merk
I’d look at Latin America because that’s those countries’ names you haven’t heard. They’re not in the crossfire. They have access to energy. There are resources in there. There’s a lot of interesting things in Latin America I would look at.
Monetary Metals
Potentially related, of the BRICS countries, that’s Brazil, Russia, India, China, and South Africa, which do you think is most likely to overperform in 2026 and which is most likely to underperform in 2026?
Axel Merk
Well, that’s always relative to where we are. One of the things I didn’t mention earlier is that when you deal in a country where, let’s say, you have an autocratic regime, one of the advantages is you get things done, right? And also, in many of these countries that are autocratic, if you have an overthrow of the government, often these countries are very dependent on mining.
And so just because you have a change in government doesn’t mean that suddenly things don’t work. There might be a short- term shock or whatever it is, but often these mines come back. Now, there are exceptions. Mines can get expropriated. But it’s a— to just stay with my Latin American theme, I would say Brazil. But there’s lots of asterisks in there. I’m not giving any specific investment recommendation there.
Monetary Metals
I now want to ask you about what’s the biggest risk in terms of policy going forward from the Trump administration? Is it tariffs? Is it the kind of geopolitical risk from conflict in Iran? What’s the biggest kind of policy risk going forward that you’re looking at?
Axel Merk
To the gold investor, that entitlement reform would be tackled in earnest. That is the biggest risk,
because if you fix entitlements, then there’s going to be a headwind to precious metals. Increased real risks otherwise is the biggest risk. And in the short term, yes, the Iran crisis there has been causing higher real yields. By the way, part of the reason we’ve had the price of gold rally in recent days, more or less anyway, is because real yields have been coming down.
But keep in mind also that the market is getting used to things. And then back to what I said earlier is that when you’re faced with a supply shock, governments come up with the oddest ideas. And it’s those second-round things that tend to be helpful to precious metals. So let the Iran shock move to more of a chronic issue. And there’s going to be government there to help. And it doesn’t really matter whether it’s Democrats or Republicans. They’ll mess things up in a way that’s going to be beneficial to the price of gold.
Monetary Metals
Now, I want to ask you about gold versus silver for the rest of the year. Not giving any financial advice, obviously, but if you had to predict which you think would outperform, gold or silver for the rest of 2026?
Axel Merk
That’s a fool’s errand because they’re each so volatile. And it really depends on the risk profile. I am more comfortable holding gold, but that doesn’t mean that silver can’t outperform. That’s just about as good an answer that I’ll give you.
Monetary Metals
Now I want to ask you about weaponization of the dollar. Obviously, the US froze Russia’s reserves. Obviously, this kind of weaponization trend can continue. How important do you think this weaponization is, whether implicit or explicit going forward?
Axel Merk
It’s hugely important. There’s a book called Choke Points that discusses the history of the
weaponization of the dollar. And it really started at the beginning of last decade, but then went into high gear with the Ukraine war when the Russian central bank was sanctioned. It’s hugely important because it provides an incentive for countries not friendly to the US to divest of the dollar holdings. Doesn’t mean they’ll put all their money into gold, but gold is a beneficiary of that trend.
Monetary Metals
What do you think about this idea that countries will start to do bilateral trade using gold? Obviously, we’ve seen reports of the Iranians saying that they have to use gold or the renminbi in the Strait of Hormuz to be paid. But do you think other countries, maybe whether it’s because of sanctions or for other reasons, will choose to be paid in a non-political currency like gold? And in a way, this will help the gold market kind of become more robust over time.
Axel Merk
I think it makes for great talking in blogosphere. I’ll believe it when I see it. These countries want to use their own currency. They might use the currency of the other country. For the time being, they tend to be dependent on the dollar. The renminbi is going to play a more dominant role potentially in some transactions. But I doubt that these countries want to take on the gold risk relative to their own currency. I think it’s to a significant extent, that’s wishful thinking.
Monetary Metals
All right. Here’s another one for you. What is the most kind of wishful thinking or incorrect assumption that most gold investors make that you want to dispel today?
Axel Merk
Oh, that the world is run by the conspiracies that most folks in the gold camp believe in. And the reason I say that I’m actually far more pessimistic than the folks who have conspiracy theories. I believe that most people, there are exceptions, of course, in the policy side, work with the best of intentions, except that the road to hell is paved with good intentions. And what I mean with that is, I mentioned that I know Kevin Warsh, I’ve met numerous of the folks at the Fed and other policymakers. I like to engage them directly. And they all mean well.
They all mean well. And it’s just that they are hostage of the system in which they’re in. And so if you are a conspiracy theorist, what you believe is that you just have to get rid of that bad apple. And everything is going to be dandy. That’s not the case. That’s why I tried to call Milton Friedman earlier and then forgot his name to say that, no, no, you can’t. Even imposing fiscal discipline doesn’t help. The only thing that helps is if you have a constitutional limit of how much spending these folks can do, because they’ll always find a way to spend more money. And so anyway, that’s my answer.
Monetary Metals
All right. I want to ask you now, what’s the best piece of advice you’ve ever received? It can be
financial advice or it can just be life advice. What’s the best piece of advice you’ve ever received?
Axel Merk
Well, invest in yourself and your health and then spend less money than you make because that is—well, you’re laughing. I wrote a book about this at 250 pages in 2009. I can give you the summary. It literally means like spend less than you make because when you spend less than you make, you’re your own boss, right? It’s a— when you live in debt, we talk about, hey, are the miners a good investment? Is gold investment? Gold tends to flow to the folks who can afford to hold it.
And if you live within your means, it doesn’t matter if the stock market goes up or down 20%. It’s nice when it goes up. It’s not so great when it goes down. But it all matters when you’re in debt and you have to service that interest rate. Remember when you were a student and you had no obligations and then suddenly you got a family, got all this and this and this, you got to make all this money to just stay afloat. There was a time when things were much simpler. And so simplify things.
When there’s a crisis, simplify things. And I think it’s going to be better for And then investing in your health is because you are a fixed income generating machine. And you can earn income longer when you’re healthier, right? And so that’s the quote unquote best advice I can give.
Monetary Metals
All right, last rapid fire question for you. Let’s talk about longevity. How important do you think
demographics and longevity will be going forward? Obviously, if investors live for 10 extra years
where they’re healthy, maybe they’ll invest in more stocks, maybe they’ll use their gold more often, maybe they’ll need more healthcare spending. How important do you think demographics and longevity specifically are for investing going forward?
Axel Merk
Well, for society as a whole, it’s hugely important because if you have an aging population and no youngsters and you have everybody gets a benefit from the government, that social fabric will break apart. As an individual, you might not want to rely on the government help to finance your old age.
And so you want to be in a position where you can be independent, obviously got a plan for deteriorating health as you age. We all wish that we live forever and are healthy forever. And so people will need to make their own decisions. But at the same time, I firmly believe that you need to enjoy life. My father-in-law is in his early 80s. He’s more fit than many 50-year-olds. He still climbs on trees and does other things.
And since one day he might crash out of a tree and die, that’s a much preferred way for him to go than being a vegetable on a bed for 10 years, right? And so people will have different preferences. My own view is, yep, you invest in your health and try to enjoy life and try to have enough of reserve so that you can afford to get old.
Monetary Metals
All right, last interview question for you. What’s a question I should be asking all future guests of the Gold Exchange Podcast?
Axel Merk
You can ask them whether they invest in gold, whether they invest in silver. That’s, I guess, one thing. Or if you’re talking about mining, whether they invest in the miners and see how much they dodge that question. You want to know whether— and the other thing you want to know is whether their speech is regulated or not.
So you mentioned earlier, right, we manage about 4.2 billion. That means every word that I say is censored, right? I cannot use superlatives. And one of the biggest confusions out there is that you have some guests, I’m sure, that talk amazing things. Well, neither the SEC nor FINRA breathers down their neck and will go after them if they say something wrong. So I think clarifying where they are, whether they have skin in the game, I think helps in educating your audience about that these different actors talk differently. I try to be direct, but I’ve learned over the years to be somewhat moderate in my answers.
Like the question you had about gold and silver, I didn’t answer it because I’m worried about my compliance. Not because I don’t have an opinion. And so it’s a— and of course, people interpret their compliance differently, but you’ll always get a— not always, there are some people who are regulated in this space who give answers that I wouldn’t dare to give. But I think it makes a difference, and the investor and the audience should be aware of that.
Monetary Metals
Axel, for those who want to learn more about you and of course your offerings at Merk Investments, give us some more of where they can find you?
Axel Merk
Sure, MerkInvestments.com. We have a physical gold product, we have a gold mining fund, and I can’t discuss them here for aforementioned regulators. I am active on X @AxelMerk where I give my musings about all things macro and gold. Follow me there and I try to be responsive. If anybody has any questions, feel free to reach out anytime.
Monetary Metals
Well, for the audience, it was a pleasure for me as well. And for the regulators watching, none of this is investment advice. And we hope to see you back on future episodes of the Gold Exchange Podcast. Axel, thanks so much.
Axel Merk
My pleasure.