Precious metals like gold and silver are surging due to rising geopolitical tensions, with central banks and governments driving demand as a hedge against conflict.
Analyst Clem Chambers sees gold potentially reaching $4,000–$5,000/oz, with further upside if global instability worsens; platinum and silver also offer compelling supply-demand dynamics.
Interest rate cuts and increased liquidity may fuel inflation and volatility, while political interference with central banks could further destabilize markets.
Clem Chambers explains why precious metals are on their way (0:35). How far do gold and silver go? (4:30) Interest rates and precious metals (11:50). Politics vs. central banks; tech and tariffs (15:40). Finding what's wrong with a potential investment (21:15).
Transcript
Rena Sherbill: Clem Chambers, welcome back to Seeking Alpha. Welcome back to Investing Experts. Always great to to you.
Clem Chambers: It's great to be back. I'm actually here in New York. New York, New York. So good they named me twice. And it's buzzing here.
RS: If you can make it there, you can make it anywhere, Clem.
CC: Ah, yes. I know. I've woken up in a city that never sleeps.
RS: Hey, we could keep this going all day. There's a lot of material to source. What are you doing in New York? Are you getting a sense of the pre-Fed meeting vibes or other information?
CC: My vibes at the moment are oh, dear.
I mean, gold and silver and the precious metals are on their way. And that only says one thing to me, which is trouble, in the world, on the military front. And so I'm expecting the White House to do something pretty striking, hopefully not literally, on the Ukraine situation.
I think that's why gold is running and silver's running, and gold's broken out and silver's broken out and precious metals not that long ago, but a couple of years ago.
And I'm not a gold (XAUUSD:CUR) fan. Never have been. Don't really like it. I've got a load now, but I'm just kind of thinking, and I thought, hold on a minute. Why do governments hold gold? And people say, oh, well, they're gonna turn it back into money one day. Well, no. They're not. They're never gonna do that.
So why do they have warehouses full of this stuff like that? Well, what's the point of that then? And, of course, suddenly, it just jumped into my head. Well, it's bullets. It's currency of war. In a war, you pay in gold. In peace, you pay in paper. But in war, you pay in gold.
That's why countries keep it. That's why they can't not have the ability to fight a war, so you've gotta have a warehouse full of it. And then, of course, the implication is over many years that war, and the likelihood of it has receded. And, of course, now it's not receding anymore. It's the opposite. It's coming this way. And every month that goes by, there's another headline of, oh no. What are they doing? No. Oh, dear
They wanna do what? And which country now doesn't like another country and and China and Taiwan, Pakistan and India, Russia and Ukraine, Russia and Europe, America versus Greenland. I mean, dear. I shouldn't laugh, but you cry otherwise. And, of course, it means that gold's gonna go up because every country's got to buy more gold, isn't it?
Because as tension rises, you've got to defend yourself. And one of the ways you defend yourself is by having gold because that would be the currency if things got really bad.
Poland came out a couple of months ago when, yay, we bought loads of gold. If you're not really into geopolitics, you go, why would Poland care about buying gold? Well, what's that all about? Well, obviously, they're not particularly historic friends of Russia. And that's why they're buying gold, and they're not the only ones.
That's why China's buying gold. That's why all sorts of countries are buying gold. And in the old days, there'd be people like me going, oh, I've got to buy some cougar rounds. I need gold. And the investment banks will go, I can push those guys around. I can go, sure. I can run the price down. I can run the price up.
The customer is the retail, and they've got no way of stopping me pushing them about and doing what Wall Street does. But when a government comes on board and starts saying we're buying gold, you can't get in the way of that price.
Wall Street or whoever can't get in the way of China buying gold, can't get in the way of that demand, can't get in that poke they can't get in even in the way of of countries like Poland because countries are the 800 pound gorillas.
You can't manipulate the market market against those guys. And that's why the price is running because there's a customer out there, many customers, and they're the biggest possible customers, and they are buying gold.
And that's why the price is running. The question is how far does it run, not which way is it going.
RS: So how far does it run? What are you looking for along the way? And what if this military posturing doesn't turn out to be, hopefully, it doesn't turn out to be a bigger deal than it already is. What if it dwindles down? How do you see it going either way for the precious metals?
CC: Well, you see, I look at charts. And the reason I look at charts is they show you what the people who know are doing because they can't really go and buy tons and tons of gold without pushing the price.
And so when it runs, you go, oh, no. Here's something wicked this way comes. And same for Bitcoin (BTC-USD) because Bitcoin is flight capital.
So if there are people on one side of an argument and they think they might have to leave the bar in a hurry, they buy Bitcoin because it's flight capital, and you can flee with Bitcoin at a much bigger scale than you can flee with gold.
And it's perfect for flight capital is Bitcoin.
RS: Although, also, if I may interrupt, we're also seeing, like President Trump's strategic reserves. We're seeing some countries get into Bitcoin. We're seeing a lot of companies get into Bitcoin. It seems to be evolving beyond that.
CC: I'm not a fan of that argument. I would tend to say that whatever government touches turns to dust.
And I think we would all agree that they don't have a great record of efficiency or looking strategically forward on what's gonna happen. So the fact that government says we like this now. That's no endorsement. In fact, it's the opposite. The dead hand of the engagement with government is really a negative, and Bitcoin has run as it's run purely on the retail market.
And now that we've got so called institutions, well, they're not famously good for the assets they look after. In fact, they're the opposite. They're famous for rampaging through the private investor and industry, sucking every fiat pack dollar out of an asset they can get their fangs into.
That's what happens with the institutions. So institutions now saying it's groovy. It's groovy. It's exactly a counter-indicator. And government getting excited, well, that's not so great either.
And when the sorts of governments are really excited about Bitcoin, you find out the ones that are really excited. It's even less of an endorsement. North Korea, El Salvador, Iran. Iran minus 25% of the Bitcoin.
Bitcoin says, oh, something's gonna go bang very shortly. But gold going up is is the grind towards conflict. And there's a long road for that to grind along and $5,000 I thought before this all kicked off, before this was a thing, when gold was nobody loved it a few years back, I wrote it's gonna go to $3,500.
And I wrote that in Forbes, and I drew little doodles on the old chart and said, this is where it's gonna go, and it's there now. And when I said it, I can't see it going any further. My voodoo magic says 3 and a half thousand.
And then when it started to go, it became clear to me that it could go to $5,000. So I think $5,000 is a number, but as things unfurl, it will become clearer what that this will all mean.
So I think somewhere in the four to five thousands is what's happening next, and things would have to develop in a more negative manner for any move above $5,000 to be a thing.
But, if bad things did happen and, frankly, if you're not confused and upset and disorientated by how geopolitics has been developing in the last year, then maybe you haven't been reading enough.
It can go to $10,000. When people say to me, oh Bitcoin's going down to going to a million dollars a coin or $10,000,000 a coin or $20,000,000 a coin.
And I go, yeah. But beer could cost $10,000 a pint. And, you know, there's all sorts of things that can happen to make big numbers, but what you really want is an asset that goes up in real terms.
And gold is going up in real terms because the demand for gold is going up in real terms, and therefore, the value will go up in real terms, and that's really the key.
And if you look at say, silver (XAGUSD:CUR), is there are some very funny ratios going on in precious metals. Gold, they make 3,200 tons a year of that. Now they make 25,000 tons of silver, and there's a shortage of silver, but that's only eight times as much if my mental arithmetic does the business.
Silver eight times gold, that'll be like, $400 an ounce. And I don't see that. I'm not saying that's gonna happen. But the ratio of production is 25,000 tons to 3,200.
And when you go to platinum, which is an incredibly important thing for the future hydrogen economy, dealing with all this pollution that's gonna be caused by all this energy that's gonna be needed because of AI, they only make 200 tons of platinum. They only make 200 tons of palladium. 200 tons. I mean, that's crazy.
So that is where I'm digging into when it comes to precious metals is, what's the demand of supply, and what is the the production level, and what's gonna happen when the price goes up?
Now there's a lot of silver out there just sitting around. So if the price moves much above where we are now, all of a sudden people will be melting down tea services again like they did back in the day.
And there are a lot of tea services, and I could have tons of silver, which I could buy in tea services in knives and forks because you can basically buy all that old Victorian silver, which is beautiful and handmade and fabulous for the price of the silver.
And in fact, you can buy it at below the price of the silver. So that stuff is out there. We can find a lot of silver out of centuries of silver usage and melt. That's what people do. They they they buy teapots, and they melt them down because the tea silver in the teapot is worth more than the teapot quite incredibly. Even stuff that's 400 years old, even stuff that's like Charles the second of England by the great fire London. When you buy a teapot from that period, it's not much more than silver value because nobody uses that stuff anymore. And who wants to have it on the shelf when someone comes through your window to take it away?
So there's issues with that. But, nonetheless, going back to precious metals, these precious metal ratios, what will pop out of nowhere if the price hits a certain level, that is interesting.
But the direction of travel is up because of this global tension. I mean, this meeting just a few days ago between China and Putin and India, I mean how can gold go down?
RS: How does the interest rate conversation figure into this? As I mentioned, we have a September meeting coming up. There's much talk of lower rates. How does that figure into the precious metal conversation?
CC: Well, okay. First of all, interest rates are set by central banks, and they can set them where they like and they can they can make their bond yields go wherever they want to go if they want to, but there are ramifications.
So if a central bank comes out and says, we're gonna buy back our bonds, and we're gonna keep on buying them. We're gonna bring down the value or the yield by just buying them back and giving you a fear.
You can bring that bond rate right down. You can bring the interest rates right down, and that's what QE was about. But the trouble is with that is that you end up monetizing your debt, and you then end up injecting cash into the system, which then is more money than the stuff.
And you get inflation. That's how it works. Monetization. Printing money. You can just print money. You can just say, bring paper in this one, and we will push paper out with presidents on the other end, and you get inflation.
Or you can say, give me give me your bonds, and I'll give you cash, which is almost as bad because all of a sudden people start printing bonds, and that's the same loop.
Or you can say, give us our bonds back. That we've printed, there's enough of them after all. And that has a very similar effect at all.
It's all about liquidity, how much you inject, where you inject it, and how you shift the overall spread of liquidity strike illiquidity. So the more you bring assets towards liquidity, the more cash goes into the market, and it starts splashing about the place and flooding around.
I had a million bucks of government bonds, but now I've got it in my hand. And now I'm going to buy a car with it or buy a house with it or go on holiday and create retail inflation. So what happens to interest rates and what happens to liquidity, what happens to what the central banks do next is very much a determining factor.
And most central banks have been trying to pull in the liquidity that they pushed out during COVID without crashing the economy, without taking too much money out to get inflation back under control.
But now America has decided or the American government has decided that they want growth, and that interest rates have to fall, and thereby, liquidity must go up. And therefore, that's gonna be stimulative, but it's also gonna be inflationary. And it's where they set that balance because they've got all the tools these days.
The reason central banks are made independent is so politicians don't go round and tell them that they need to get reelected next time around and flush the money and don't care of the consequences. Now if you go south of the border and you go into South America, they've been doing that for a hundred years, which is why they've got all that inflation because they say print money. I wanna be elected. Print more money. My mates need more money printed for them.
And that's how they have all this runaway inflation. And that's why places like Turkey have runaway inflation because they just print money. They don't tax. They just print it, and they use inflation as the alternative to tax. That's a very miserable place that you end up in.
Down here, you have too much austerity, and everybody there's not enough money to go around. You could be doing so much better if you printed some. And that's the other end is something completely different, which is hyperinflation, and countries move from one end to the other depending on their political system.
RS: What are the scenarios that you're playing through in terms of the bond market for the next couple of months and the stock market for the next couple of months?
CC: I'm worried. I wouldn't say worried, but I could see a potential coming where the political level is picking a fight with the central bank level.
And what happens then? I mean, the central banks have been working very, very hard to try to, you know, keep things on the rails.
And they've been left to do it, and they've been given support by the political systems all around the world to do their job. They haven't been told that they don't know what they're doing and that they should do something else.
That's the whole point of being independent, that politicians will try that one on. So when you start having America saying, oh, you central bankers, you don't know what you're talking about. You're idiots. Start actually insulting them in a sort of schoolyard manner and then starts getting them sued to throw your weight around, well, that's potentially an explosive situation, isn't it?
RS: You wrote an article last week about Intel (INTC). What's your sense of how much the tech sector figures into the general stock market conversation, and what's your sense of how tariffs are affecting the market?
CC: Tariffs are a single hit to inflation.
And once they're they factored in, that's it, unless you put them up. When you charge $7,000,000 for a container ship from China to land at your port, you're injecting another cent or 2 of inflation into the system and that's happened.
And nobody even noticed that there's this big 2% import duty that comes by charging Chinese ship owners you land that here, we're gonna charge you $7,000,000. That's going into inflation, and that's another thing.
So there's a lot of unexpected, unpredictable, not even followed things that are happening, and they're all getting baked into the economy. And it doesn't have a positive or negative effect much apart from reading headlines to start with, but then it gets baked into the system.
And it's either gonna be good or gonna be bad. And there's so much getting baked in, and it's so dramatic that it just adds to volatility, which means we could have a great run for six months and then a crash.
That it could go to the moon one minute and then drop like a rock the next. Because without a doubt, overall, economic and political volatility is up, and that means things are gonna be a more bumpy ride. So, overall, we're just gonna have a really, really bumpy ride.
And it could be good, and it could be bad, and it's hard to imagine somehow it's gonna be amazingly good. But, who knows? There it is. And when does the process of injecting more and more volatility aid?
Because this is gonna get cumulative. So you start out with a tremor, and then you get a shake, and then you get a real shake, and then things start to break. And that's the trip you take from being Switzerland to going to the far end and being Sudan. It's just a level of volatility, a level of unpredictability, a level of entropy, a level of of madness.
There's no government that doesn't get up to mad stuff or anybody for that matter. But when you get down the far end, it's absolutely terrible. And, unfortunately, we were going through a period of increasing entropy and increasing volatility and increasing danger.
And going back to gold, I'm not a gold bug. That is the currency for that situation. We're bound to see elevated volatility, elevated inflation, elevated uncertainty, and if you're a speculator, that's wonderful news because that's where you make your money.
But going back to tech, I see that we've had a market that's developed into very much concentration to a very small numbers of stocks.
And that's been a factor of a lot of market operators using hedging to generate their returns. If you follow the logic of hedging, you end up going long, a smaller and smaller group of larger and larger companies and shorting a broader and broader and broader group or smaller and smaller companies.
So you get valuations kind of like both suddenly, there's, like, a small group that valuations don't make any sense anymore, that everybody buys, and a a large group of people that everybody kinda sells.
And I think there's a lot of that has been going on.
A lot of that hedging and arbing has meant that a small group of superstar stocks with the ability to to have incredible, quarterly earnings and do all sorts of magic with numbers get into a tighter and tighter group of more highly valued companies.
While great companies that have great businesses and make great money that even pay dividends are basically suppressed because they're the short leg of the long leg, which is now only concentrated into a very small number of companies.
RS: We were just talking about this on our Wall Street Breakfast podcast where our director of news was talking about these valuation concerns, specifically as it pertains to NVIDIA (NVDA) after their earnings calls.
What's your sense of how you're looking at stocks? What's your sense of how you're specifically looking at them now and how would you encourage retail investors? What metrics or what data points? Is it earnings calls? How should we be digesting and marinating over the data points, and what data points would you say are worth focusing on?
CC: Well, I'm basically a contrarian, so I disagree with everybody. And I just try to find the completely obvious thing that's wrong.
For example, they only make 200 tons of platinum. I can't explain that. I can't explain why that should have the same valuation as gold. It's such a chasm.
It just doesn't work in my head so much that I follow that. So, for example, the market looks about a year out. And so if anything's gonna happen maybe in more than a year's time, nobody cares.
So I like to look out two years. Most people cannot be contrarian. They wanna go rah rah rah and support stocks and investments like sports, and they somehow think that their opinion somehow makes the progress of that asset, helps it.
Or what if they're short there? It's rubbish. And they expect what they say they hope what they say will make it go down. And I don't go along with any of that. I just think that most people should find the the theme of investing, be it momentum, be it tech, be it contrarian, be it value, or whatever it wants to be, be it astrology.
And they need to be find an area where they're comfortable in, and they feel that it flows for them when they make three decisions, there are only wrong ones. So that and that you could sleep at night. You must sleep at night. You should be diversified. You should be sensible.
You should find the theme that fits. So if you love tech, that's great. If the only thing you love in the world is Tesla (TSLA), then just study it to death, and you'll know when to be short and when to be long.
But as long as you're comfortable with it rather than I've got some test issues. I like to ask you what you think about them. If you don't know, if you have to ask, the answer's always no. So you have to find the comfortable place, the happy spot for you, and then it'll be fine. And if you don't, then you won't be fine.
And if you follow other people, you won't be fine. You have to absolutely know with your investments. I know I should be diversified, and I should have 40% in bonds and 60% in equities or 60% in bonds and 40% in I absolutely know that.
I've read a few books, and I'm convinced that's the right thing to do. And I constantly check that I'm not wrong. And that's what my thing is. You'll be fine if you go, I went down a pub and someone said there's this new gold mine coming up, and it's gonna be great. And they drilled out the center of the earth and it's all gold down there and it's going to go up to the moon. You're lost.
You're gonna lose all your money. So in a way, you have to have a theory and you have to keep testing it. It doesn't matter how mad it is. Doesn't matter that nobody agrees. Doesn't matter that everybody agrees.
You gotta keep testing. You gotta keep testing it, which is the whole purpose of your publication is that you can constantly benchmark, acid test your crazy ideas or maybe brilliant ideas against everybody else. And pretty much everybody else is gonna be wrong just like you, but you have to keep testing it. And then you'll be fine. You'll do great.
RS: Would you say that you have learned more from experience? Or was it a book? Was it a guru? Was it somebody that taught you something and then you applied it? What has been the greatest teacher for you?
CC: For me, what I did when I started out, doing all this is I just made little rules. Don't buy political footballs. Don't buy family farms. Don't buy companies with a PE more than 12. Don't buy companies that send out press releases that start off with, I'm delighted to to tell that our figures are down this year or whatever.
Just a list of these little rules and don't break them, and then see how they work for you. This family firm has gone up to 10x. I got that one wrong or whatever. So you just build up these rules, and then you don't have to have many, but you'll pick up more as you go along.
Keep it sane sane and obvious. Don't keep really obvious truisms, and you don't need a much of a list. And then you look around and you see ones that fit them on the buy side or break your rules so you don't buy it.
And then you just go around the perimeter. Oh, look at that one. Oh, tick tick tick tick tick tick. I saw that. I've made too much money on this one. I need to sell some to get back to my diversification. I'll sell some.
RS: How much conviction do you need to make something a rule? What is the metric that makes it a rule? Is it seeing something a few times or sense, intuition?
CC: Just seems like common sense. Common sense, that rare thing.
RS: I was gonna say, does that still exist, Clem? Is it still around?
CC: I mean, it doesn't and that's mainly because of the current state of the media. But that's really where you make your money by getting to your common sense.
It's like someone was talking about Warren Buffett to me. He said, oh, Warren Buffett's selling down his stock. It must mean the market's gonna crash. I said, it must mean he's 93, and he's making arrangements. It's common sense that somebody of his age is going to be starting to organize his affairs.
You don't have to imagine that it's something more complicated than that. So just keep stuff really, really, really, really simple. It's like, what's the purpose of gold? It's a simple question.
What is the purpose of gold? And then work out from there. So you get your little ideas, and then you just keep testing them, testing them, testing them, expecting them to be perhaps wrong. Or the world to change on you. You'll be fine. You'll make on two, and you'll lose on one, and you'll be fine.
RS: Well, appreciate the conversation, Clem. Clem Chambers is the name that he goes by in real life and on Seeking Alpha. I'm happy for you to share with our listeners your final words and also where they can find out more of your analysis and writing.
CC: They can read my stuff on Seeking Alpha. I know a lot of people write a lot on Seeking Alpha, but I only write stuff when I think it's glaring, and it's good because I write for publications like Seeking Alpha and Forbes and do lots of media as a way of crystallizing my thinking so that I don't go, oh actually, I sound silly when I say that. Or oh, that can't be right.
It's clear in my mind why I believe, for example, gold is $4,000. Why platinum's only 200 tons a year of production and what the implication is of that.
And by having to go through those though processes, it over the years has put me on the spot to to pick up on lots of great opportunities.
And occasionally, you take your eye off the ball for ten minutes and you miss something like the quantum thing that I completely missed that, earlier on. And I wrote a piece in Seeking Alpha about what is the equivalent of quantum computing that will be coming next?
The themes that can break out and will have a mad, crazy trading opportunity if they do. That's the sort of thing that I like to write about, and I hope people enjoy it.