Your Gold Can Do Something It Couldn't Before | Joseph Cavatoni

Everyone says the West dumped gold this quarter. The World Gold Council's data says that's wrong, the selling was narrow, American, and almost entirely paper.

Speaking with Kitco News at the Rule Symposium 2026 in Boca Raton, WGC senior market strategist Joseph Cavatoni said North American investors fled gold ETFs on rate fears while Asia bought "at a record pace." Gold's worst quarter in 13 years, he argued, was the work of short-term traders, not a broken thesis, as a safe haven, gold "cuts both ways," sold for cash and margin calls after a 160% run to January's record.

The real buyers never left. Cavatoni said central banks kept accumulating well above their long-run average, with nearly 90% of those surveyed planning to hold or add gold, and confirmed it is "probably fair to say" gold has now overtaken US Treasuries as a reserve asset. He also unpacked gold's quiet shift into Tier 1 collateral, now accepted by clearing houses, central banks, and even crypto lenders.

Recorded July 09, 2026.

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Transcript

SPEAKER_00 0:00

Kitco News on-site coverage of the Rules Symposium Natural Resource Investing is presented by Paris Mining.

SPEAKER_01 0:31

Of course, let's welcome Joseph Capitoni. Hey, Joe, good to see you. So just talk to me a little bit about who sold.

SPEAKER_02 0:54

Sure. I think that there's a couple of things at play in terms of the selling dynamic that's taking place. The first is over the last 18 months, I'd say that both Western and Eastern investors have been heavily engaged in the market. But with the noise and of the change at the Fed and with the risk of rate environments holding or being higher in the U.S., Western investors have definitely stepped back from accumulating gold and actually have looked to move themselves out of it in the ETF market in particular. The Eastern investor has some sold some, but it's still looking like it's running at a record pace in terms of accumulation. So I think North American, I think that you've honed in on that. I think that's the right way to think about it. North American investors, particularly U.S. investors who are really playing that short-term speculative position on gold. Where should I be thinking? How should I be thinking about it? And that's what's been pushing the price negative in terms of the U.S. market. That's where the selling has taken place. But if you look at physical demand, physical demand has still been very popular, very high, and we'll likely see that continue in Q2 around the globe. Eastern and Western investors accumulating in physical context. So it's really that trader, the speculator, those that are short-term in their mindset pushing crisp. Yeah.

SPEAKER_01 2:06

That frothy trader, I mean, we've talked about them before. It's kind of loose hands. And I mean, central banks are still buying about a thousand tons a year now, double uh the last decade. So, you know, when we see the the price of uh gold kind of take a little bit of a hit, everyone talks about gold prices, it's gonna hit 35. Where's the base? Do you think that the the central banks have kind of put a floor here on this price?

SPEAKER_02 2:29

Well, I think there's a few things to say about central banks, and I know we'll talk more about this, but they are definitely signaling that they have a continued interest to grow their reserves with an asset that performs best with what they hold. They hold dollars, they hold treasuries, they hold fiat currency. The natural place for them to go is to the gold market for liquidity needs, for no credit risk, and actually for it could be to be mobilized to actually earn them some income off of it, which is actually an interesting dynamic that a lot of people don't understand, Yeshev. But they can lend it. They can actually put it into the OTC market in London and monetize it in a way. So it can generate some income.

SPEAKER_01 3:06

Okay, so that's an argument to the counter, you know, no yields on gold kind of argument. I think that's an old school way of thinking about gold.

SPEAKER_02 3:13

I think that people need to pick up the phone, call their bullion banker, and say, what can I do with my gold these days? Interesting. And I think that they'll be quite surprised to see that there is an interesting market developing around it. Like it's not as liquid as you might think that uh maybe something like equities is. But ultimately there is a market for it. And I think people should be exploring it. And more importantly, they should be asking for it because it's actually doable.

SPEAKER_01 3:35

You know, uh China just added uh gold for the 12th month in a row, and we've seen this out of the East a lot, and we talked about it before, but just talk to me a little bit about what they see that the West investors don't.

SPEAKER_02 3:46

Well, I think that they see the significance of gold as a reserve asset, giving them a couple of key tenets to their portfolio. I think number one, it gives them a liquid instrument. Number two, I think it puts them in a position of trade that's not impacted by sanctions or geopolitical risks. But it also protects them against a downgrade of the U.S. if that happens again with respect to the rating agencies. And I also think it gives them something that interlinks into a super robust market for trading gold. You've got a Shanghai gold exchange, you've got a Shanghai Futures Exchange, you've got a very robust jewelry market, you've got pensions or I should say insurance companies that are actually permitted to sample and test gold in their portfolios. So you've got an ecosystem that understands gold and it's working to it. And they're a key component to it, and they're seeing the value of gold as a diversifier and a trade instrument. And I think that that's why they're doing things like what they've announced in Hong Kong this week, which is this clearing platform in coordination with Hong Kong and Shanghai Connecting. This is important. They're gonna look to P to appeal to central banks and say, hey, look, we can do this too. We're gonna complement the OTC market in London, we're gonna actually expand what gold is doing worldwide, and maybe even get a price fix for the Asian region, which is something they need in their morning hours. They don't have it. They have to wait for a London fix.

SPEAKER_01 5:07

What do you think London thinks about this?

SPEAKER_02 5:09

I think the London market is realizing gold's global, and I think that they're looking at it and saying, okay, what should we be doing to expand our impact in that part of the world as well? And look, this is discussions that are taking place everywhere. You've got it in Singapore, you have it in Hong Kong, as I've just mentioned. The London market's always looking at how it could be evolving and growing. The Middle East definitely have gold on their mind, and even the Western markets, the US, Canadian, and and the markets here, thinking about what role gold plays in the monetary system and the economic system going forward.

SPEAKER_01 5:42

You know, it's it's I guess not everyone. Turkey has been a big seller this year. So does that kind of put a dint into the story at all from your perspective?

SPEAKER_02 5:50

No, I think actually what it does is give us a very cool, very transparent use case of simply saying, hey, look, there's a central bank that's accumulated a lot of gold. It's been a very pronounced central bank for accumulating gold, and they have a use for it, and they actually have demonstrated that for us. You see that in the case of Turkey, you see it in some of the smaller emerging markets, Tanzania and others. So you're seeing these markets that are actually putting marks on their gold portfolio or using it in a way that they actually said in our survey, for example, that they would. They needed to backstop their currency. Great, put it to work.

SPEAKER_01 6:24

Has China been a little bit more, it almost feels like they've been more vulnerable with showing their hands a little bit. I mean, they're talking about Hong Kong, we're talking about Shanghai and them working together. I mean, how much could we really kind of trust these official numbers? Because, you know, especially it's always been a little bit selective and lumpy. Do you think that that's changing?

SPEAKER_02 6:40

Well, I think what you have to understand around what a central bank will report is that there's a formal mechanism that the IMF has stipulated that people need to adhere to, and China does that. But I think that there's also growth of uh, you know, accumulation of gold, maybe outside of the central bank reserve account that's basically being held by the PBOC. So you need to understand that there's a vested interest in gold in that market. So we report what's coming through official channels, and then we do our best to give you an estimate of what's unreported based on destination of the gold. For example, if it's heading to Beijing and the imports are going that way, likely for government use, and if it's heading to Shanghai, likely for investment use. So we do our best to give the absolute best transparency we can. It changes at times, we even have to reset numbers at times, but what we know for sure is import data, use data, these factors are continuing to show us there's growth in the market. And actually, the central bank does report accurately through the IMF channels. And at times they may need to true it up as well. Yeah. But over time, we trust the data.

SPEAKER_01 7:42

Yeah, we've got to talk a little bit about the gap in numbers, just because demand by weight, it kind of barely moved, it's up about 2%, but the dollar value hit a record up 74%. So what's that gap telling us?

SPEAKER_02 7:51

That's telling us people are still very interested. They're spending more money to buy less gold because the price has actually, you know, really taken a big move of 160% up over the last 20 months. And I think that what that tells us is that the demand that people are expressing in the form of jewelry, because that's a great example where tonnage is down, but spend is up. And in the emerging markets where these are people who are trying to do their best to save, and that's a form of savings for them. They're still spending on it, and it's giving us a good signal that the interest in gold is still significant.

SPEAKER_01 8:25

Yeah, it's interesting when you talk about the jewelry side, and I guess you could also talk about Asia buying physical bars and coins. I mean, it's at record levels while the West continues to sell its paper. So is that the real split in this market?

SPEAKER_02 8:37

That's what's actually interesting to understand. We always talk about gold being global, and you need to make sure you don't lose sight of that. ETFs get a lot of press. Futures get a lot of press. What's key is understanding where the physical markets are going. Like you said, bars and coins, record levels. Let's see where it comes in on second quarter. But that's where people are saving, and they're saving over the counter. And that's actually being a good signal to us to say people are still putting money in the bank. They're holding on to their assets. And actually the jewelry recycling levels aren't as high as we would have maybe expected at high price. People are holding on. Still holding on, but let's see where second quarter comes in. I'm quite keen to see how that number looks. Because again, that's an emerging market mechanism of savings and wealth, wealth, wealth preservation. They're moving it back. We know that the fabricators and the jewelers who are holding inventory, they've recycled. But are the real consumers putting their money back in? Because you know, you've got a higher inflationary environment that's global. It's not just a U.S. Kevin Walsh discussion. It's a global condition. It's a consequence of oil prices, it's a consequence of where we are again today, back in a conflict with Iran. It's challenging as having a huge impact on emerging markets.

SPEAKER_01 9:46

Yeah, you brought up Warsh, we got to go there, we've got to talk a little bit about this war and the Fed, the macro still exists. And I mean, you know, gold fell a little bit, it's catching a bid today, but it fell a little bit on Fed and oil, but uh, Iran's escalating towards war today. And in your data, which usually wins? Is it the safe haven bid or the or higher rates?

SPEAKER_02 10:03

I think higher rates have a much more significant short-term impact on the price, and it's transparent. It's going to be very quickly seen, and most of Western investors who are positioning around that discussion are using highly liquid instruments that are, again, transparent. You're looking at ETFs being used for futures positions being used. I think strategically, though, the bigger discussion is not around where the rate market is today, it's about the overall economic condition and expansion of economies versus just the noise today on the quick short-term alternative to holding gold. If rates stay high and bonds are appealing, then I'm going to go there on the short term. If cash deposits look good, I'm going to go there on the short term. If dollar strength is good, I'll hold off. But what you need to stay focused on is this shift strategically longer term. So while we know that we're going to lose out a little bit on price and probably on allocations short term, we'll still see this growth accumulation of gold based on bigger issues like what we're never hearing anything about, which is the debt level in the U.S. and its sustainability. All of these issues that are short-term in nature are being tackled, but where are we on that? Still quite challenging.

SPEAKER_01 11:11

And Gino, you bring up a good point there because uh the Fed does seem to have some a lot of short-term noise to the gold price. And I mean it came out split nine to eight and it's pulled its guidance. On that short-term bid, especially for the retail market, does that kind of uncertainty actually push people into gold?

SPEAKER_02 11:28

I think it gives them an interesting opportunity because at 5,400 they were maybe saying, well, I missed the trade. Now you actually have a very healthy environment. We think that the number is a good number in terms of where gold should be based on our valuation models. And we're looking at somewhere in the range of plus or minus 5% because of where we are going to tread with this uncertainty around rates for the next six to 12 months. So I think right now, if you're interested in gold and you were disappointed because you couldn't get into 5,400, take a look at it today.

SPEAKER_01 11:56

You know, there's this debate in Washington about, you know, the government understands that they've got 40 trillion in debt, they and they don't want more, but they don't know what the heck to do with it. Uh you're in D.C. I mean, are a lot of people talking about this right now? Is this an actual discussion?

SPEAKER_02 12:10

I think it's something that needs to be discussed more. I'll say that. And I think that that's actually something that I think will bubble up in the second half of the year. I think what we should be keeping a close watch on, we're going month to month with the Fed. You know, the June notes were out. We've got uh brand the base book coming out in the mid-month of July, we've got a meeting at the end of July. I think all the governors were in line in terms of what they were saying in June. No rate cut, no rate move at all, hold. I think what we should be listening for is what comes out of Jackson Hole. Right. Because that'll be Kevin Warsh's first opportunity to say this is a moment of more strategic view from the Fed. And actually, when he's now reset it, how should we be listening and understanding the signals he's going to be sending us? Because he's clearly changed what the Fed's doing and how it's doing it. So the dot plot will be there, but let's hear what he has to say in September.

SPEAKER_01 13:00

You know, we talk about East versus West all the time, and we kind of got into who's setting the price now. I mean, the if the East buys and holds while the West trades it in and out, they're obviously setting a little bit of that price. But you know, it's funny, I mean, the West sold right as war risk was climbing. I mean, are they offside again?

SPEAKER_02 13:16

So, interesting about the war trade with the spec with respect to the gold market. So the East have been major contributors to the price appreciation, both investment and central banks, emerging markets, I should say. But when you think about what gold does leading into a conflict, it does two things. Number one, it appreciates because conflict is definitely a risk moment. Then the assessment of how the conflict will play out is understood by the market, and that's what impacts the gold price next. So, conflict in Iran, we saw the price trending up. Once we had the conflict, and there was clarity that this was going to disrupt the nearly a third of the oil flow, cause inflationary conditions that are not only US and Canadian driven, but they're global. And they're impacting emerging markets quicker, faster, and more difficult. They're even impacting the flow of fertilizers, potentially food pricing, everything's at play. That's when you start to say, okay, what are the conditions and what is the impact of the conflict? That's why gold took the headwinds, because an environment for inflation was developing and it's going to stick until we see an outcome and a confliction to the conflict.

SPEAKER_01 14:20

But how much of it do you think was kind of used for liquidity? Because I mean, if the East is really setting the price, I mean you must get asked all the time, I mean, why did gold just have its worst quarter in over a decade? Well.

SPEAKER_02 14:29

When we talk about this safe haven trade, what people need to have a very good appreciation for is when the economies grow and people save and spend, that's great. Economic expansion grows the price of gold because people love to buy, spend, bling, whatever they want to do. But when it comes to the safe haven trade, people say, I've got to hold gold because it's a safe haven trade. And guess what happens as well when you hold it as a safe haven trade? You need to go to it when there's a time for need. And actually, if you need liquidity and you need to make a margin call or you need to generate some cash flow, you're going to sell your gold. It was up 160 some odd percent when we actually hit that number in 5400 in January. And if you're looking at your safe haven and your portfolio of assets that you want to monetize to meet margin calls, or take profits, or actually generate some cash, hey, in an environment where the dollar might strengthen, of course, that safe haven nature leads to that being a liquidity instrument of choice. So it cuts both ways. It definitely accumulates on the way up, but it also has an impact on the downside because it gets utilized.

SPEAKER_01 15:32

Let's talk about the dollar there. You brought it up for a second. I mean, obviously a record share of central banks are piling into gold. And I know that you say the dollar is kind of uncontested and maybe they both kind of fit. We heard it here this week, you know, that gold's past treasuries is a reserve. Uh, you've got the numbers. True, overstated.

SPEAKER_02 15:48

Um, I think on the valuations that people are uh are putting, both the treasuries and also to the gold market, yeah, I think the numbers probably fair to say it has overpassed it. But I think what's more important than just trying to gauge whether the number's bigger or smaller, I think what the number and what the behavior is telling us is the key to the central banking community. They see a need for holding on to a currency like the dollar, holding on to dollar-based assets, because that's the trade environment that the world has set today. So they're not dropping the dollar. What they're looking for are the best diversifiers to holding those assets. And there's really one choice: it's gold. The euro hasn't fit the bill, and what our survey results are telling us, we have an annual survey, just have it out this past month in June. It continues to signal though as dependencies just on fiat currencies are going to decline over the next five years. And the majority, near 90% of them, are going to continue to hold or increase their gold holdings over time.

SPEAKER_01 16:46

You know, it's interesting when we talk about that too, because only about 4% of central banks buy gold through funds, and more are kind of pulling their gold home to store it. So, I mean, is is the is trust in Western vaults kind of slipping here?

SPEAKER_02 16:59

Well, I think two things are at play when you think about central bank holding its physical gold, because most buy physical gold, if not almost all, buy physical gold. They buy it in the wholesale space. The first thing is if they have a need to mobilize it domestically, because a lot of the conditions that they have highlighted in our report, not just sanctions risk or seizure of assets, it's actually a need for homegrown inflation protection, a need for mobilize, like in the case of Turkey, which you brought up earlier. They want it in the home front. So they need it at home. They don't want to be waiting for it to be imported in from London. But they'll continue to use the London market, and the Bank of England has stood out as the number one destination for central banks to maintain their holdings because, as we mentioned, you can mobilize it and get a yield on it. And that's where they keep it. They split it between homegrown, but also back in the liquid wholesale market of London.

SPEAKER_01 17:50

You know, we talk about the safe haven bid, we got this new word on the floor I've been hearing about working collateral as well. So let's go there. I mean, since last year, obviously banks have can kind of treat uh allocated gold like cash. I mean, it's tier one. So, I mean, clearinghouses take it, right? Central banks take it, now even crypto lenders, is gold turning into, or I guess from a hedge into working collateral inside the system?

SPEAKER_02 18:13

I think that there's so much interest in the market for gold. And actually, what I've said before here on the program and in many of these events that I attend, it's probably the coolest of commodities because you've got every type of institution, individual, and investor involved. You've got hedgers, speculators, traders, owners, compensions, central banks, they're all involved. And with that comes a healthy capital market. It can even be better, and we're doing a lot of work to make it even better than it is, but today you'll watch a central bank put its gold into the lending system, and they'll earn a fee on that. So they'll diffuse the cost of holding it, but they'll also generate cash flow off of it. And it's actually fantastic. It's what needs to happen more with the gold market, which is why our work around pulled gold to interest, digitization of gold, wholesale trading of gold, working with the London Bullion Market Association is key because we're going to keep opening those doors of monetizing gold so they can actually be better positioned when somebody says it's just a rock in the vault. It's not. It's a mobilizing asset that can be used in many ways.

SPEAKER_01 19:18

It's interesting, all right. Uh the bottom line, I mean, if you can kind of borrow against your gold uh without ever selling it, does that kind of make the structural demand sticky in a way it never used was?

SPEAKER_02 19:28

I think it tells you a big signal. So in the case of Turkey, you heard that they were selling, but also swapping their gold, using the swap market. What does that tell us? It tells us that they're not exiting the gold market. They're mobilizing some in physical, but they're also using an instrument that says, I want it back when I'm done on the mobilization of it. They're staying in the market. It's a very exciting time.

SPEAKER_01 19:48

Yeah, it's been fascinating to watch, Joe. Last question before we let you go here. I mean, just kind of that one number. I mean, you see all the data. Kind of the single most important figure in your data right now that you think people aren't paying attention to?

SPEAKER_02 19:59

So the biggest number that we're not paying as much attention to is the continued increased level of artisanal and small-scale gold mining. This is kind of in the periphery, and it's actually something we're being very keenly focused on tackling the challenge. Bad players, producing gold, making its way into even we had an article in one of the media outlets that talked about how the U.S. Mint and the Royal Canadian Mint had maybe had some gold coming from illicit finance coming into their into their coffers. That's a big thing we need to tackle down. The market needs to see this. Governments need to recognize this challenge. It could be as much as 20% of the production of gold on an annual basis. Understand that number and help us tackle the problem because we've got a lot of solutions through our gold processing initiative that can actually tackle it down.

SPEAKER_01 20:44

All right, Joe. Appreciate your time. Thanks for having me. We appreciate it. All right, that was Joseph Capitoni of the World Gold Council. Always a busy time for him at that show. And here's what the data kind of leaves me with here. I mean, while the West spent this quarter selling the headlines, the world's central banks kept quietly buying the trend at a record pace and paying record prices to do it. Now, whatever gold does next week, that's the real story underneath the price. For all of us here at Kitco News from the Rules Symposium in Boca Ratan, I'm Jeremy Stafford. Great weeks come uh great guests coming up all week, I should say. Keep joining us.

SPEAKER_00 21:15

KitCo News on site coverage of the Rules Symposium Natural Resource Investing is presented by Paris Mining.