Ep 147: Where is Gold Going from Here? With Patrick Yip

You purchase a lot of gold and you store the gold at your house. All it takes is one guy breaking into your house and your gold's gone. Because chances are you're going to value your life and your family's life more than your gold, right?

Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm your host, Chris Larsen. If you haven't yet, get a copy of our book for free at our website, nextlevelincome.com. that's www.nextlevelincome.com. just click on the book link and I'll even send you a copy if you put your address in. On today's show, we have Patrick Yip. Patrick serves as the director of Business development, Atmex and One Gold. Atmex is one of the largest retailers of physical gold, silver, platinum and palladium and has sold over $15 billion in product over its 20 year history. One Gold is a fast growing online precious metals platform that has processed over 900 million in transactions since it founded four years ago. Patrick joined Atmex in 2011, has held roles in merchandising, satisfaction, sales, project management and business development. He played a key role in the company's 250% growth on marketplaces such as ebay, Amazon and Walmart. And today he's going to join us to talk about the commodities market, the precious metals market, gold, silver, bitcoin and more. Patrick, welcome to the show.

Hey, thanks for having me on, Chris.

Absolutely. I'm excited to talk about this. So we're going to be talking about a bunch of different stuff. I'd love to hear a little bit more about your background before we get into, you know, kind of some of the bigger topics we talk about today.

Yeah, so I'm the director of Business development at APMEX and One Gold. And for those of you who don't know, Mex is one of the largest Internet retailers of precious metals. We've been in business for over 20 years and have done over 15 billion in lifetime sales to retail customers. I've been with a company for about 12 years now. I've had various roles in merchandising, sales, promotional, project management, marketplaces, and now business development. Recently I began running the company's subsidiary called One Gold, which is an online investment platform which allows customers to purchase a vaulted position of gold, silver and platinum. You get into this in a bit, but One Gold has done over 900 million in transactions in its first four years. In operations. And then recently I also led the, to launch the first precious metals rewards credit card. And it's called the bullion card.

Oh, wow. I have not heard about that. That's wild, man. So, yeah, love to hear about that. I think gold seems to always pop up when inflation starts to rear its head. And I remember we had our last big cycle, actually somebody that was in my wedding with one of my wife's roommates that we were all good friends together, he worked for a company that was in the space and we had this whole conversation. This was back like 2006. So gold was, was on a, on a nice tear back then. And just thinking about this, Patrick, you know, I've. And I'd love your thoughts. This is not one of my areas of expertise, but I understand there's basically a 30 year commodity cycle that kind of goes through. You know, we kind of, it kind of goes up, it goes down. If you look at some of the developing company countries, you know, their economies are largely tied to this. Do you mind sharing a little bit more about kind of how the commodity cycle works? How, how precious metals? Because I know we're not just talking about gold today, we're talking about gold, silver, platinum, other different things. How does the overall commodity cycle kind of factor into these things?

Yeah, I think everything is cyclical too. And just to kind of not go back as far as 30 years, let's say, let's say you go back to 2000, for example. Okay. You had 2000 to 2010. And you almost remember like anyone invested in stocks would, would call that the lost decade, basically. You did anything in stocks? Basically, yeah, you, you just tied up your money. Ten years later you didn't make anything. Gold, on the other hand, went up from $250 to about $1,900 in 11. So gold rallied and then the cycle reversed again. So you look at 2010 to 2022, the S&P started around 1250 and then 4800 in 2022. Gold basically didn't do much. It was 1900, went down to 1050 and now it's around 1900 again. So now it's like, I think things changing and everything's cyclical. Nothing goes up forever, nothing goes down forever. It's just like I wouldn't be surprised to see the cycle reverse. And you're seeing stock start to correct. And you ask most banks, most financial analysts, and they say we're overdue for a recession. We've had a boom since 2008 to 2022. In the equities, it's like that's the longest boom in American history. So if you have the longest boom, would you expect a bust? Well, maybe it's a longer than normal bust. And if this happens, normally gold and equities are inversely correlated. So I've heard people saying they wouldn't be surprised to see another lost decade in stocks from 2 up till maybe 2032. I mean, time will tell what happens, but if that's the case, gold's likely to perform well like it did from 2000 to 2011.

I think that's a great point. I think the first point you made, which is a diversified portfolio makes sense, right? It's like nothing's up forever, nothing's down forever, you know, and if you do have a diversified portfolio, need to rebalance, right. I think a lot of people like, oh, like things are on a tear. They're reluctant to sell, they're reluctant to sell their stocks that have gone up, you know, but that's, that's where a lot of the value of a diversified portfolio comes in. If you rebalance and you want to rebalance too quickly, if you, I think if you rebalance every day, you lose a lot of that. If you rebalance every quarter, it comes out. And if you look at how, you know, we talk a lot on the show about how the richest families do things, right? And you know, the richest families, they have positions in the stock market in precious metals and businesses and commercial real estate, like we focus on. And, and there's a lot of value in that. So. And personally I've held, I've held gold as a position in my portfolio pretty much as long as I've been investing, you know, in, in the stock market, one of the metrics that I look at is the Buffett indicator. And I look at, they call it the Shiller Cape, I believe, right. Which is the adjusted pe. And both of those which suggest like what you said, Patrick, which is over the next eight to 10 years, as these indicators look out, they're predicting kind of like mid single digit or even flat returns in stocks.

Yeah, I think that's a good point too. Another thing too, and while I'm bullish on the precious metals is I think there's a lot of similarities between today and the 1960s and the 1970s. I mean, you mentioned cycles earlier and that's the last time inflation at these levels. So you know, going back there, if you look at 1960s and 1970s, what, what, what, what happened? So the Fed, we had inflation Rising. And the Fed was trying to add inflation by rising interest raising interest rates, which sounds very similar to today. Right. Gold went from $35 in 1971 to $200 in 1974. And then you got to 1974, and there was actually a brief period of time where the fed funds rate was above the inflation rate. I'm surprised they got high that high. But what that caused is it caused gold to go down initially from 200 to $100, and it put the US economy in a recession. So the Fed says, oh, we're in a recession. Which similar. Today. Today. Right. I mean, you're having people calling for recessions. And then the Fed says, okay, I got to get, get the US Economy out of recession. So they started lowering interest rates. And what happened with gold is it rallied from $100 to $850 up in 2011. So, you know, where does that put us today? Like, I think that it's likely the US Will go into recession probably later this year. I'm hearing a lot of people say that. Like I said, we're probably overdue for one. I don't think the fed funds rate is going to go above the inflation rate. I think the latest came out today. It was 6.2% year over year inflation. Fed's fund rate is 4.5%. They're talking about 25 basis point increases if you're almost 200 basis points away. So I don't think they're going to get above the inflation rate, which probably means gold won't crash like it did in the 1970s. But what happens is, if we go into recession, I would not be surprised to see this Fed pivot now that everyone's been talking about. And if that happens, gold will likely rally. I don't think it's going to make an move up from 100 to 850. But could it double or triple? I mean, possibly. Wow.

Okay, so a couple things here. So, Bretton woods, what year was that and how did that affect the price of gold at the time?

Time. Yeah, so that was 1971. That was when the dollar was, was moved off the peg. It was basically trading at $35 an ounce. And then it.

And just, just. By the way, we have a lot of people that are listening that like, weren't around then. I wasn't around them, but studying, you know, history and those sorts of things. So before Bretton woods happened in 71, the. The value of the dollar was pegged to gold, correct?

That's correct. Okay.

And then met at Bretton woods unpegged it. And what happened, Sorry, just to reiterate there, what happened to the price of gold after that?

Yeah, I mean, basically it went from 71 at $35 an ounce all the way up to 850 in 1980. And yeah, and the thought there, I mean, the thought about the whole gold pegging and the gold standard was to prevent the government from just freely printing money. It created this normal, like a measuring stick. If you're working all day and you're earning dollars, well, what's the value of a dollar? Well, the value of a dollar is the value that it buys of a certain good and service. There's a, you know, a loaf of bread, a tank of gas, or whatever it is, that's the value of your dollar. But what's scary too is, is if you look since the pandemic, and depending on stats you're looking at, they're saying the Federal Reserve printed more than half the money in existence since the. Since the pandemic. And you think about that. So that's 20 to 20, 23. And half the money in existence has been printed. So if you're saving dollars, it makes you question, like, what are you working for? Like, what's the value of this? If could just hit a couple buttons and make more of them.

Yeah, it's really, it. It really makes you stop and think and it actually makes your head hurt if you think about it. And you know, we hear a lot about the Fed and that's one of the reasons that I love real estate and we talk about it so much and we have such a large position, is because it is an inflation hedge. It produces cash flow, it hedges against inflation. It's a real asset. And that's why I love to talk about gold as well, because it is a real asset and there is real value in it along with these precious metals. So one of the asp. And again, I want you to correct me as I kind of go through here and kind of educate both myself and the audience. So one of the values of having gold or owning gold especially, is that as we print more of these dollars, the value of gold stays steady, but the price may go up because it's relative to dollars in existence. Is that accurate?

Yeah. There's a common saying too, that an ounce of gold in ancient Rome bought like the night toga, and then an ounce of gold today will buy you a fine suit too. So, like, if you're talking. So that's the thought too, or like a certain of silver would You a tank like a gallon of gas back in the 1960s and that certain, that same amount of silver would buy you the, the same amount of gas today. And for the most part a lot of companies trend with each other. So, so like if, if all, if gold goes up, it's chances are that oil is going to be up, wheat's going to be up, and all these other commodities will go up. But I, I'm, I believe in, in this time you want to get something that, that's tangible, whether it's gold, whether it's real estate. You can't print more real estate, you can't print more gold. It requires mine the gold or to make a house, to make a property. It's something the Federal Reserve or the US Government just click a button and make more. And I've always said too, gold to me is like the best form of money. So it's like money without a country. So like the Euler could be manipulated by the Federal Reserve, the Euro could be manipulated by the ecb. I mean they basically could decide how many of these things to produce. And gold, you can't produce it, you have to mine it out of the ground.

Yeah, no, I, I think that's, I think that's a great point and I think that's why it's been around for so long. It's fairly unique. It does have some industrial applications. Maybe not as widespread as say silver for instance. But another thing we hear about has some of the features that you talked about, some people call digital gold, which is Bitcoin. And I know that's, that's kind of gained popularity in, in this space. How would you compare it to gold versus, you know, people say, okay, well you know, I should own gold, I should own Bitcoin now. What do you think?

Yeah, a lot of times we get asked if it should be gold or cryptos and I would say, why not both? No one knows what's going to happen. But yeah, I look at it. Gold's been around for thousands of years. Different cultures, different countries valued it. You look at ancient, you know, ancient books or whatever, and people always valued gold. It was money. Cryptos, on the other hand, have only been around 2008 since that last financial crisis. We don't know how they're going to react in a rising interest rate cycle, which so far doesn't look like great. We don't know how they're going to react in a recession. I mean, I don't know. Time will tell, right? I would say you got to figure out your allocation. And you know, I would say it shouldn't be zero for both gold and cryptos, nor it should be 100. You know, you don't want to go 100 all in and everything, but figure out that right allocation. And with cryptos, I always say that, you know, bitcoin, let's say is 20,000, could it go to 100,000, maybe to zero? Also a possibility. Right. You just have to balance your portfolio correctly. Don't go 90%, 100% in cryptos hoping to hit it to the moon and get $100,000 bitcoin because it could go to zero. You've seen some of these articles where people said they've lost millions of dollars in cryptos. I go, well, that should never have happened at the right allocation.

Yeah, I think it's one of those things. It's like if it's too good to be true, you look at the tulip tool ball mania, you know, you look at, you know, dot com stocks back in the 90s when I first started trading the stock market and all these things and yeah, it's interesting. Gold continues to, to persist. I, I love it. I love the physical aspect. I think it's, it's great to give as gifts. You know, when you look at that, including silver, maybe you don't want to give a whole, a whole, a whole gold coin to somebody like that. And that, that brings up another point, Patrick. And you, you very quickly touched on this here. You talked about the value of physical gold. I think as ETFs have come into play, these indices that are out there for stocks, I think it's been phenomenal for your average investor because I started my Portfolio with Vanguard 20 some years ago and I was like, this is awesome. I can get super low cost index funds. And then they went down lower. And then ETFs came out and the cost went down even lower. And then I saw, oh, now we can, I can, I can buy. I think the first one I bought was gltr. Was the, the, was that an ETF or is that a fund? I'm trying to remember how to think.

It sounds like a fund. Usually the ETFs, the most common ones for gold are the GLD and SLV. Is the silver one.

Yeah. So I was like, oh, this is interesting. But then as I learned more about it, I learned that you weren't actually buying the precious metals in, in these, some of these ETFs in these indices. Can you kind of describe how, what those products are? So if people Say, hey, I, I'm Patrick. I have precious metals in my portfolio. If you don't have physical metal, like, can you actually have it in your portfolio?

Yeah. So let's talk about a couple in a lot of things over there. Let's talk about a couple different ways to own gold. We could talk about the ETF's first, maybe physical next, and maybe a vaulted as a third option. But, you know, go ahead. Yeah, ETFs are basically one of the most popular ways to buy precious metals. This is the GLD for gold, the SLV for silver. They're easily integratable with any trading account, easy to get in and out of. Basically the most popular mainstream way to buy gold. But one thing that's interesting about a lot of ETFs or a lot of investments that people invest in is people rarely read the prospectus. So if you read the prospectus with a gld, and I know it's a boring material, not the most exciting thing.

To read, I pay my attorney to read those because they're so boring.

Yeah, I don't think most people want to read those. If you need to go to sleep, you can read it. And you're.

Well, I know I always get, I get to page. It's like page nine. Like that's as far as I get on these prospectuses. And then you're like 134 pages. Like, I got to read all this. And yeah, my investors, I like, yeah, you have to read it all. You have to read it. Don't, don't, don't tell me you didn't read it and sign it. Come on.

But anyway, if you look at the gld, they say you're owning shares in a trust. Trust owns gold. So you're one step remove. You don't own that actual gold. Another concern I have too, with the GLD and slv, as they say, the metal's not insured. So the worst thing that you want to happen is you get into gold, you see gold go up, you're like, yeah, I made the right decision. And for whatever reason, the vault got broken into or something, and your gold's gone. And that investment that should have appreciated actually went away. And then another downside too about the GLD is they say the metal could be held at a custodian. Sub custodian, Sub custodian of a sub custodian, which to me is like, hey, Chris, could you hold my gold? And you're like, oh, don't worry, I gave it to my friend. And then your Friend says, hey, I gave it to my friend. And you're like where's my gold? It's still there. You have too many parties involved and that's one of the reasons why I personally won't touch an etf. But you know, for some it works for them.

Yeah, I mean I guess, you know, it isn't. If let's say you have money in a 401k, you really want exposure to precious metals, maybe that's your only option. Sure. Although I found that like Most of the 401ks and different options with companies that I've seen, they don't really have a good option for, for physical gold. Now we were talking a little bit before the show. Tell me you know where Atmex fits in and where one gold fits in and how this, this goes into this whole universe here Patrick that we've been talking about between physical gold owning gold, you know, making it a part of your portfolio.

Yeah. So Atmex is basically one of the largest, if not the largest Internet retailer of precious metals in the US we sell gold s, platinum, palladium, we sell bars, rounds of coin. We sell collectible stuff called numismatics. We also sell nice gift giving things like, like little peanuts things, Star wars things. If you want a gift to give. Not, not, not something recommend investing in but you know that little, little novelty things. But what we do at Atmex is we primarily sell products to customers for physical delivery. So some people call us like the Amazon of precious metals. We have over 25000 products in stock. Anything you want, you can add it to your cartoon, have it shipped to your house and yours to do whatever you want with it. Obviously there's a lot of upsides about physical metal. It's tangible, it's off the grid. No one could hack it away from you. You could easily pass it from generation to generation. Your taxes are self reportable. I do recommend you report your taxes but that's up to you know, everyone to decide on their own. But upsides for physical precious metals, however, there are some downsides too and that's where we, we created One Gold back in 2018. But normally when I tell people get invested in precious metals, they start with a couple thousand dollars and then that couple thousand turns into tens of thousands and then maybe if you're fortunate enough it turns to a six or seven figure sum. And we've had customers that purchase north of $50 million from us too. So there are people with deep pockets purchasing this stuff. The problem about having any large amount of metals it's not a deal because it's like you could be going away on vacation, you could be leaving your property with your gold there. You hope that it never happens. But you know, one guy could find out, hey, you're a gold bug. You purchase a lot of gold and you store the gold at your house. All it takes is one guy break your house and your gold's gone. Because chances are you're going to value your life and your family, family's life more than your gold. Right?

Yeah, somebody stole, yeah, somebody stole some coins from my grandparents that were helping them out. And yeah, that's. We don't know who it was or when it happened. And it was, yeah, it was, it, it probably wasn't stored in the best place, but yeah, it was, you know, tens of thousands of dollars worth of, worth of coins unfortunately. So, yeah, case in point, happened to our family.

Yeah. So that's where we came up with one gold back in 2018 is. So APMEX partnered with Sprott Asset Management. Sprott is basically a large alternative asset manager out of Canada with about 22 billion in management. So basically large firm to create a new and modern way to purchase gold. So we basically wanted to create the easiest, seamless way to purchase gold without any of the downsides of the GLD and the slv. So a lot of times people call One Gold Robinhood or the coinbase of precious metals because it is so intuitive and easy to use. What One Gold is, it's a platform that allows customers to buy, sell, trade a vaulted position of gold, silver or platinum stored at their choice of vaults around the world. So we have the U.S. canada, Switzerland and the U.K. depending on where you want to store your gold. We first start by having agreements with these various vaulting companies. So it's like a Brinks, a Loomis, a Royal Canadian Mint. Basically top tier vaulting companies around the world. We Then source for 4 ounce gold bars and thousand ounce silver bars. So these are the bars that you see in like movie scenes, these big like wholesale bars. We then place it into the various vaults and make it available for customers to buy. When customers buy it, it's 100% owned by the customer. Doesn't appear up in our balance sheets. It is insured by like Lloyds of London and the V Canadian Mint owned by the government of Canada. It's regularly audited by a top five accounting firm. And the nice part about it is if you ever decide that, hey, you have this vaulted position but you really want a coin, you could swap your position and redeem that position for any of the 25,000 products available at Atmex.

Oh, so if I have a portion of one of these vaults, I can say, hey, send it to me in form of one of these basically retail types of.

Yeah, and a lot of times people do this too, because like, yeah, let's say, let's say you had a couple hundred dollars to put away every month. Well, an ounce of Gold's about $2,000, right? You can't buy an ounce of gold every single month. So someone might say, hey, I want to put $500 away every month. Okay, $500. But because one gold we're selling you like ownership in a larger bar. We could sell it in 0.001 ounce increments. So you could put $500 in gold. So you put the $500 and four months later, when you have $2,000, you then swap it out and you said, hey, I got myself a gold eagle. And in the meantime, you're in gold. Instead of waiting four months to say, well, I would like to get in gold, but I can't afford a full ounce right now. And so I'm just going to wait.

Gotcha. That makes sense. So, you know, until I have the bar like that, I think of Putin holding the gold bar in the. In the vault. You know what I'm talking about? I don't know why that makes me chuckle. So I'm just like that guys. He. I just think like when the camera turns away, he just takes that and he sticks it in his pocket and, you know, and walks.

It's funny. Like, I don't know if you've ever held one of those, but like, It's. It's a 400 ounce gold bar, is it probably weighs, I don't know, like £30 or something. So like it's. It's basically like gold is. I think gold is about 19 times heavier than water. So like if you imagine bottled water and you imagine like the weight of 19 of those compressed into one bottle, that's like, that's the weight of. So it just, it doesn't feel natural. And even something like lead, I think lead is only about like 11 or 12 times denser than water. So gold's a lot denser than lead. So like, if you never held a, you know, gold bar or gold coin, it just. It just feels different, unlike anything else you've. You've held.

Yeah, I like that. And I look forward to holding one of those. We'll get a picture. We'll do the same picture. I was actually Putin for Halloween about six years ago, so that'd be good. I can do one.

I don't know if that's your Halloween costume these days.

You know, I like to, I like to do humorous Halloween costumes that might promote some sort of political discourse as well. You know, it's like a whole nother layer of comedy, you know, of humor. So I got to, actually, I met somebody that was Hillary Clinton that night. So it was cool. We did a little, we did some pictures and then the devil, and then we saw the devil. So the three of us, this got together, you know, that was a nice, nice threesome. But I'll joke. That's a joke. That's a joke. Nobody be offended. But in all seriousness. So this, this seems efficient to me, Patrick. So you can invest, you can do portions. Because I know if, if I, if I purchase gold, there's a transaction fee, there's a shipping fee to that. So if I'm accumulating smaller positions, that's probably more cost effective than if I, if I try to just buy smaller positions, I'm going to probably deal with higher transaction fees than if I waited to, to get a p. A piece of physical gold. Is that accurate?

Yeah. And in the physical market, they, they have what's called a premium. So like the, the metal cost is obviously the commodity cost. And then normally as you go smaller and smaller increments, the premium is higher. And the analogy I, I look at this is like if you bought a, let's say you bought a one pound bag of coffee versus a ten pound bag of coffee. Well, per pound, the one pound bag is going to cost more. Right. So like with, with pressure metals, if you get into like fractional ounces, half ounce, quarter ounce, 10 ounce, it's going to cost more relative to the commodity price than if you got a one ounce product. I, I personally like buying one ounce products. I stay away from some of the fractionals unless that's just what you want. But it's, it's probably, you know, I recommend trying to minimize that cost over spot or your premium when buying precious metals.

Yeah, and that's a great point. So I think you guys are doing a great service to help people, you know, that are trying to accumulate that. Just like, you know, like you said, like Robinhood, you know, as people want to get into, you know, into smaller portions.

Yeah, I think Robinhood allows fractional shares too. Like if you wanted to buy Google, for example, it's like you're like, hey, I Don't have money to buy one share of Google. Buy a fractional share. Why not? Right.

Yeah, exactly. And that's, you know, that's one of the big things. It's like, you know, as some of these barriers have come down, it's easier to accumulate wealth. It's more, it's more efficient to do all those things. So I've been, I've been trying to learn about your platforms a little bit more myself here. So again, so app Mex is where you can go and you can buy these physical pieces out there, share where the audience can, can check out Atmex as well as One Gold and then also tell them about the app that One Gold has as well.

Yeah. So if you want the physical metal, check us out@appmex.com that's apmex.com and if you want the vaulted SOL or you want something just to get started. Super easy way to understand. Different products, different premiums. Everything's super attractive on pricing. Check it out. Check us out@1gold.com that's O N E G O L D dot com. Both these have mobile apps too as well. So you could go to the Apple App Store or the Google Play Store. The, the App Max app is actually one of the only, I think the only shop precious metals app out there. And then the One Gold app allows you to actually manage your investments as you go. So like if you ever want to check your value of your gold portfolio, buy gold on, on a whim. Or silver, I mean you could do that easily with One Gold app.

Awesome. I love that. I'm gonna check out Atmex because I love, like I said, I love silver coins, coins around the holiday time. I love the, the Australian coins. You got the little koala bears on there and the different things. It's neat. You can teach. I'm always looking for ways to teach our children about investing. I think this is a terrific way. Check out Atmex. Check out One Gold. Patrick, anything else you'd like the audience to know?

No, that's about. If you want to reach out to me directly, feel free to email me too. I'm at Patrick P A T r I c k dot yip. That's yipmex.com wonderful.

And we'll have that in the show notes here if you're reading. Also the, the websites for One Gold as well as Atmex. Patrick, this has been a great discussion. Enjoyed having it with you today and thank you so much for sharing with the audience.

Great. Thanks again for having me on.

My pleasure. Hey, Chris here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.