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Episode 53

A Future of Sport Special

Published on: November 26, 2020 • Duration: 20 minutes

This week Real Vision’s Roger Hirst talks to a number of experts from both traditional and e-sports to talk about how the Covid pandemic has affected their respective industries. With global sport worth half a trillion dollars and many leagues struggling from the lockdown restrictions, will the rise of esports threaten the traditional games?

  • [00:00:02]  The Covid pandemic has disrupted people's lives in every corner on Earth, the impact on sport may therefore seem relatively trivial in this context, but global sport is a half a trillion dollar business, on which many people's livelihoods depend. Traditional sports, such as soccer, rugby and American Football, have been thrown into turmoil, especially those that rely on the revenues of thousands of spectators packed into stadiums and arenas across the world. Not only have these traditional sports been unable to operate at anywhere near normal capacity, but the lockdowns have also seen a rise in the popularity of online experiences such as esports, So what are esports? esports are multiplayer video games played competitively for spectators, some of which are derived from traditional spectator sports. So is the rise of esports a threat to traditional spectator sports, or is this an opportunity to innovate and develop new business models that will bring in new audiences? I spoke to a number of experts from both traditional and esports to understand the risks and the opportunities faced by this market. 

    [00:01:07] First, let's look at the issues facing traditional sports, which rely on spectators for the bulk of their revenue and how Covid has impacted these businesses, especially in the lower leagues. 

    [00:01:18] There's been a huge impact on traditional spectator sports, obviously with the prolonged shutdown in the spring and the basically inability of leagues around the world to allow access from fans live in the stadium. So the expectation is that this disruption is going to continue for quite some time and the operational challenges will be huge, even though there have been some great success stories. 

    [00:01:45] I guess the big difference now post or during a Covid situation is that I'd say 75 percent of how we effectively monetize our business has been suspended, and paused at the moment. And that's obviously what provides a huge amount of risk and pressure for us as a business, as with any live event or any live sport, the big a big thrust of our ability to revenue generate comes from supporter and consumer interaction and engagement. 

    [00:02:13] The biggest challenge facing the industry is probably not at the elite level. It's probably actually for the lower leagues, the grassroots sports, basically the sports that rely much more heavily on spectator consumption, people being in the stadium, watching the game live. 

    [00:02:29] In terms of traditional sports, there's many sectors that are under huge financial pressure. The longer this goes on that there's no there's no disguising that, certainly within rugby I think equally there's some big established clubs that are feeling huge financial risk and pressure. We are equally under a huge amount of pressure. I think the more key question is how long is it going to take certain certain businesses, certain brands, certain sectors to bounce back? And that that's more of, I think that's more of the crucial question for me. And if we look at some of the reflections on, you know, we've got nine thousand members, to assume that they're going to immediately feel comfortable about coming back into a stadium in two, three, four months time,  at this moment in time, that is an assumption. So we don't know how long it's going to take. And it may take one year, two years, three years for us to then get back to the revenue generating sort of levels where we were before based on people's propensity to feel comfortable coming into the live sporting environments or live environment where you've got, you know, large volumes of people congregating. So I think that's more of what we need to get under the skin of and understand. 

    [00:03:45] Elite sports have the protection of additional revenue streams, such as lucrative sponsorship and broadcast deals, though the revenues from these deals may have already peaked. Changing demographics are already in play for sports such as American football and European soccer, even before the pandemic impacted the sports market. 

    [00:04:00] When you're looking at a lot of younger people and what they are doing, it's not that you don't have younger people viewing football because you certainly do, but you have them at the same rates that you did, you know, 10, 15 years ago - you don't. And so then when you're projecting forward, it does seem like, look, football is still going to be incredibly popular brand or a still significant period of time, but I think when you start to talk about maybe 10 years out, I think that becomes a very different question. 

    [00:04:29] Historically, traditional sports have been extremely lucrative, especially at the elite level. And a lot of that is driven by media rights value, which globally is worth around 50 billion. But there are only 10 sports leagues which account for 60 per cent of that value. And so at the elite level, the major sports leagues are doing very well and they have been historically, but that's largely underpinned by Pay TV. And over recent decades, Pay TV has actually been in decline. Since 2010, it's declined about six percent. And so the kind of long term durability of the traditional sports model is definitely coming into question. And Covid has only really exacerbated this issue and made the industry a lot more aware of the symbiotic relationship between the leagues and the and the broadcasters. 

    [00:05:27] I do think that you may start to see, perhaps not now, perhaps not even the next year or so, but moving forward, you may see a lot of broadcasters pushing back on increases that they have been expected to pay. In a sport like football, honestly, despite the fact that we obviously have seen some declines in ratings this year, as we've seen in essentially all sports, all US sports. If you look at, essentially every night that there is a major NFL game, it is within the top five, usually broadcast that night. Repeatedly we're seeing this. And last year we actually saw increases for NFL ratings, obviously, before Covid hit. So live sports continues to be one of the things that really keeps people from cutting the cord entirely. That makes me think that with football, I don't think we're going to see a reversal anytime soon. Now, that doesn't mean that perhaps 10 years from now, if you continue to see declines, especially among younger people watching sports, that that might not reverse itself. I just don't think that's going to be a near-term trend. 

    [00:06:37] There is a suggestion that consumer needs are now moving away from TV, and that's likely to also have an impact on where the money flows. So esports are really exciting in this regard because there are so many more delivery mechanisms for reaching consumers and there's also a lot of brand interest because of the younger demographics. Most sports fans are aged under 35, and that's a very interesting demographic for brands trying to advertise to consumers. So over time, there probably is going to be a shift away from traditional sports and into esports and gaming. But for now, the traditional sports model is still quite, quite durable. 

    [00:07:20] One of the big questions is whether the impact of Covid will push spectators permanently away from stadiums in preference for live streaming. For many the lockdown encouraged people to engage with esports and gaming events for the first time. Could this be the beginning of a new trend? 

    [00:07:33] So the first thing is that there's a very different operating model between traditional sports and esports. So traditional sports, there's a centralized regulatory body that sets the rules of the game. But anyone can play the game as long as they follow the rules. Whereas esports, the rules of the game are set by the IP owners, which actually are the video game publishers themselves. And you've effectively can't play a video game without permission from the from the publisher in the sense that you need to buy the product or pay for it in some way. And so this has also actually changed the monetization model for the two different industries.Traditional sports, you know, the fact that anyone can play, the monetization actually comes from watching the sport itself. That means that the the rules of the game are designed to make the sport as watchable as possible. In gaming, the monetization comes from the experience of players. So actually buying the game or inplay purchases, and that means that the game publishers themselves have to make the content as engaging as possible in order for as many people as possible to actually play the game and ultimately pay for it. 

    [00:08:50] So I think what we may end up seeing is this real divergence where you're going to have the live sports again in the US, you think of the big football games, the big basketball games, which will probably only become more expensive. Because essentially it will all be about this very premium experience. I mean, we, frankly, already been seeing that. And I think that is going to accelerate. At the same time that I do think it's likely that you will see as esports becomes even more popular, that it seems unlikely that you're going to be able to charge people the type of things you would charge for a live spectator sport. So I don't necessarily think that means that the live spectator sports will die, I just think the business model is going to change. 

    [00:09:31] Although esports has accelerated and done in parts very well in a in a lockdown environment, we have to bear in mind also that a lot of esports league, esports rights holdder models are also based upon the traditional spectator model, based upon the model of filling major indoor arenas and putting on, you know, an outstanding experiential event. So we need to bear that in mind. And in actual fact, it's not necessarily about a shift away, but perhaps even more of a convergence between the two. 

    [00:10:04] And there's no question that esports has seen an explosive rise recently. And Covid has definitely accelerated that. But there's a pretty significant difference between traditional sports and esports. So traditional sports is a 500 billion dollar industry, esports forms part of a hundred and sixty billion dollar video game industry globally. And if you look at the average revenue per fan in esports, it is around five dollars per fan per year and in traditional sports is around 60 dollars per fan per year. So there's a long way to go for esports to take market share from the traditional sports. But there's also a lot of complementary aspects that as a result of Covid are only now being mainstreamed into a wider audience. 

    [00:10:49] I think when inverted commas lockdown down first happened, there was obviously a jump in esports consumption. A jump in esports consumption and indeed a jump in gaming consumption more generally, which obviously incorporates both esports and grassroots participation gaming. And I guess, you know, to the point we just talked about, it's not quite as simple as drawing a link between the success of esports on the Covid-19 lockdown. As we talked about, a lot of esports rights holders rely on live events and live event live event revenue. But what they have been able to do quicker than traditional sports is, is pivot their their business model. And you can very quickly flip a live event esports series online. 

    [00:11:44] The cliche about Covid is that it's accelerating trends, and I think in sports this is definitely the case. Obviously esports are where you're seeing essentially all of the growth and I, I can only imagine that that's going to pick up, as you've obviously had more and more people staying home, playing esports, perhaps people watching esports who maybe didn't in the past. 

    [00:12:07] In reality, this is not about traditional sports competing with esports, but with all sports competing within the broader media and entertainment industry. 

    [00:12:15] So in many ways, we've got to look at look at it more on a macro level, more on the level of entertainment generally competing for modern day eyeballs. And you could throw traditional gaming and you could throw music into that particular mix as well. But we do need to bear in mind that within that esports ecosystem, there's a huge amount of competition for eyeballs. Within that traditional sports system, there's a huge amount of competition for eyeballs so internal competition before you even think about who you compete with outside of your own, your own particular bubble. So that's a really important macro point to bear in mind. And I guess the kind of the the proof will be in the pudding. I mean, whether it's esports, whether it's music, whether it's gaming, whether traditional sports. 

    [00:12:59] So there's two key trends that Covid has definitely accelerated is quite clearly in the media space. The first is the preference among consumers for direct to consumer streaming video as the preferred audience path for media consumption. And the second thing that Covid has really highlighted is the popularity of gaming as an entertainment format. And there's two implications here, really for the sports industry. The first is that traditional sports relied quite heavily on broadcast rights in order to reach consumers. And so, obviously, with direct to consumer streaming video being the preferred audience path, there's a clear divergence between how the industry delivers content right now and how consumers would like to receive it. And then the second related to gaming, really, that's about finding ways to introduce more interactive technology into the sports experience. 

    [00:14:00] Lookdown was an environment in which esports were able to flourish. But it's also been an environment in which the traditional spectator sports have innovated. Live and online opportunities are likely to combine in the future to complement rather than compete with each other. 

    [00:14:13] We've had to be creative and innovative. But then I think that's also served as a benefit to us as a business to evaluate forensically as to how we can continue in the future to look to deliver value to our partners as well. 

    [00:14:27] And we're already seeing it with traditional sports creating mirror style esports leagues to mirror their traditional sports leagues, not necessarily as a separate, say media rights product, but more as a content play, more as a marketing play. But we may well see that develop and amplify into something more more standalone. So there is already a coexistence, both in terms of, you know, trying to create, I guess, umbrella style media companies. So you got the idea of an esports brand and a traditional sports brand coming together and creating an entertainment brand. 

    [00:15:04] And we know for a fact that if we want to grow our brand, we have to diversify the community that we talk to. And esports is one example of how we could quickly establish ourselves into a more diversified age category and across both genders. So I see it as a positive, and I would have absolutely no problem establishing a potential route to market in such a way. And as I say, I don't see it as being a conflict to what I always think will be the primary delivery of what we do, which is live based entertainment. 

    [00:15:37] And certain sports have inevitably and undoubtedly pivoted their business model in line with with modern day consumer expectations. And they've done that, I guess, by viewing themselves more as entertainment brands, as media companies, if you will. And that's kind of evidenced by how they use their commercial control over their players, their individual talent, if you like. And obviously, content is so important and that's a major driver, and so many traditional sports have and indeed teams within traditional sports that have bought into that. 

    [00:16:12] We'd started to sort of take a bit of stock about how we wanted to exist in our space anyway pre-Covid. We know that we know digital engagement with fans, finding content to engage with a broadening, diversifying audience is absolutely critical to our development. And nothing's changed in that respect. And I suspect most other brand sports and brands and businesses feel exactly the same. Certainly, if you're a brand that wants to globalize and go, as I say, into different markets. 

    [00:16:45] There are clear challenges for the traditional spectator sports, but it's unlikely that we will see a sudden shift in consumption habits. Brands will bounce back. The stadium experience is one that spectators want to return to, but future experiences may be different as traditional sports embrace the opportunities that technology can provide. 

    [00:17:02] Yes, inevitably they'll fully recover. I think the landscape will, however be different. And again, you know, to the to the discussion we've just had in relation to esports and traditional sports convergence, I think the business model in that new world might just have to look a little bit different. 

    [00:17:23] I always think live events, live sport will always have its place. Me personally, I don't think anything supersedes the feeling of being sat in your seat in a stadium such as this and watching a live event. I genuinely don't think anything will overtake that. But I do feel esports, online engagement, digital engagement is a really positive accelerator for clubs and brands like Harlequin's to in order to diversify their market reach. 

    [00:17:53] Do sports have to reinvent themselves? I think a little bit they do, because while it is certainly true that once we have a vaccine, once people are able to go to games again, I'm sure people will. But the issue is at least what we've definitely seen in the United States, is that fewer people have been attending in general. This has been a long term trend. So I do think that hopefully this experience will have shown a lot of these leagues that they can't just take this for granted, that people will continue to go and that they really do have to do a bit more. 

    [00:18:24] In troubling times like this live sport can still play such a huge positive or can can deliver such a huge positive impact. So and not just across premiership rugby, but Premiership Premier League football as well. You know the fact that these the matches and the leagues have managed to be reestablished and still the leagues and the owners of the rights are still managing to deliver on those to their broadcast partners, tells me that actually, do you know what? They still are hugely valuable. 

    [00:18:54] I think the long term future of competition is very bright. Now, what that competition is going to look like, I think is still very up in the air and most likely will look quite different than what we've considered traditional sports over the past decade. 

    [00:19:10] But when you amplify something and shine a light on a problem, it actually eventually leads to solutions, it leads to opportunities. It's really a case of grasping those opportunities. So I think sport will recover provided, you know, it isolates the issues, identifies them and indeed grasps the opportunities which will inevitably come as a consequence of all of this. 

    [00:19:36] Traditional sports have suffered from the loss of spectator revenues, and if the ban on crowds continues, some of these brands may not survive. Sports brands that came into the Covid crisis with a strong business model and low levels of debt will be able to weather the storm. What's also clear is that out of the many challenges they face, sports clubs and brands are finding opportunities to embrace some of the innovations coming out of the online and digital space. Spectator trends were slowly shifting even prior to Covid, but the crisis may have opened more doors for cooperation and convergence that sees the traditional spectator sports embracing crossover business models that allows them to tap into a new generation of viewers. 

    [00:20:19] And you can now get The Big Conversation from Refinitiv as a flash update on your Alexa device or Google assistant, if you want to know more about how to download it to your smart speaker, please go to Refinitiv dot com forward slash flash briefing.

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The big explainer

What are precious metals?

Published on: November 13, 2020 • Duration: 14 minutes

This week Roger Hirst is joined by Cameron Alexander, Refinitiv’s Head of Precious Metals, to talk about the precious metals market. Gold and silver have been two of the consensus trades of 2020, although these have been grabbing the headlines, there is more to the precious metals market than just silver and gold.

  • [00:00] We are asked the question all the time, why invest in gold? And we say the main reason is that it's a hedge against uncertainties, a hedge against the unknown.

    [00:08] Welcome to The Big Explainer.

    [00:20] Gold and silver have been two of the consensus trades of 2020, although these have been grabbing the headlines, there is more to the precious metals market than just silver and gold. Refinitiv's Head of Precious Metals, Cameron Alexander, outlines the broad-based sector.

    [00:39] Well gold and silver are the main precious metals that most people would be aware of, but there are others we should also look at as well. Gold and silver obviously mainly jewellery and industrial use, but also heavily involved in investment. But platinum as well is something we should consider. Platinum jewellery takes up around 30 percent of the global platinum market in any one year. But combined with palladium and rhodium, they make up the main platinum group metals, or PGMs, and they're mainly used for industrial applications, and primarily as the auto catalyst in vehicle exhaust systems for emission control, pollution control. They are also used in glass manufacturing, in petroleum and also chemical manufacturing, as well as wider use in electronics.

    [01:26] The outlook for industry such is the strength of the economy, drives the performance of many precious metals such as platinum and palladium. Gold is mainly influenced by the macro backdrop of fiscal and monetary policy or the outlook for inflation.

    [01:39] In 2020 we've seen all these factors at play, creating significant price swings within the sector. Gold and silver tend to be driven by macro developments, whereas the other precious metals are much more driven by industrial movements and growth within the economy. And they're much more focused on the fundamentals of these metals, particularly platinum and palladium and rhodium, where often in case of palladium, the amount of demand is actually exceeding supply, so there's often a deficit for that metal, which drives the price even higher.

    [02:08] In gold we don't have that situation, same for silver, the price is actually driven by macro developments and the actual fundamentals of the market don't have a great play in terms of the price movements. Gold and silver still tend to be the primary focus of this sector because they have a very long history as a store or medium of wealth.

    [02:27] Gold has been around for thousands of years, more than five thousand years in fact. If you go back to three thousand six hundred B.C., the Egyptians who are using gold back then to adorn their caskets and in the tombs. Fast forward a little bit to the Greeks and in five hundred B.C. and also the Romans in one hundred B.C., they started to use gold as a vehicle for placing value on it, and they started to use it as a currency.

    [02:52] Silver also has a long history, with evidence of mining dating back to three thousand B.C. And in fact silver is responsible for many empires. Silver really gave the opportunity for communities to move out of a barter system and to start to trade using something with value.

    [03:07] Gold often gets the top billing, but it was silver that allowed communities to expand. In many ways we saw the perfect storm for silver and gold in particular when the Covid pandemic hit global economies. Lower bond yields, especially real yields, were particularly beneficial to gold. Yes - we have seen gold and silver really take off this year. They've been very popular given that we've seen so much uncertainty in the financial markets. Warren Buffett once famously said that to invest in gold is to invest in risk. We've seen significant risk this year as the global economy has dealt with firstly a health crisis, in a Covid crisis, but also more recently, an economic crisis that has needed significant stimulus from the government to try to get things moving again.

    [03:51] Gold is also considered a major, a good hedge against higher inflation, and also due to rising costs of goods and services, which can devalue the US dollar and push gold prices higher. Cutting interest rates has also made low returns for investors who are investing in debt or also investing in bonds. And in recent years, that has also encouraged investors to look to other alternative investments. If you focus on gold in particular, there's a vast array of instruments through which we can gain exposure. Investment styles vary from region to region.

    [04:25] Jewellery is popular with retail investors in Asia, whereas financial instruments such as ETFs and futures are more popular with institutional investors. Yes indeed, there is so many ways that people can invest in gold. I think most popular would be gold bullion and gold coins. In gold bullion you can buy anything from a tenth of a gram right through to large investment bars at 400 ounce bars, which can be bought from a retailer or trader and kept at home, or you can pay additional fees to have that stored somewhere secure. Of course, you can buy coins, and they also traded from mints and also from coin traders, but they tend to attract slightly a higher premium than you would find in bullion. Of course, across in Asia, we see consumers there buying jewellery as a means of investment in gold. And most likely we see that in places like China and across India and the Middle East, so really the developing world. That's because they have very high purity jewellery. So in China, we see 24 carat jewellery. In India the standard there is generally 22 carat. Whereas is in the Middle East it's around 21 carat. South-East Asia is a mix between 18 carat back up to 24 carat. Aside from just purity, it's really the mark up in these regions that encourages people to come back to market to buy. So the mark up is very, very small. You're really only paying for the making charge or the labour charge on any particular jewellery item.

    [05:46] And so it's quite possible for those in these regions to buy and to sell gold, gold jewellery, and to still make money as opposed to in the West where the mark ups are very, very high, and you're always almost certainly lose money when you're trying to recycle that. In these parts of the world, like India and China, the rural areas or the farmers make a significant contribution to their annual consumption for gold. And it's not unusual that farmers would buy gold jewellery after a harvest and then sell that back gradually during the year if they need to generate cash flow.

    [06:18] Gold plays a very important part in culture in many countries, including India. India is probably one where you see the religion playing a very important part of their gold consumption. This year has been a terrible year for Indian gold consumption - the first quarter was very poor, second quarter we saw demand fall way over 90 percent in terms of jewellery fabrication as the country was in lockdown for almost the entire period. Demand has come back in the third quarter, but is still quite weak compared to last year. Finally in the fourth quarter now we're starting to see demand come back as we move towards the wedding season and the religious festivals where gold is often traditionally given as part of a part of the festival. Diwali is coming up in the next couple of weeks, and that should also lend itself to

    higher demand. We've seen the local price in India start coming back into premium after being in a discount for pretty much the whole year, which signals that demand is coming, coming back to the market, albeit slowly. The retailers are finally happy because the people are coming back into the stores to buy ahead of these festivals. And over the next two or three months, we should see some solid demand coming back in from India.

    [07:22] Other areas we could look in terms of investment this year has been ETF demand, which has really expanded over the last a few years, that's Exchange Traded Funds. And we've seen a significant increase this year and we're on target to see a record level in 2020. This offers really a safe and convenient way of investing in gold that is backed by physical gold demand, which is stored and vaulted somewhere else. Of course there are other ways of investing, and we've seen growth within the digital space in the last couple of years.

    [07:50] Digital gold is really sort of a block-chain technology similar to sort of Bitcoin, but although in contrast to Bitcoin, it's backed by actually something with value. So in this case, it's actually backed by physical gold. And while it's not physical investment, we are seeing an increase in investment in mining equities.

    [08:08] So mining stocks, those involved in the gold mining and silver mining and perhaps PGMs. Investors are looking for a leveraged play here, hoping that the gold price rise will encourage a higher stock price movement. We're seeing a significant increase in this space.

    [08:22] There is, of course, the futures market as well, which is not really attracted to the retail investors or mum and dad investors, and it's somewhat synthetic it doesn't have a huge impact on the physical market at all. Mining stocks are often considered to be the high octane play on the underlying asset. Gold and silver miners regularly move with much higher volatility than the underlying asset.

    [08:45] Supply and demand have also been influenced by central banks, whilst the Covid crisis has impacted supply chains, taking some mines out of production just as demand started to pick up. Central banks have played a significant role in adding additional demand over the last few years. What we saw in the third quarter was very interesting. For the first time in many years, we saw net selling from central banks. So this year for the full year, we'll still see net buying by central banks, but the volume of buying has come off significantly.

    [09:12] That's primarily because we've seen a big decline from Russia this year. And also China has been absent from the market once more. Turkey in fact, has been the largest buyer this year. But in the last quarter, they actually turned to become a net seller. On the supply side this year, they've also been constraints due to the Covid. There were periods when we saw over 100 mines that were shut down or suspended for a significant period of time from one week to over three and a half months in some cases.

    [09:36] Most of those losses were seen in places like South America and South Africa which saw significant closures for several weeks. Most of those losses will be made up however, in the second half of the year, and we are expecting to see only a modest decline this year in mine production, probably in the order of 3 and 4 per cent. A lot of that will be made up in 2021 as most of these mines are fully back on deck.

    [10:02] The outlook remains good for gold and silver because of the macro uncertainty. Even if a successful vaccine has been found, the economic damage will linger on and fiscal policy response will be a powerful tailwind. This economic uncertainty, however, will make the outlook less favourable for those metals which are mainly a play on industrial growth.

    [10:21] There are also market-wide liquidation risks for precious metals, as we saw earlier in 2020 and during the great financial crash of 2008. Gold is playing a very important role right now as a hedge against uncertainty. And that's one reason why we're seeing a significant increase in the price over the last 12 months.

    [10:38] I think we asked a question all the time, why invest in gold? And we say the main reason is that it's a hedge against uncertainties, a hedge against the unknown. There's a risk that the stock markets are top heavy and we could see a retraction in equities, there's a risk that we could see weakness in the US dollar, and that's, again positive for precious metals, mainly gold and silver.

    [11:01] If we see a weakness in the economic growth that's likely to drag back the platinum group metals. So palladium and platinum are likely to pull back. But on the contrast to that, gold and silver are likely to rise on this ongoing uncertainty.

    [11:15] With the current situation with Covid, governments globally are having to force into stimulus programs, spending vast sums of money to try to generate growth in their ravaged economies. This is likely to see further weakness within the dollar. So we're going to see further contraction with the currency, which again is going to lend to higher price for gold potentially.

    [11:35] But what it does mean is that we're going to see low interest rates as governments try to stimulate growth and try to reduce the cost for the consumers. And that again, is going to make the cost of carry for gold lower, and it's going to make these assets for bonds and for debt non-yielding in fact, negative yielding. So gold becomes more attractive under that scenario. And under this situation, we believe it's going to continue for some time.

    [12:00] We can't really see at this point an exit strategy for when things are going to change dramatically from where they are today. There is a potential risk that gold and silver get sold off in a broader sell-off among equities. We have seen earlier this year, in April, we saw a significant sell-off in equities, and at the same time, gold and silver was sold off dramatically. We saw gold lose 12 per percent over a period of three or four days. There is that risk if we see economic situation in the United States continue to deteriorate, then we could see a significant sell-off in equities.

    [12:28] Under that scenario, I think gold could possibly be sold off quite dramatically over a short period of time. This is really a short-term arrangement. I think longer term gold prices would come back, and would in fact trade even higher. But there is that risk that the gold prices could come down, which might provide the opportunity for a good entry point for those looking to invest. We often lump all precious metals together where there are, in fact, many different forces at work, economic, monetary and fiscal, to name a few.

    [13:02] In general the current outlook for more fiscal policy should be supportive for gold and silver, and this outlook is unlikely to change even if a vaccine is forthcoming. The bearish case for gold is where economies return to normality and real yields can rise once more. There's been a very close inverse relationship between real yields and gold over the past 10 years. When real yields fall, gold rises. Given the colossal size of the global debt pile, however, central banks are likely to use more quantitative easing in future to cap real yields.

    [13:32] We can expect more fiscal policy in the future. Currency debasement is supportive of gold and silver, and if fiscal policy creates inflation, it should also be supportive for the rest of the precious metal complex as well.

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