The Real Volatility Is Not Gold. It Is The Currency Measuring It | https://www.themorganreport.com
David Morgan and Keith Weiner discussed the role of gold and silver as money rather than speculative investments. Both agreed that perceived volatility in gold is not a flaw of gold itself, but a reflection of the instability of irredeemable credit currencies used to measure it. Sound money, in their view, is not about forecasts or price targets but about incentives, discipline, and trust.
Weiner emphasized that monetary breakdown happens through distorted incentives rather than obvious inflation. He argued that irredeemable currencies turn markets into gambling arenas, where gains come from wealth transfers rather than real value creation. In an honest monetary system, speculation would largely disappear, forcing capital toward productive activity instead of financial gamesmanship.
The discussion then turned to liquidity versus yield. Weiner explained that earning yield on gold through leasing makes sense for those who are not highly leveraged and who plan their liquidity needs realistically. Morgan stressed the importance of balance, keeping some metal fully liquid while putting a portion to work for yield. Both rejected all-or-nothing thinking and favored optionality and diversification of use.
Backwardation was framed not as a pricing anomaly but as a signal of scarcity and eroding trust. Weiner highlighted an extreme episode in silver backwardation during October, which reflected acute physical tightness. He explained how this environment actually discouraged refiners from processing silver, since hedging costs exceeded refining margins. Morgan added that a small subset of metal-centric refiners, mainly outside the West, operate with balance sheets denominated in metal rather than fiat, allowing them to function even in backwardation without traditional hedging.
On silver’s dual nature, Weiner acknowledged its industrial consumption but argued it still behaves as money. He shared an anecdote showing that while investors demanded gold-denominated interest on a platinum lease, silver leases consistently settle in silver, reinforcing silver’s monetary character. Platinum, by contrast, was described as purely industrial. Silver’s role as money, he noted, is especially strong for smaller transactions due to its practicality and tighter spreads at lower denominations.
They addressed above-ground silver supply, agreeing that stock estimates are uncertain and likely larger than commonly believed, which explains why past attempts to corner the silver market failed. Price increases tend to draw metal out of hiding, restoring balance over time.
Regarding leasing at scale, Weiner explained that while both gold and silver leasing markets can grow substantially, they remain niches relative to total global stocks. Silver leasing faces natural limits due to value density, though large industrial users can support meaningful demand. Broader scale would require additional financial products beyond leasing alone.
From an Austrian perspective, both agreed that interest rates should ration capital, not conceal insolvency. Weiner argued that decades of falling rates inflated asset values and masked widespread economic destruction, creating a growing “bezzle” between real value and market prices. Artificially low rates, in his view, prevent necessary liquidation of unproductive debt and reward failure.
When asked what breaks first in a systemic crisis, price, liquidity, or trust, Weiner argued they are inseparable. Trust erosion drives all three, with backwardation serving as an early indicator. He reframed gold pricing as gold bidding on the dollar rather than the reverse, suggesting that misinterpretation stems from a dollar-centric worldview. The crisis, he said, has been unfolding intermittently since 2008 and is not yet finished, though the dollar itself may not be the first to fail.
The conversation closed with Weiner explaining Monetary Metals’ mission. By paying interest on gold and silver, the firm aims to return metal to circulation and finance productive, physical businesses such as jewelers, mints, refiners, and recyclers. The goal is not simply yield, but restoring gold’s monetary function through use, settlement, and trust. Morgan concluded that sound money is about discipline and behavior, and that monetary systems tend to fail quietly before breaking all at once.
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