Episode summary
Axel Merk: I Sat Down With Kevin Warsh — What the Fed Is Really Up To and Where Gold Goes Next
The Julia La Roche Show
· · Hosts: Julia La Roche · Guests: Axel Merk
Summary
Axel Merk argued that Kevin Warsh is trying to shift the Fed away from micromanaging the economy and toward a narrower monetary role, while still keeping a tightening bias because inflation remains elevated. In Merk’s view, Warsh’s phrase about “removing a dose of accommodation” signals caution rather than an aggressive rate-hike campaign, and the market’s near-zero odds of an October hike fit that reading.
Merk also linked recent gold weakness to the Iran war as a temporary supply shock that pushed real rates higher and kept precious metals “hostage” to geopolitics. He said the key question is whether gold can decouple from that conflict and refocus on broader drivers like fiscal deficits, central-bank diversification, and long-term demand from investors worried about purchasing power.
More broadly, Merk said AI is creating a debt-fueled capital boom that could eventually force lower rates if the sector stumbles, which would help gold miners. He argued that the combination of large capital needs, high margins in precious metals, and a stretched fiscal backdrop makes miners look attractive, even if volatility remains high.
Key takeaways
- Merk said Warsh wants a tightening bias, but not a sledgehammer, and sees almost no chance of an October hike.
- Merk argued gold has been pressured by the Iran war because markets treat it as a supply shock that lifts real rates.
- Merk said the main gold buyers are central banks, diversification investors, purchasing-power investors, and speculators, with speculators recently on the sidelines.
- Merk expects AI debt financing could eventually push the Fed toward lower rates if the sector gets a rude awakening.
- Merk said gold miners are attractive because AI’s capital intensity is leveling the playing field and precious-metals margins are still strong.
Notable quotes
“he removed a dose of accommodation. And I think that really says it all. The market got then all excited about the noise”
“when people talk about Fed independence, it is not about a tweet of the president. It is about the structure of the Fed”
“I believe that Worsh got the job because he believes in an AIdriven productivity boom”
“the market is pricing in a near zero chance of a hike this week”
How the episode opens
Borch got the job because he believes in an AIdriven productivity boom. You can try to just pay it off. Well, that's going to be a depression, but you can try to outgrow this debt.
So, you have a chance here with the investments that are taking place to allow this boom to happen. But at its core, Walsh is a hawk has always been. Axel Murk, CIO and founder of Merc Investments, which is now managing around 2.5 billion in assets under management, friend of the show.
It is great to welcome you back. Really appreciate you taking the time today, Axel.
It's been a while. It's great. Great to be back with you.
It has been a while. Um, and as we're having this conversation, um, we're headed into the FOMC this week. So, it's great to have you even for a bit of a Fed preview.
And I I certainly know you as an expert on macro trends. And before we even get into the Fed and what's happening, let's just do the setup, the big picture macro view for you today, uh what does that look like when you look out at the economy? You throw markets in there.
What have you been paying attention to? What's been on your radar? And where do you see things headed?
And as you know, Axel, you can take all the time you need to set the table.
Sure, I'll take a few hours. And uh you call me an expert. I certainly have opinions. Um, one of the things I've always tried to do is dig deep into the sources, the backgrounds, look at primary news, um, engage policy makers amongst others, and get up from the bottom up kind of form my own opinion.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed accommodation
- gold market outlook
- iran supply shock
- gold buyers
- ai debt and rates
Companies and tickers mentioned
- Merk Investments
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Julia La Roche Show, this episode and its artwork belong to Julia La Roche. Octagon is not affiliated with the show; this page is an independent summary.
