This is Wall Street Week. I'm David Westin, bringing you stories of capitalism. Gold is all over the place, from setting new records to plummeting, to a partial recovery. What does it mean for investors and for those getting the gold out of the ground? Plus, the US had its China shock 20 years ago. Is Europe in store for its own version this time as China looks to find new markets for its exports? And investing in art can be fun. It can be satisfying. But like any investment, it can go down as well as up. We update our story on where those investments are today. But we start with the Federal Reserve facing new leadership in May and under continued scrutiny from the Trump administration. Our colleague Michael McKee sat this week with outgoing Atlanta Fed President Raphael Bostic.
We're speaking with the Atlanta Fed president Raphael Bostic, who is retiring at the end of this month. So this is sort of your HR exit interview. Mike, it's always good to see you. I want to ask you, as you travel around your district for the past year, what's the mood like among companies and consumers? We've seen the surveys show that people are getting very, very pessimistic.
Well, I'd say it runs in two ways. So, first of all, what has been true throughout the last year is a tremendous amount of resilience on the part of businesses and consumers. You know, April 2nd, when the tariffs were announced at very high levels, that put everyone back on their heels and there was a lot of uncertainty. And what's happened through the year is, people have figured out ways to deal with that uncertainty. So as for today, I think most businesses and most households are not thinking that the worst of the possible outcomes are going to happen. They're not sure they can get to the best ones. But everyone's trying to find a state where they can get through. So I think the sentiment is one of cautious optimism. But I put emphasis on the cautious as opposed to the optimistic, I think people are really trying to wait and see what happens.
Well, what do you think that means for the economy?
Well, I think it means that what we've seen for the second half of 2025, we will continue to see through 2026. And, you know, I talked to a lot of folks in the last six weeks or so, and they said, we think our experiences in October, November and December are likely to move on, and then there are some reasons why they think it might actually get stronger. You know, the tariffs, people have gotten used to those. And so those effects will have run through by the middle of the year. We see some of the stimulative aspects of the tax bill last summer, those will be coming on board. And if consumers start to feel like there is more certainty, then I think businesses think there's some upside potential in the economy.
Well, this last week, we've gotten a lot of bad news on the employment front with ADP and Challenger and the other numbers that have come out. Does any of that—you don't have another meeting to vote at, but does any of that give you pause about the Fed pausing at this point?
For me, no. You know, I think we've been in a situation where inflation has been too high for too long. And by many readings, it's been kind of marking time, has been at a plateau well above our target for the better part of two years. That's not acceptable. And for me, I think we can't lose sight of the inflationary concerns. The labor market is very turbulent right now and some of it is because there's some big structural things that are happening in the economy. When I talk to businesses they're reluctant to hire entry level people at the same rate that they did before because they think that things like AI can replace that and they can deploy resources for other things. And I'm hearing that kind of reticence. There's also the reality that during the pandemic, a lot of companies ramped up because the demand ramped up and they've been slower to right-size. We see a bunch of that right-sizing happening as well. And then we have issues around the labor supply and whether the immigration shifts are going to be temporary or permanent. And if they're permanent, then we're going to have a lower, steady state of job creation. So, for all those reasons, I think it's very hard to make a clear statement. And then, of course, we don't have a jobs number today. So we're not getting the data in a timely basis. My team tells me it'll be April or May before we start to be able to draw clear signals from the data to really understand what's going on.
Yeah, we want to wish you a happy non-jobs day today. You started a long and varied career at the Fed in 1995. Since then, what have you learned about the economy and about inflation?
Well, I think for the economy, one thing that is true is that it is a very complex economy, it's very large. And to understand it, you really have to get out and see all parts of it. And one of the things that's been great in my role here is I've had a chance to do that. I think it's given me a deeper understanding of just how people engage and experience the economy and how they make decisions to move it forward. In terms of inflation, what I've learned is that we really don't want to have inflation. Once inflation gets entrenched in people's minds, it changes how the economy evolves. And it's one of the reasons why we need to keep our policy in a restrictive posture so that we get inflation back to 2%. That's paramount. High prices and the prospect of rising prices really do have a lot of families on the edge. And I mean, you all have reported a lot about the K-shaped economy. There are lots of families that are feeling very precarious right now, and that's a source of concern.
Do you think the economy is becoming more K-shaped?
You know, I don't know more. I mean, it's been that way for a while. Just before the pandemic, I had been talking about this and we were trying to find some metrics to really detail how there's a split. I used to call it the barbell economy, where you're either at the high end or the low end, the K-shape is the same thing. What I know is that there are a lot of families that are precarious and feeling very uncertain about the prospects for the future and the prospects for their children, for that matter. And that concern, I think, does underlie a bit of the low consumer confidence that we continue to see being reported. And what we'll need to do is really give people reasons to be optimistic, show them where the new jobs are coming from and show them how they get the skills to compete for it.
Well, this week, Treasury Secretary Bessent said the Fed has lost the confidence of the American people. Do you think you have lost the confidence of the American people? In your district, do you hear people raising questions about that?
That's not been my experience. As I go around the Sixth District, people tell me we're grateful for what you're doing. You have a very hard job, and we want you to be as data dependent and as open to information so you can make the judgment that you can. Look, the world is very complicated, and it's actually more complicated today than it has been in my whole time here. So what I think most people understand that, and they know that we're doing the best job that we can under very difficult circumstances.
Well, the new chair designate, Kevin Warsh, says the Fed needs regime change. What does that mean to you?
I have no idea. I mean, you're going to have to ask him what that means. But I think we definitely need to be data dependent. Our bank has really taken on board the notion that we need to go out and engage and talk to business leaders, find out how they're engaging with their businesses, how they're making decisions. And that combination we have found to give us the best perspective on how the economy is performing. I don't think that we should change from that. I think we might need to even lean in more to those non-official data sources as the economy is changing so rapidly, because those are all looking backwards, and we need to be looking forward.
Well, he's been very critical of what he calls the Fed's mission creep. Does he have a point?
I actually don't even see the mission creep argument. For me, on the banking side, for example, our job is to make sure that every bank that's alive today is alive tomorrow. And so we need to make sure that banks are thinking about the risks that could cause them to need to deploy capital in ways other than in loans. And so having conversations about those things, I think, is fully appropriate, and we should be doing that. We don't tell the banks where to lend on, I've never told a bank don't do a loan, or don't do that sort of thing, and my examiners don't as well. I think we're asking prudent questions to make sure that financial sector business leaders are aware of trends that could be introducing risk.
What would you tell Donald Trump if you had the opportunity about Jay Powell and about the Fed?
I'd say Jay is trying to do the best that he can. He's a smart man. He understands markets. And if you want him to succeed, you should let him succeed.
Well, the Fed itself, do you think it is under threat from this administration?
Threat. I don't know. What I would say is my whole time here, and I think that most of the history of the Fed, there have been people who thought the Fed should do other things, and talked about that, and called them out. This is another one of those times. And we need to be mindful, and we need to be solid and resolute to understand that that's part that comes with the territory. And with that territory then requires our strength and our resoluteness to stay focused on what we've been asked to do.
Coming up, gold remains the hot commodity. We look at what's driving it and who stands to benefit.
This is a story about money burning a hole in your pocket, and the more money there is, the hotter it can get. Last September, we showed you how Australia's gold miners were cashing in, and that was when gold was at $3,600 an ounce. It's jumped much higher since then. Our colleague Paul Allen saw firsthand how miners are now putting that cash to work.
In the Australian outback, scrub and red dust stretch as far as the eye can see. It's desolate out here, and it's dry. But beneath the dust, there's a bounty that miners are willing to dig a long way for. How many ounces of gold would be in a typical truck?
So there'd be around 500 grams of gold in a truck. So we've got a line of trucks slowly making their way out of the pit here.
How long does it take to get from the bottom to the top?
Yeah, it's well over an hour.
The Kalgoorlie Super Pit in Western Australia is a sight to behold. More than 600 meters deep, it would cover even Manhattan's tallest skyscrapers. It's so vast, it'd swallow Central Park.
This project is going to be an important one for our business and our shareholders.
Stuart Tonkin is CEO of Northern Star, Australia's biggest gold miner.
Probably around $300 to $400 million per annum being spent moving material from the southern part of this pit, gaining access to over six million ounces of gold in the bottom of the southern part of this pit.
The price of gold has been on a tear. Tonkin's company and many others around Kalgoorlie are cashing in. But the gold industry has been here before.
There's probably more failure stories than success stories where people can point to in the gold sector. And so repairing a lot of that trust with investors as we go into another cycle has been really important for our company and I think for many Australian companies to get that investor trust.
Two of the dominant players in Australian gold mining, Northern Star and Evolution, are reaping the rewards. Seeing the return on investment from projects planned years ago now surging. Lawrie Conway is CEO of Evolution Mining.
So back in June 23, we made the decision to invest $250 million building this plant expansion and $75 million to open up a new mining center into the north here to feed the plant, taking it from two million tonnes to 4.2 million tonnes. And in 23, it was pretty difficult. The market was harder, it was hard to get people, hard to get equipment. I think we were very fortunate when we did that. But you know, gold price was only $2,400, $2,500 an ounce when the board approved this. And it had very good economics. I mean, bringing it in right now at $5,000, $5,200 an ounce is a perfect time to be commissioning it.
In 2019, Evolution reported adjusted gross profit of about 270 million U.S. dollars or about 410 million Australian dollars. That's now jumped to about $1 billion. It's expected to grow even further to almost $2 billion. And how about on the costs front? What's that like at the moment? Because, you know, I imagine your diesel bill must be pretty high.
Yeah, diesel is only about 4% of our costs. Power will go up because we're obviously doubling the processing, and the processing uses power. 50% of our costs are labor.
And investors are keeping a keen eye on costs this time around. When gold prices last jumped, Australia's gold miners underperformed, falling 16% in the three years from 2010, while the price of the metal itself rose 52%. Kate McCutcheon covers Australia's gold miners for Citi.
So last cycle, we definitely saw a lot of transformative M&A, which was very value destructive. So that last cycle from 2000 to 2012, the 10 biggest gold stocks in our coverage universe cumulatively burnt $10 billion in free cash.
As an industry, we've made those missteps because when the price did come off and that cycle changed, shareholders went, 'Well, where's the cash?' And all the industry said is, 'Well, we reinvested it into projects, or we went and bought assets, and therefore we've reinvested that money for you.' And the shareholders were like, 'Well, we would have liked some of that.' And we didn't see that. It hasn't changed too much. I mean, other than that, we're putting more cash in the bank, which is why our shareholders want to see it.
So it's interesting you say you've got more cash in the bank. Has this changed your approach to reserve management and long-term planning as well?
You know, you've got to see it as a sustained price at these levels before, because you can't just change your mine plans overnight. So what it does mean, we look at our reserve pricing. We look at what the costs have changed, because you do see costs generally follow the gold price. And then we look at what projects become more economic in a higher price environment. And then we apply the normal discipline of when do you bring those on. Look, I think it's important that you look at a lot of these things in hindsight. Some things like hedging, you know, hedge book legacy at prices that people had never thought that they would see exposure to. You know, when people had a high equity price, they probably tried to use that currency by raising lots of money on the back of an elevated equity price, and then potentially dropping money out of their balance sheet, return capital to shareholders that then wasn't retained for its own sustainability inside the business. So there are very many different disciplines of what people do at different times.
And do you feel lessons have been learned? Do you feel like the approach is different this time?
I feel that the heat has come out of some of that. But I've found a foundation discipline of true capital management across a variety of things. So, you know, dividend paying gold companies was never really heard of. There's a lot of good track record of gold companies paying dividends, doing share buybacks, compressing registers that they had raised equity on the back of. Those are the type of capital management measures that aren't typical to a gold company.
Even after its recent sell-off, gold is up by more than 60% over the past year, a rise that has come in part because the U.S. dollar has gone in the opposite direction. Robin Brooks is a senior fellow at the Brookings Institution and former chief currency strategist at Goldman Sachs. We talked with him before the most recent volatility.
So this move in gold started after Jackson Hole on August 22nd, last year. Basically, what's going on is there is this fear that fiscal policy, not just in the United States, but heavily in the United States, fiscal policy has been out of control for so long. We are running deficits in non-crisis peaceful times of 5, 6% of GDP. We've never really done that before. And so there's a fear in markets that fiscal policy is just out of control. And the only way to get debt to sustainable levels is to print money and to inflate our way out of over-indebtedness. And so my view is that this gold rally is one particular manifestation of really a debt sustainability fear and a fiscal crisis. That is why you're seeing long-term yield all over the world rise. So debt is a global problem. And I think what the gold rally tells you is markets have kind of run out of patience. They're looking for safe havens.
So who's buying the gold? I mean, the price wouldn't go up this high unless you didn't have a lot of people eager to buy, either more buyers, new buyers, or current buyers who are willing to pay more.
So the most common thing I hear is that this is about central banks buying gold. And the story basically goes that the United States and a bunch of other countries put a lot of sanctions on Russia after the Ukraine invasion. And so countries don't want to hold U.S. dollars in their foreign exchange reserves. They're shifting into gold. And it's true that they are buying, but they're buying at a steady pace. The pace hasn't accelerated. So it definitely doesn't explain this crazy run-up in precious metals that we've seen since August. So central banks, I think, are not the explanation. I think, like in every historical bubble, going back to the tulip mania, this is basically about animal spirits and the retail investor and people who are worried about their retirement savings getting eroded by inflation. And so seeking safety in things that they think will preserve value.
If it dates back to Jackson Hole last summer, what happened to Jackson Hole that triggered that? I mean, we've had a debt problem in the United States for some time.
Jackson Hole was pivotal because at the event, the Fed meeting, or the Fed event where Jay Powell, the chair of the Federal Reserve, gave a speech saying, 'OK, inflation is kind of high, but the labor market is weak. Yes, those two things are in conflict, but we think the evidence steers us in favor of cutting interest rates.' And so that was actually kind of a bold statement because it said, 'We're going to cut.' And in September, one month later, the Fed did indeed cut, and it made three 25 basis point cuts last year. And so it makes sense that that event would raise questions in investors' minds about, 'Hey, how safe is my money in fiat currency? Should I be looking for alternative ways to protect my retirement savings?' And so that is why I think Jackson Hole was such a pivotal moment. The other big Fed event that got gold prices and other precious metals to rally was the last cut that the Fed made on December 10th. So Jackson Hole is just one of many Fed events that have caused people to say, 'Hey, wait a minute, why are we easing when inflation is so high? This is steering us in a bad place.'
You say inflation is so high. It still has a two in front of it. It doesn't... It isn't 2.0, but it's come down a long way. And the 10-year yield, while it's a little higher, right now as we talk is around 4.2, something like that. If there really is a concern about our repaying our debts in the United States, why aren't the yields higher? Why isn't inflation higher?
So this is a great question. And, you know, let me say, first of all, the debasement trade is totally new, right? We're learning about this in real time. But there are two big pushbacks to the debasement trade. The first is that, hey, wait a minute, U.S. Treasury yields aren't particularly high. If anything, they've kind of traded in a range or even fallen somewhat. So what are you doing talking about a fiscal crisis? And second, if people are worried about inflation as an erosion of retirement savings, then why is breakeven inflation still so low? You know, that's pretty low too, as you know. And so I think there's good explanations for both things. First of all, as I mentioned at the outset, there are a lot of places that are in much worse fiscal shape than the United States. So in a relative sense, the U.S. looks relatively okay, and that makes Treasury yields relatively attractive.
So as we look at the political situation today, there doesn't seem to be a lot of prospect of really getting our fiscal house in order and getting the debt down anytime soon. And as far as I can tell, that's true with both parties, Democrat or Republican. So does that indicate, as far as you can see, and we can't predict, but as far as you can see, gold will continue to be elevated and may even go higher?
Yeah, I really worry that we are at the very beginning of this debasement phenomenon. I mean, at the end of the day, this thing has been going on in earnest less than a year. Market phenomena can play out over decades. And I mean, the point that you just made, Treasury yields are still low. Well, there's a lot of reason to think that they can go higher. And of course, we are in an environment where we have midterm elections later on this year. The current administration may do lots of things to stimulate activity. So we may actually get strong growth, and we may get a pickup in inflation. All of these things, I think, would steer towards gold and other precious metals going higher. Gold prices also jumped on Liberation Day, April 2nd last year, when there was all this tariff uncertainty. So we need two things. We need governments to focus on getting their fiscal house in order. And we need governments to get along across countries. We need geopolitical stability. Do I think either of those things are likely? No. So I think things have to get worse before they get better, meaning gold goes higher.
Up next, the U.S. had its China shock at the turn of the century. Is it Europe's turn next?
This is a story about the second coming of China. The first China shock hit the United States after it joined the WTO. This time, there's concern about Europe and whether U.S. efforts to curtail Chinese imports might hit European producers. But it might not be that simple.
About two hours outside Frankfurt lies the town of Schweinfurt. Dating back to 791, it's one of the oldest towns in Bavaria. Today, Schweinfurt is part of an auto industry that's at the center of Germany's modern industrial might.
The auto industry is really the backbone of Germany.
German car makers are among the most famous in the world. Mercedes, BMW, Volkswagen. But supporting the iconic brands is a vast network of parts manufacturers. One of them is the Jopp Group, based near Schweinfurt.
So we are the main machining plant here of our headquarters.
We are an automotive supplier, mainly for maybe 80% of our business. We're supplying directly to the OEMs, the vehicle manufacturers, and supplying to the tier one suppliers that supply to the vehicle manufacturers, like Audi, Mercedes, Volkswagen, Porsche. So you can find our parts in all of these vehicles.
But the German auto industry is facing stiff headwinds. Germany employed over 800,000 auto workers in 2018, a number that fell to just over 720,000 last year. And it isn't just auto manufacturing that's down. The German manufacturing sector overall employed around 5.5 million people at the end of September 2025. That's 2% less than a year earlier.
China is really a challenge for the German automotive landscape at the moment. With the rise of the battery electric vehicle, which has gained now 17% market share here in Europe as well, access to battery technology is much more difficult for German OEMs. Access to raw material is much more difficult. And the Chinese OEMs, there has been a lot of new OEMs actually coming up. I think it's about 100 in China. So competition in China is very tough, actually. And the export of components and vehicles from Germany to China has decreased significantly. We're a family business. We have a long-term relationship with our employees. But programs from our customers were postponed. We had volume drops. So we had to react. Not only last year, but for the last couple of years, we had to adjust. We had to close two plants. We had to do some restructurings. And we had to lay off around about 500 people. So coming from 2,000 now to 1,500. But actually, we had to do it.
If this sounds familiar, consider the United States at the turn of the century, specifically the year 2001.
China joins the World Trade Organization. This is a very productive, fast, rapidly advancing country. And then barriers were removed. They became more competitive.
