Hedge funds now hold more than $2 trillion of US Treasury debt behind roughly $3 trillion of repo funding — the position central banks used to occupy.
Central banks bought Treasuries without much regard for price. The buyer that replaced them does not have that luxury, and Brett Heath says that switch is what pushes long-term interest rates higher no matter what the Fed decides next week.
"Last year, central banks collectively around the world held more in gold in nominal terms than US Treasuries for the first time in history."
Heath is chief executive of Metalla Royalty & Streaming, a NYSE-listed royalty company that just posted the best quarter in its history — record revenue and its first real net income — while gold itself was down 21% from its high.
I listened to the full interview so you can skip it. 45 minutes of audio, 15 minutes of reading.
Here are the 11 takeaways that matter.
👤 Guest: Brett Heath, CEO of Metalla Royalty & Streaming, an NYSE-listed royalty company up 82% over the last 12 months
🎙️ Host: David Lin, a former BCA Research macroeconomics researcher who now runs The David Lin Report
📰 Published: 9 September 2026 on YouTube · recorded 8 September 2026
🔴 YouTube | 🟣 Apple Podcasts | ⏱️ 45 min | ✅ Time saved: 30 min
Key Takeaways
Hedge funds, not central banks, are now the marginal buyer of US Treasury debt
Over $2 trillion is held by hedge funds behind roughly $3 trillion of repo funding
The US rolls over about a third of its debt every year, the highest turnover in the G7
It sold debt at auction 444 times last year
Rising long-end rates are turning royalty and streaming financing into a mainstream part of mining's capital stack, not an alternative one
Central banks bought gold's entire drawdown from $5,500 to $4,000, and Heath calls $4,000 the floor
A 15-year resistance level on the gold-to-mining-stocks ratio just broke
Mining margins are running near 31%, against roughly 17% for the rest of the market
Central banks now hold more gold than US Treasuries in nominal terms, for the first time in history
Another $9 trillion of Treasuries still sits on foreign central banks' balance sheets
The US will not default because it can print money, but that comes at the cost of the dollar
A gold-to-oil ratio near an all-time high has preceded past recessions, and Heath says the usual statistics can no longer be trusted to say whether one is here
Copper, not chips, is the AI buildout's real supply bottleneck
A data center can be built in 18 months; a major copper mine takes 18 years
Metalla posted the best quarter in its history while gold was down 21% from its high
The stock is up 32% year-to-date and 82% over the last 12 months
Only one exploration project in a thousand ever reaches production
After eight years as the sector's most active buyer, Metalla has done one deal in three years, calling the market too frothy to chase
1. Hedge Funds Buy the Debt
The show opened on a down morning across nearly every asset — stocks, gold, bitcoin, the dollar — while oil rose after Iran-backed Houthis attacked Saudi oil facilities over the weekend. David Lin flagged one more data point before Heath came on: "And we have a situation where the Fed watch tool, the CME Fed watch tool, is now predicting a 58% chance of a Fed rate hike by next week. This is up from only 50% a few days ago."
Heath said the more important shift had already happened, in who is actually buying US debt.
Central banks, historically the least price-sensitive buyer of Treasuries, have been replaced by a far more demanding one. "So who has been the buyer? Who has stepped in to buy the debt?" "And the Office of Financial Research just published that over $2 trillion are now held by hedge funds, and there's approximately $3 trillion of repo funding behind it."
The US turns over its debt faster than any other G7 country. "The US turns over about a third of their debt annually." "In fact, I think Canada is only the second highest, but the balance of the G7 average is around 11%."
Frequent issuance means frequent chances for that new, leveraged buyer base to demand a higher price. "The US came to market 444 times last year. Every auction is a chance for a changed buyer base to reprice it."
On the Fed's own next move, Heath was less certain: "Those odds jumped materially after the Jackson Hole speech, but Waller has also said a lot of things and hasn't kind of followed through."
2. What Higher Rates Break
Lin asked what happens to the economy once long-term Treasury yields move up, regardless of what the Fed does with the short-term rates it controls directly.
Long-term Treasury yields set the price of money for the whole economy, not just the government's own borrowing. "The long end is the foundation for the price of money. So this affects everything." "30-year mortgages, real estate market's going to go down. The affordability for the whole economy is going to go up."
The cost of capital is rising for governments and industries across the developed world, and Heath said his own sector is already feeling it. Metalla's lending capacity comes from revolving credit facilities priced off those long-term rates, and as that debt gets more expensive: "And what we're seeing is that as that becomes more expensive, streaming and royalty finance is actually kind of moving from being an alternative form of financing to really a material part of the capital stack. It's not really alternative anymore."
He pointed to the recent Vale and BHP stream deal as an early example, and said he expects more of the coming mining build cycle to be financed through royalties and streams rather than bank debt, given where the cost of capital is headed.
Asked whether Metalla's own cost of capital rises too, Heath said yes — but that the larger royalty majors have an edge: "The larger majors are kicking off billions and billions of dollars of free cash." That lets them price deals more aggressively than a company Metalla's size, which competes on other terms instead.
3. Oil, Diesel and the Houthis
Lin's cold open covered the weekend's attacks: Saudi facilities hit by Iran-backed Houthis, and the US striking Iranian oil tankers in response. Heath said the market should expect the disruption to spread: "I think what investors should prepare for are major supply disruptions across a bunch of the material commodities that mainly run through the Strait of Hormuz."
A widening gap between diesel and oil prices should close, but the cost pressure runs through freight either way. Global shipping runs overwhelmingly on diesel, which Heath said is not something that can easily be swapped for a different fuel.
He expects oil prices to keep climbing. "I think oil is set to go higher."
The damaged infrastructure will take years to fix, compounding the supply problem. "A lot of the infrastructure that has been damaged is going to take multiple years to repair, and the world is going to continue to have greater demand on less supply, and that's going to make the price go up."
4. Gold's $4,000 Floor
Gold ran from $2,000 to $5,500 on central bank buying, then dropped back toward $4,000 before rallying again. Lin asked why it's stalled where it has: "The move from $4,000 to $4,400 happened very quickly throughout August. We're now in September and gold hasn't broken above $4,500 yet."
The entire drawdown from $5,500 was central banks buying, not a broad sell-off. "So as gold was moving from $5,500 down to $4,000 — look what happened, the central banks were just leaning into buying." Heath said the modest selling that did occur was mostly retail ETF outflows.
He calls $4,000 the floor, even if it gets tested again. "I think $4,000 probably is the floor."
Gold has broken its downtrend and is consolidating, he said, adding: "It is consolidating. It looks really in a strong place today, and I think it's likely going to go higher."
Sentiment was weak from roughly May to July, as gold fell. "Prior to July, around May to July, sentiment has been weak as gold has been falling from $4,800 to $4,000-ish throughout this year." Heath said bullish sentiment for the miner index hit a multi-year low during that stretch — before a sharp reversal once $4,000 held.
5. Miners Catch Up to Gold
Asked whether royalty companies act as a sentiment gauge for the broader mining cycle, Heath pivoted to what he called the most mispriced part of the market: the equities themselves.
Mining-sector profit margins are running well above the rest of the market, and Heath says that isn't reflected in valuations. "If you look at the margins right now, the mining sector is running at like 31% versus the average — I think it was around 17% for the balance of the other sectors in the market."
Multiples remain near decade lows even as positioning stays light. "You've got GDX trailing PE at 20x, which is about a decade low, and managed money net longs right now, I think as of recently, is just been around 43%."
A 15-year technical ceiling on mining stocks relative to gold just gave way. "One data point that I like to watch are the ratios. And one of the ratios that I recently saw break out of a 15-year consolidation was the gold-to-XAU."
He reads the breakout as a signal the equities are about to outrun the metal itself, reversing the pattern of the first leg of the rally, when gold significantly outperformed the miners. "We just saw that breakout, meaning that the mining equities are basically positioned to materially outperform the metal."
6. Central Banks Dump Bonds
Lin asked what triggered sovereigns' shift away from the dollar. Heath traced it to a specific moment.
"Well, it started when the US started to weaponize the dollar. That was probably the start of it." He pointed to US sanctions on Russia and the seizure of other countries' assets as the event that made the rest of the world reconsider what it was holding in reserve.
The shift has already produced a historic first. "Last year, central banks collectively around the world held more in gold in nominal terms than US Treasuries for the first time in history." Heath noted gold's own price roughly doubled over the past year and a half, which flatters that comparison, but said the trend is real regardless.
There is still a long way for the rotation to run. "There's still another $9 trillion of US Treasuries sitting on foreign central banks' balance sheets." He singled out emerging-market holders, China among them, as most likely to keep reducing exposure.
The reason sovereigns want out, in his framing, is that gold can't be devalued by a government decision the way a currency can. "So gold is the largest, safest — call it — currency of the world that can't be debased, and that's where these sovereigns want to sit."
7. Why the US Won't Default
Lin read Heath a passage from a Reuters explainer on central bank gold buying, arguing that near-zero rates for over a decade have left central banks with printing money as one of the few tools left to fight economic turmoil — a move that devalues the currency it prints. Heath agreed with the mechanism, and set the US in that frame directly.
A government that can print its own currency effectively cannot default, but the escape has a cost. "Yeah, and look — if you've got the power to create money, you're likely never going to default." That relief is not free: "it comes at a cost."
He pushed back on the idea that the US is uniquely insulated from its own debt load because other countries look worse. "A lot of people are always like, oh, well, I've heard 100 times, the US is going to be the last one to fall, or it's the cleanest dirtiest shirt — but it's not really the case, because the impact of the rates to the US versus Japan, which has a much higher debt level, which I think is less relevant, is that Japan — higher rates — they're only cycling around, I think it's around 10%, or maybe even less, of their debt annually."
Because the US refinances roughly three times faster than Japan does, higher rates hit its budget harder and sooner. "You look at the US, they're already over a trillion dollars — if they cycle higher and rates go higher, that can be kind of an exponential amount of capital that goes into that, and ultimately that's just going to compound on itself as the fiscal situation gets worse."
8. A Recession Signal, Muted
Lin showed Heath a chart of the gold-to-oil ratio. "I just want to get your reaction to this — the gold-to-oil ratio is now sitting at an all-time high, near an all-time high." He noted the ratio has spiked before nearly every recent recession — early this year around the Iran bombing, and during COVID — yet no recession has arrived this time.
Heath said the government's own definitions have shifted too often to trust the comparison. "Well, if you look at the economy in general, the problem here is that the government statistics have been changed so many times over the years that actually what quantifies a recession, what quantifies inflation, has changed, and they're continuing to change this."
He said conditions feel contractionary even without an official recession, something he tied to the new Fed chair's public discussion of how the statistics are calculated.
Extra liquidity injected into the market has slowed, but not stopped, that drift. "Some of that has been met with additional liquidity that's been put into the market and kind of slowed that process down, but it does feel that generally the world's moving into more of a contraction-type environment."
9. Copper's AI Bottleneck
Asked whether Metalla's own portfolio shows a shift in demand, Heath said the company had bought its copper royalties five to seven years ago, before AI was part of the conversation — and that the timing is turning out well.
Data center power demand is set to double by 2030, on a par with an entire large economy's electricity use. "When you look at the data center power demand — it's expected to double by 2030, expected to equal almost all of the electricity that Japan consumes on an annual basis, according to the IEA."
He argues the market is pricing the AI buildout through chip stocks when the real constraint is upstream. "Copper is really — I think the part that nobody's pricing in the AI story — like AI is really a power problem before it's a chip problem, and the power runs on copper." "Everyone is watching AI trade through chips, chips, and the binding constraint is really copper, and it's the one no one's pricing at the moment."
The mismatch is a timeline problem, not a price problem. "But the reality is you can build a data center in 18 months. To build a major copper mine, it takes 18 years." A higher copper price, he said, will not shorten that.
Very few companies on the planet can actually build a major copper mine, and each one can only build them one at a time. "And what I would say is that there are maybe a dozen companies on the planet that even have the resources and skill sets to build these mines. And in each one of those companies, I would argue that it takes probably five years for those companies to build one of these mines, and they're not building two at the same time."
Grid buildout around new data centers multiplies copper demand well beyond the servers themselves. "Wood Mackenzie has estimated that three to four times the amount of copper is going to go into the grid, like basically upgrading the grid around these data centers." Even so, he noted: "The amount of capex that copper makes up as part of these data centers is like less than 1%." That, he said, is one reason operators won't substitute it away.
Two of Metalla's largest copper royalties are set to come online just as that demand curve steepens. "Two of our largest copper royalties — our royalty on First Quantum's Taca Taca and our royalty on Hudbay's Copper World — are both set to come online kind of in and around 2030."
10. Metalla's Record Quarter
Lin closed the macro discussion by turning to Metalla's own numbers. "So your stock is up 32% year-to-date. It's up 82% in the last 12 months."
The company just posted its best quarter ever, even as the metal it's built around fell. "Again, we just printed the best quarter in the company's history. We had record revenue, we had our first real net income, while gold was down 21% from its high."
The record spanned every major financial metric, not just one line. "Yeah, by revenue, adjusted EBITDA, net income — so kind of across most or all of the financial metrics, our Q2 was a record."
Heath credited portfolio growth rather than the gold price for the results, saying a number of Metalla's assets started producing or ramped up production, and that the underlying portfolio's growth should keep outpacing whatever gold does, near term or long term.
11. Inside the Royalty Playbook
Lin asked Heath to explain, for a viewer new to the space, how a royalty company makes money without operating a mine.
A royalty buys a permanent slice of a mine's output for no ongoing cost. "But what they basically are — these non-dilutive, non-controlling, non-operating interests in mining assets that give us a claim to a certain percentage of whatever metal is in the ground, a lot of times, if not most of the time, in perpetuity." Metalla holds around a hundred of them, and gets paid once a mine reaches production, usually quarterly.
Most exploration projects never become mines at all. "Yeah, I mean, it's one out of a thousand exploration discoveries make it to production." The average time from investing in a developer to collecting royalty cash flow "could be five, upwards of ten years," in his words.
Metalla manages that risk by sticking to majors with the balance sheets to see a project through delays. He named Zijin, Barrick, Teck and Alamos Gold as the type of operator the company prefers over single-asset junior producers, who have a harder time getting a mine into production at all.
Discipline has meant walking away from most of what's on offer in a frothy market. "We've done that over this part where the market's become really frothy — you know, we were the most active royalty company from a transaction perspective for eight years straight, and we've done like one transaction in the last three years, and things have been priced at much higher levels."
The slowdown isn't from a lack of looking. "We're actively looking, but again, we're going to remain disciplined, and you kind of see it in the activity level — we looked at probably 100 different things in 2025, and so we're not doing a lot of transactions right now, just because, as you noted, the market is very frothy at the moment."
Bonus Insights
Lin compared Metalla's approach to a venture capitalist collecting a few home runs to cover its losers. Heath pushed back on the comparison. "I wouldn't say that. I would say that when we buy a royalty, we expect that royalty, or expect that project, to go into production." He said the firm's real risk is time, not picking winners: it holds out for ore bodies good enough that "the great economic ore bodies always find their way" into production even if the original developer can't finish the job
Asked how much of a royalty portfolio typically changes hands or gets sold off, Heath said assets do move, but the strategy is to keep building a diversified book of roughly a hundred royalties rather than concentrate on a handful
He closed with a self-aware admission about market timing that applies to more than just Metalla: "But unfortunately, we like to buy when things are high and sell when things are low. It's what people like to do, myself included, in the past."
Heath's throughline is that the debt market's plumbing has changed — leveraged, price-sensitive buyers now sit where central banks used to — and that gold, mining equities, copper and even his own royalty business are all downstream of that single shift.
Products, Companies & Tools Mentioned
Metalla Royalty & Streaming (Heath's company — a royalty and streaming business up 32% year-to-date after its best quarter on record)
First Quantum Minerals and Hudbay Minerals (Metalla holds copper royalties on First Quantum's Taca Taca and Hudbay's Copper World, both expected online around 2030)
Vale and BHP (Their recent stream deal is Heath's example of royalty financing becoming a mainstream part of mining's capital stack)
VanEck Gold Miners ETF (GDX) (Heath cited its trailing P/E of 20x as evidence mining equities are cheap relative to their margins)
CME FedWatch Tool (The tool David Lin cited for the market's shifting odds on a Fed move)
Books & Resources Mentioned
Reuters, "Why Central Banks Buy Gold" (The article David Lin read from, on gold as a hedge against a government's own money-printing)
Metalla's Asset Handbook (Heath calls it the best resource on the company's website for understanding the full royalty portfolio)
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