Adrian Day: A New All-time High for Gold Wouldn't Surprise Me

I'm Charlotte McLeod with the investing news network and you're about to watch part 1 of my latest interview with Adrian day president of Adrian day asset management part 1 covers what could be next for gold and how that relates to what's happening economically we hope you enjoy I'm Charlotte McLeod with the investing news network and here today with me is Adrian day president of Adrian day asset management thanks so much for being with me online today well thank you very much for having me Charlotte great so we we haven't had a chance to talk to you I don't think since PDC and that was when we were really starting to see how the coronavirus might impact the global economy and the mining space more specifically so to start off I wanted to ask for your take on how gold has performed during this time and I guess if it's done what you would expect it to do to during a time like this although it is quite unprecedented yeah I think in terms of direction is certainly done what I expected you know a sharp decline at the beginning in the middle of March and then a sharp rally that that's certainly expected and we normally see that in in sort of crisis situations and in sharp market sell offs then you go back to 2008 or even go back beyond before that so that's a typical patent so gold sells off in in the in a in a broad market sell off and it does it as I think everybody knows people are always surprised why did it go for and sometimes it falls more than than the stocks of gold stock service full market but it's because people want liquidity and gold is the ultimate source of liquidity and so you always see in a cell of that well I won't mention names but the big cap mine is always full more than the tiny juniors because if you're looking for liquidity you can't get it in the tiny juniors gold also recovered and it recovered first and that's also typical in 2008 I better grab time but in 2008 go recovered and the gold stocks recovered before the broad market and if that by the time the broad market of bottom six months later gold stocks had all already more than doubled so the direction certainly certainly what I would have expected I'll be honest I'm surprised that gold and the major goals dogs have rallied so far without a correction I'm also surprised at the broad market has done as well as it has almost not not all of it as some of it is still down I can think of somebody down a you know forty percent from both February eyes but the suddenly S&P in general has recovered very well so yeah yeah that feeds into you my next question which is we we are hearing that we could be entering a global recession or we could see recessions in specific countries around the world at the same time we have government's really doing their best to prop up their economies so what's your take on the world's economic health right now I know that's an extremely broad question but let's see what we can do well that's awfully broad as you say yeah I mean a few things one is I think I'm clear clearly we've got clearly we've got economies in certain sectors of the economy so GDP you know very weak unemployment very very high employment very very weak and I think the truth is when you look around a lot of businesses are probably not going to make it they're not going to recover you think of restaurants you think of businesses like restaurants for example which work on slim margins to begin with they've been shut down in many places I'm in Puerto Rico they've been shut down for two months and in two months I can tell you the landlord's are saying don't worry about the rent this month don't worry about the rent this month but once the restaurants open that's not a forgive miss they're going to want the back rent paid most restaurants they've laid off people if they had whatever a small restaurant with 12 people they might try and recover try and open with eight people or seven people so all of these things have rippled ripple effects and when the restaurant opens if they're only allowed to open a 50% capacity as it is in many places most restaurants most restaurants simply cannot make it on 50% capacity especially you know that they have a 9:00 p.m. curfew or you know something like that so restaurants is just one example but but you could look at many stores you know clothing example they've been shut down for two months they still have to pay the rent when they reopen it's it's it's only a it's not a forgiveness it's just a temporary thing so I think a lot of these businesses of Ivers work on slim margins or we're struggling to the game with you know more malls that competition and so on they're going to have a very great difficult time coming back right and the reason I asked such a broad question is because I think investors here a lot of the time like if the economy is bad it's gonna be good for good and that's just a big piece of information to deal with and I'm not sure people know what to do with that right now so maybe maybe there's something you can tell us yeah I would I would say that a bad economy a recession is not good for gold because people need money to buy gold but what is good and a lot of gold demand consul-general yes Jewelry let's not forget that so typically recessions bad economies are not good to go what is good for gold is a crisis situation so if you have a monetary crisis which often comes with a weak economy then that is good for gold but it's not the bad economy that's causing people to buy gold it's it's it's it's a monetary crisis and the uncertainty but suppose I'd be able to buy gold I mean I think gold is going to continue to do very well there's a big debate do we have deflation are we going to head into inflation and you know I suspect that we're going to have a sort of deflationary period I wouldn't call it deflation but deflationary period for a few months and then we're going to see I'm inflation by this time next year there's a lot of reasons of that huge subject but I'm not worried about a deflation and gold a lot of people say oh yeah if we have a deflation it'll be bad for gold no not at all deflation is are actually positive for gold Gold does well in deflation so long as it's money Solange's instability is the instability where is inflation or deflation it's the instability that causes gold to do well okay I think those there are a lot of good distinctions that should be helpful for people I wondered if you have any idea on where the price might go as we continue you know because I watched your your previous interview with us in PDAC and I think I think you're you're suggesting maybe 1750 per ounce by the end of the year which we have made it there so um I wondered if there's any update I'm certainly not going to hope but gold doesn't go any higher just so I can be correct no I you know how high is it gonna go is definitely gonna go higher in my view so that's a simple one it's gonna go higher how much higher I mean a lot depends on a lot depends on what what what adults and looking at where we are now looking to where our economies are where the central bank is where the economy likely is I mean I would say meaningfully higher I wouldn't be at all surprised if we had new highs new all-time highs this year and you know 2,000 2,200 is is is is a relatively sir but if estimate for next year I think so I'm very very bullish very bullish on gold because what's happened is it's it's the monetary policy if you can call it policy I put air quotes around policies the monetary policy being pursued by the Fed and by central banks around the world you know even Canada was talking about maybe negative rates now maybe but all central banks pretty much every central bank around the world is pursuing this QE infinity and that is exceptionally bullish for gold because it's it's basically a sign from the central banks but they're defeated no central banks we had we had in the u.s. we had tarred them we actually won qe2 qe3 and then the Fed said they were going to tighten and normalize it and raise interest rates name normalize rates and normalize a policy well the balance sheet hardly barged downwards I mean you can look back over a 15-year graph or twelve year graph and you hardly see any movement downwards and interest rates of course inched up two or three times in the US didn't move up at all in Japan and now they're just you know down again so the the central banks have have been defeated and with QE they I mean with the new policy QE infinity they have admitted that they're basically defeated and it's it's basically just it's not a well-thought-out policy there's no thought as to what the unintended consequences of this are there's no thought to how do we eventually get out of it it's just oh dear we've got a crisis let's throw money at it it's a big crisis so let's throw a lot of money at it right I've been asking people and I guess I'll ask you now to how do how do these governments come out of it is there a clear path it sounds like they at least don't know what that might be [Music] well--there's they're sort of Governments in the sense of administration's and there's governments in the sense of central bank's i am it so we'll talk about central bank's first I am extremely extremely cynical about the central bank's as I seen 2014 right there was six years after the credit crisis 2008 in 2014 the Federal Reserve said it would normalize it was two and a half years after that before they had their first interest rate hike and they never did start selling off bonds they simply started they simply stopped reinvesting the bonds of maturity but he never actually net sold they just stopped reinvesting and then after what a year and a half that was all abandoned and and let's not forget monetary policy was going back up again you know the balance sheet was increasing and monetary policy was getting easier well before Corona hit in the u.s. it started back last September when we had the the overnight repo crisis and the Fed started pumping money back in had a rate that at the time was faster than I had ever done before in history was faster than 2008 so monetary policy was already loose so anyway the central bankers in my mind have absolutely no idea how to get out of this and I don't think they're even they don't even have a subcommittee somewhere sort of considering you know what what happens when you know governments I don't know you know clearly when you've got when you've you know increased unemployment pay extended unemployment pay sent checks once now a second time in the u.s. in in UK people who aren't working are getting paid 80% their normal salary that's difficult to cut back on because suddenly let's take the u.s. for example you know if people are you're saying well we're going to extend unemployment pay because in the u.s. unemployment pay has a has a deadline you know I don't know what it is but if you haven't found a job after X number of months you stopped getting the unemployment but that's being that's been you know cancelled ruined Coronas has been extended and extended so if come August September when it's meant September when it's meant to run out and the economy hasn't still fully opened are they really going to say you know what we said it would run out in September sorry you don't have jobs but no more unemployment no of course not so I think these things are just going to continue for a long period of time until the economy gets significantly improved now a lot depends on whether the house where the Congress becomes democratic or Republican in the fully Republican or fully Democratic in India in the fall elections because obviously the Democrats will be more willing to to you know extend and put more money in but I just don't think that I just don't think the government is going to suddenly say well it's September it's all over you know you're on your own now it's just not going to happen I also think we're heading towards a what I'll call a selective bet jubilee and you can see how the government has already said well you don't have to pay student any interest on student loans this month would extend at that Oh we'd extend it out another few months don't worry about it I again I think we're moving to a point when a lot of the government is going to insist that a lot of debts are simply forgiven or written down you know whatever are they really going to say to students are they really going to say to people who have student debt in September well you had six months of not paying interest but hey now we want that six months interest no of course not it's going to be written off so I think we're gonna see more and more and more of that there's already pressure for landlords you know residential landlords to forgive the debt but you know forgive the rent for the time that the lockdowns existed so yeah I mean I think I think unfortunate I think we're heading into a period of far more far more sort of interference in the economy if you like farm or socialism and far more far more interference in the economic decisions by the government I mean the truth is I don't know but the vast majority of people I know and not just people but the banks in the US we're saying hey you know when you open the website the first thing you see is a if you're having difficulty making your payment because of CO vid don't worry about it give us a call now they're not doing that out of the goodness of their hearts because they're nice people won't they maybe or maybe not but you know institutions are doing that insurance companies were doing that you know if you can't pay your bill this month don't worry about it and again landlords I mean landlords were worth were saying you didn't have to pay your button rent this month but don't pay your rent next next month so I mean people were doing that kind of thing anyway but I don't think any of these people were expecting to forgive that debt you know they were expecting to get it back at some point the credit card payments that you didn't make in March April May they were just being added to your balance so you were paying more in interest in the long run so I am very very cynical about what's happening thanks for watching part 1 of my interview with Adrian day click below for the link to part 2 which covers strategies for investors in the current environment and recent trends like M&A activity [Music]

Channel: Investing News

Views: 3,603

Rating: 4.970149 out of 5

Keywords: adrian day, adrian day asset management, gold, gold price, gold outlook, gold forecast, gold mining, gold stocks, central banks, federal reserve, united states, economy, quantitative easing, QE infinity

Id: QsItOKq5sKU

Length: 17min 25sec (1045 seconds)

Published: Wed May 27 2020