gold news

 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Adrien day president of Adrien day Asset Management thank you so much for being here well it's good to be with you Charlotte good to be back with you once again and not too long after our last conversation just back in mid November or so new means right right yeah so we're going to we're going to pick up on some of the things we were talking about there of course and during that time gold was having its its comeback after

the post elction correction and I know you're feeling a little bit cautious thinking maybe a longer correction for gold will will be healthy so how are you feeling about it now well we didn't get the the longer correction um and and and you know it's a really interesting Market I think we're back more or less in terms of of of buying patterns we're back more or less to where we were at the beginning of the year the central banks are are buying again China as we know which has been the largest buy had

been the largest buyer of gold for two years but paus back in June they're back in the market in November and December so we're going to finish a year we don't have the year and numbers yet but we're going to finish a year if not at an all-time record highs it's going to be a strong so the central banks have come in have picked up buying China has particularly come back into the market and then North American investors have gone back into selling so we talked about I know how you know the the the North American

buyers were just beginning to come back in um but but now that's reversed as well and so if you look at for example the G GLD which is a physical uh ETF GLD since us Thanksgiving not your Thanksgiving but American Thanksgiving at the end of November there's only been four days of inflows every other day has been an outflow you look at a GDX which of a senior stocks a gdxj which are the junior So-Cal Junior dos they're both getting outflows again and and significant steady outflows so we're back to where we were

at the beginning of the year and you know the central banks are buying China's buying wealthy Middle Eastern and Asian people are buying but North American are still selling and I think that's a reflection to preempt your question I think that's a reflection we know why the central banks are buying because and and this is a point I would make I think gold is going to continue to go go up and and certainly even even in November I was thinking of a shorter term correction I wasn't thinking or what I said is it

would have been healthy um but the reason central banks have been buying for the last two years hav't gone away with Mr Trump and if anything with Trump threatening 100% tariffs on any country that dares move away from the dollar that does not make South Africa and Brazil say h sorry we didn't really mean it it makes them want to step up their defenses against dollar weaponization so you know I I I think that source of buying is going to continue to be very strong and the second largest source of buying is the

Chinese uh retail and consumers and they're buying because they're worried about the economy they're worried about the Juan they're worried about real estate record number of house foreclosures in December uh in in China and they don't want to put their money in the bank because the banking system is a little bit fragile so gold is going to be a beneficiary there so I think those Trends are going to continue uh the real question is When does the when does the North American and European but the Western

investor particularly the North American investor turn from selling back to buying that's the real question that is the real question and do you have do you have an answer yes I will ask it please we have to look at why why are v North Americans not buying I think that's an important thing they're not buying because the economy is supposedly strong uh you know the jobs if you want we can talk about that but last week $256,000 okay the jobs Market is strong the economy is strong retail sales

strong um inflation Wow way down from uh over the last year so inflation's under control stock market strong uh both in Canada and in the US and and the dollar strong US dollar strong so all all the factors all of the factors that would make people want to buy gold I mean none of the factors that would make people want to buy gold are actually present apparently so I think it's going to change when the economy starts when it's obvious that the economy is slowing when the stock market it's obvious that the

stock market is rolling over and if anyone's looked at the chart of Apple for the last two months they might think it's already rolling over but uh Apple Microsoft even Nidia had a pretty good correction but but but the first two are sort of rolling over and when you think that five stocks that's three that just named plus plus two others when you think for five stocks have been driving this market for the last two years and represent 16% of total World Equity markets for the decline in those markets

in just those handful of stocks it becomes very significant so I think when the stock market is is rolling over then people start to say okay where do I want to put my money and of course there's lots of places to put it there's Value stock stocks that haven't moved that have lagged the grow stocks there's income oriented and defensive stocks that have lagged the tech stocks there's foreign markets that have lacked there's oil stocks um but there's also gold stocks that's right and I think I think

listening to you talk there maybe apparently doing well apparently is the key word there and I do think we should talk about the job numbers out of the US that we just got because you were so clear when we last spoke that you know under the surface the labor market is not as healthy as it appears so what were your thoughts there well yeah the 256,000 jobs that the BLS reported new jobs was much more than people had expected and more than more than the previous few months um again when you look under the hood you see low labor

participation rate you know it hasn't moved much but 2third of of people in the working age group are actually in the job market so that's a low labor participation rate look at the number of hours work the average not the average of a new jobs but the average is 34 hours so meaningfully below a 40h hour week uh and that's the average um but I think two other things are perhaps more significant one is the BLS reported on Friday 256,000 new jobs of which they said 220 223 I think were

private sector jobs the ADP which is a private organization which reports only on private sector jobs from payrolls and they they reported the day before they reported 120,000 so one of them is wrong right the BLS is almost double what the ADP says so one of them is wrong that's the first sort of bit of caution and the second bit of caution is we know that the BLS numbers are subject to uh significant revisions they always have a first and a second revision um I'll be willing to bet anyone uh today that those revisions

will be downwards um and if you look at the last uh since 2022 so that's 3 years now um probably 34s of a months have been downward revisions and increasingly so in the last year or two that's apart from the massive 88,000 that the BLS one day said hm we don't we seem to have overcounted the number of jobs created last year by 88,000 um that's a separate oneoff but every month they revise uh numbers and last year probably nine months uh were revised downwards so those numbers have

become I think those the BLS numbers have become increasingly unreliable frankly yeah it kind of sounds like if they are constantly revised and often revised down why are we even looking at the first iteration it's the same with all of these things it's always that first release that gets the market excited and the second they have a first update and a a first revision second revision the second revision hardly gets any notice but that's the more accurate number um no they' become so I don't

know I mean some people think it's a conspiracy to help get uh the Democrats reelected didn't work some people think it's incompetence and it it may be both of those two things but it may also be is just too complex um to get the numbers right all right but whatever the reason the numbers are increasingly unreliable Okay Okay so we've got your take on on that jobs numbers from December also want to talk about CPI we just got this data this past Friday I believe and Market participants seem

excited by that core CPI number and I'm sure you've got thoughts on that whether it's warranted and and what the Brader picture really is here right well any one month whether it's jobs or or or CPI any one month can be um you know one month doesn't make a trend and I mean Jan pow at the FED says the same thing they won multiple months I mean I if you look at the last five months there's no question well at the very minimum you can say inflation is not continuing to go down um but the trend is definitely

upwards the trend is definitely upwards and I I think um you know I think we're going to continue to see that it's interesting to me that the federal Jan Powell and many of the other fed spokesmen have started talking about a new measure you know every everybody talks about the CPI that's what we all talk about CPI and then they started talking about CPI core you know for people who don't eat or or drive or heat their homes um to make the numbers sort of look better because apparently food

and energy is so volatile that we shouldn't look at them well maybe we maybe on a month-to-month basis they're not important but they're still a significant part of people's cost of living so then the FED went over to the pce personal consumption expenditure then they went to the core pce and they're really trying to find something that will get the numbers where they want so now they're talking about market-based core pce um which means they exclude as you probably know in these inflation indexes

some things are just you know you know the price of oranges of the store and some things are imputed so rent is imputed uh from uh what do they call it sorry rent uh owners um oh sorry what it's called but it's imputed um it's not an actual number an actual statistic and so now they've got this Market base which excludes all of the things that are in imputed well eventually you're going to wind up with one thing somewhere which is going down and say oh we finally found the index we like um

because all those things whether it's rent or food or energy they're the biggest part of anyone's budget um and so that's what that's what uh inflation is that's what the cost of living is and I I think we're only going to see it continue to go up I mean when again inflation is a monetary phenomenon and we you know we we shouldn't forget that I mean the most fundamental thing about inflation is it is a monetary phenomenon so if you print excess money then either you have an increase in the goods and

services or your your aggregate prices move up if you print excess money um and that's what that's why prices have been going up that's why the stock market has been going up that's why crypto's been going up it's just excess excess money around and then money has to find a place okay okay so here we have the FED seeking it it's one true inflation measure in in 2025 I guess what can we say about Fed rate Cuts or actions this year especially because they said we're

going to be data dependent right well I I think the market is now overly pessimistic and thinking there's only going to be one R cut this year and I think it's only one next year isn't it I'm not sure but certainly they cut back on the expectations just as I don't know if we said in November but certainly back in September I said the market was overly optimistic about the number of expected rate Cuts but I think right now saying only one rate cut this year is is overly pessimistic it seems to me fairly clear

that power and the FED is fully aware they're fully aware that inflation is not where they want it right they've said that inflation is not where they want it their target is 2% and as we've disced as before 2% is a totally arbitrary Target you know if you want stable prices it should be zero not 2% um but but they know full well that they're above 2% whether it's 30 40 50% above 2% uh and and they also know that that the move from where we are now down to two is is difficult so they're aware

of that they're also aware that there are indications in the economy that are not positive particularly for people at the lower half we talked last about credit card defaults well now you've got credit card rights off where where the uh uh Banks just are writing off the debt and those are now moved up to record highs so that's not that's not evidence to me of a very strong economy for that meaningfully large portion of the population whether it's 30% or 50% of the population that is basically

living from paycheck to paycheck so the FED is aware of that but at the same time they know so they know they have to move you know on the one hand they have to move rates uh uh down to help the economy on the other hand they can't move too fast or or risk um inflation moving up and you've got the other important factor which is the government debt um uh and and and um you know the incoming Administration is going to have a bit of a struggle for the next several months frankly in you know in in selling

selling the treasuries uh without interest rates moving up because um they've depleted the repo fund which was you know built up and and used as a as a way of of buying treasuries uh Yellen depleted that completely um and and there's a big issuance coming over coming coming in the next three months uh with with t t t Bill's previous issuers rolling over so you know I I think rates are going to the certainly the long end rates are going to move up because the demand for long-term treasury simply

isn't there it's not there from the traditional buyers it's not there from China it's not there from Japan uh it's not there from US Banks and it's not there from the Federal Reserve that used to be the biggest buyer okay so Trump has come up a couple of times already in this conversation so we're we sitting here I think the inauguration has now happened or may currently be happening anything else that we can say right now about the impact he may have on the economy I mean that's a question we have

to ask him is is a huge question very big and of course there's a lot of unknowns at the moment I would like to be optimistic because obviously you know nobody's wishing the us to go into depression or anything um you know I think there are some there are some signs there are some reasons to be optimistic I think the the most important reason to be optimistic is if the Trump Administration can cut a lot of the duplicative meaningless um uh you know regulations that have been put on small

business that is something that can be done easily and it will have a very very immediate response I don't think people realize just how much time a small business spends on regulation whether it's a bakery dealing with the health department and your your sink is you know 3 ft from your counter where it should be you know it's 2T 11 in but it should be 3T or or in my business in a finance or doctors or whatever meaningless duplicative illogical regulations that really hamper new business business

creation and really hamper small business getting going and as we and and so cutting those regulations can have a very very significant and near-term impact so that one I'm very very hopeful on and if they if they follow through on that you know the economy could could continue quite strong um you know the cutting of the government budget as everybody says you it's just a difficult job and it's and and at the minimum is going to take time you know if you lay off uh federal workers you still have to

pay them severance pay for the next 12 months most of them and so you don't you're not cut in the spending we know there's an awful lot of waste uh and duplication uh as well as just stupid spending but um you know every every Congressman wants the spending you know he has his own pet project and he wants the spending in his own District so I say to you support my stupid spending and I'll support your stupid spending and and that's way it goes they don't say well I'll cancel

yours if you cancel mine um and and so it's going to and so much of his spending will have to go through Congress um and and that's difficult there's no question that there's a huge amount I mean there's fraud in Medicare and Social Security so there is some fraud they could Step Up investigational fraud but there's waste and inefficiency that's the biggest part you know you can cut out sort of 150,000 ground to the lesbian theater collective in New Hampshire or something but that doesn't

save you much we should certainly get rid of all that stuff but but the waste and duplication is is one of the biggest things they can tackle and you know that's not easy because it means going into the going into the organizations and you know basically controlling it a lot of it has to go through Congress and be approved uh there's no question a waste is there um and then of course the big the big ones the elephants in the room are social security and and Medicare they don't they've said they

don't want to touch Social Security at some point at some point someone in the US has to be brave enough to say we need to tackle Social Security if you think when Social Security came in in 1940 was it 45 or 47 47 I think um I'm not American so I don't know all this stuff when when Social Security came in in 1947 the life expectancy was lower than the age of retirement so Social Security the way it was set up was NE they never dreamt they would be supporting people for 10 or 15 years and we could have solved that

problem or they could have solved that problem you know just in 1953 1956 six say every couple of years we're going to increase the uh the date that you start getting Social Security based on life expectancy now it's become much more difficult how do you say to somebody now V you know what you've got to increase the social security by 50% and oh what we said would give it to you when you're 70 69 and a half but now you're not going to get it to your 79 and a half I mean that's much more difficult raising

it by half a year every couple of years would have made the program solvent uh and nobody would have complained and um yeah nobody had the will to do it unfortunately and the longer you push these things down the road the more difficult they get but someone's got a tackle that at some point I mean we talk about the the US budget of a national debt being 36 trillion or whatever and everybody's a gas but the real number if you count all of the unfunded liabilities which is the way you and I

would do a household budget net worth and the way a company would look at it you've got liabilities that that you have to pay in the future if you include all those liabilities Social Security Medicare a Medicaid uh the social secur the national debt in the US there's there's estimates anywhere from 150 to 200 trillion So a multiple of of the 36 trillion um you know they just I you know in some ways I think it's too late frankly uh to do it in any rational manner but I wish I wish Trump and uh

Viv ramaswami and Elon Musk I wish them well but um little bit skeptical yeah yeah what a mess to clean up when you lay it out all like that yeah yeah yeah so so yeah and I think that is the the general theme I'm hearing here is you know cautious optimism but you know we're not sure how this is going to play out Okay so we've we've got to look at at some of the things that are going on in the background here we talked a little bit about where the gold price is going I want to bring it back to you

because we're here at Dr and I know you're you're on a panel coming up called gold the price is up why aren't stocks moving and I hope to go see it this afternoon is when I think it is but I think it's a question on many investors Minds so can we can we get a preview of that yeah um well first of all let's say that the X which is the US index uh from the beginning of last year is up 19% so let's not let's not cry too much you know it's up 19% that's not so

bad you know everyone's complaining because it's not up as much as they would like and their stock isn't up right um I I think there's two reasons for it we we go back to why gold moved over the last two years who was buying and why they were buying well the People's Bank of China is not going to buy newon for their reserves let alone are they going to buy Ajax expiration um they're trying to move away from the dollar and that they're just not going to buy gold stocks for their reserves

the same goes uh uh for Chinese consumers who have a number two source of buying um the same goes for the wealthy families in the Middle East you want to protect your Assets Protection means physical gold it does not mean new month or Ajax and so the reason that gold has moved over the last two years and the people buying and their reasons for buying really explain 90% of a reason and in my view and and then we come to where we are right now I am surprised that there's ongoing outflows there's no question about that I am very

surprised that there are out outflows in gold and gold stocks at the moment in in North America um but the reason that we don't have massive inflows is perhaps a little easier to to comprehend and that is that the economy seems strong and Trump's going to make it even better and inflation is under control and Trump's not going to do anything bad there and the Dollar's strong and Trump's going to make the dollar even stronger and the stock market is doing well and Trump's

going to make the stock market even stronger why do we need gold um and so the narrative is just not at the moment is just not favorable to Gold investing that'll change and I think it'll change when well we talked about that when the stock market rolls over um and when it's obvious that the economy is slowing okay yeah I think we kind of came full circle there so everything everything joins up together the other thing I've been hearing about the gold stocks at this event is that you know if

your stock isn't moving you know the the better ones are so is it a case of we need to be more selective and that's how we need to act moving forward if we weren't that is certainly true with the Juniors I mean at the beginning of a gold bull market money and we've talked about this before but everybody knows at the beginning of a bull market most of the new money flows to the big cap Miners and then later on and the big cap royalty companies and later on it flows to the intermediates and then the

Juniors and finally the expiration companies come in when you know in the U um um I was going to use a baseball analogy but I don't understand baseball so in cricket terms you know when your eighth batsman comes out to crease you know vir Juniors start moving um there's no question at the moment but if you look at the both the seniors and the Juniors frankly the better quality companies are definitely you know are definitely performing better and the market is being very very quick to punish

companies that have problems whether it's Franken NADA and cob Panama Roy or Marley with um barck but the the market is punishing those companies stocks very quickly but it's also rewarding very significantly companies that have good good returns so I think I think the Jun or good good good expiration results or or or anything you know um so you look at a company like origin which has the royalty on Silicon um you know the stocks done very well you look at uh what AAR that had good results last week the stocks you

know jumped so the market people are paying attention but I think it's it's obviously the same group of investors so when they buy one thing because it's doing well they're selling something else the the time when you know the broad Junior sector that is good companies with good people doing good work but nothing dramatic happening the time when no stocks move is is several years away I think so yeah we have to be a lot more lot more selective yeah and know lot more patient I think you're

always good at reminding us how long things take to really play out that's right that's right no absolutely and that's true of the Juniors and the seniors yeah yeah yeah you really have to be patient but again you know as a broad paining with BR Strokes we've talked about this before the gold stocks are extraordinarily undervalued right now you know you look at ago which is now the second largest gmany company and I pick ago because nobody can point to Ego and say oh that's why it's cheap you

know you point to barck and they say oh it's cheap because of Mali and Pakistan there's no reason why why ego is is undervalued it's going to end the year we think estimates fourth fourth quarter hasn't been announced yet but we it's going to end the year at a price to cash flow under 10 which puts it in the lowest desile obious entire history now typically when the gold price moves up the margins expand so you're in a situation where you've got a high gold price you've got expanding margins

because the price of oil and the commodity currencies I don't need to talk about the Canadian dollar but the same is true of the Australian dollar the Australian dollars are what 68 cents 67 cents or something you know 10 years 15 years ago was trading at a premium to the US dollar so the cost inputs for the miners both to run a mine and to build a mine although some of them are moving up not the Canadian dollar but the price of oil some of them are moving up but the costs are not moving up as much as the

price of gold so the margins are expanding um the stocks are cheap they're under owned I think the setup is just perfect for gold stocks but you just have to be patient okay that's which is hard to do but I think that's a nice a nice place to wrap up is on perfect setup unless you had any last but perfect setups a good place to start okay we we'll end it there thank you so much really good to have you as always and and once again I'm Charlotte McLoud with investing.com and this is Adrien day

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