Gold news

 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Adrian day president of Adrian day Asset Management thank you so much for joining me well thank you Charlotte good see you g good to be catching up with you as well and it it hasn't been too long this time we saw each other at the end of January or so in Vancouver at BRC and we we had a shorter conversation on gold at that trail and I thought I would follow up on a few of the points so you had told us you emphasized monetary factors

are what's most important for gold right now so I thought we could start by checking in on the FED we got pce data this past week and we know that's def fense preferred measure for inflation so I thought we could start there and get your your take on that and what the fed may be thinking as it looks at that yeah well again I mean if if we stand back we know that the numbers that have put out grossly underestimate the rate at which prices are going up and the the other thing that's important and Jerome pal

the Fed chair to give him credit has has said this himself but even even if prices are only going up 3% this year there 3% on top of what they went up the year before on top of what they went up the year before that so for most people for most people the increase in prices um is greater than their income is you know we're not people most people are not keeping up with the increase in prices um you know it's I think um I think if you look at those if you look at those uh numbers you know clearly we saw that um

Services were moving up significantly uh but the only reason goods were not moving up so much of course was because the demand for goods is going down um so you know I I suspect that we're going to see we're going to see the C Core CPI you know for people who don't sleep and don't you know how homeless people who don't eat uh the cor CPI um is still 40% above the fedone target so they have not yet achieved um they have not yet achieved what they they themselves are trying to do which I think is important

to realize but I think what what the market is beginning to sense I I mean we've talked before about how the most uh the the most favorable environment for gold is stagflation a period when inflation is stagnant or moving up or when the economy is stagnant or moving down a staging period and what we've seen in the last sort of increase recently in the last 6 or eight weeks in the US are signs that we are moving into that environment and you know at this point soft people who believe in the soft

landing and people who believe in the to the they simply cannot ignore that the economy is slowing I mean everything you look at whether it's um new jobs claims uh continuing jobs unemployment claims um new home sales uh man facturing you know the list goes on and on and on pretty much every indicator you look at is trending downwards I don't think people can ignore anymore but we're heading we're heading towards a recession and it's not going to be too far away I think you know you say okay

we can't ignore this and I think that maybe what's allowing people to or some people to do that is watching how the markets are looking with the the tech stocks I think we maybe talked last time about the Magnificent Seven and everything going on there any any thoughts on that cuz I think that maybe confuses no you're absolutely right people conflate the market with with the economy I mean it used to be the stocks followed the economy um when the economy was doing well earnings you know people

spent more earnings went up so companies did well now it seems to be almost the other way around but the economy is meant to follow the market I think people put too much too much um too much weight on what the stock market's doing um you know if if you've remember we've had a we've come off a period when we had ultra low ultra low um interest rates that enabled companies to term out that debt to borrow more at low rates to term it out so you you have um Extended maturities and companies in pretty good

shape so they can they can withstand um they can withstand a slowing slowing demand for quite a period of time and you know I think at the same time last time that we spoke I had asked you know are you expecting a stock market crash and you had said no but a rotation toward value away from growth and I was going to ask are we starting to see I think we're starting to see that if you look at the Magnificent 7 obviously n video shot up on their earnings but we've seen some stumbles in and some of the others so yeah I think

we're beginning we're beginning to see that a little bit I mean the plain fact is that I think people who are willing to invest in Tesla and Nidia and Apple at these prices uh we're sort of exhausting them you know um be people who believe in those companies are all in and I don't think there's a lot more buying power for those companies but the other thing I think we talked about this last time but on the other hand we must not forget that the Magnificent 7 they represent nearly 20% of the entire

Market of the entire world's market capitalization so if you're an investor in Switzerland or Hong Kong or London you can't ignore those seven people if you get new cash in you know new inflows the some of that money will go into those stocks okay so so we know monetary factors most important for gold but I thought we should follow up and talk a little bit more about some of the secondary factors that you are watching this year for for gold okay is there a question no I'm sorry I'm sorry um you know I I I think

it's important I you know geopolitical in geopolitical factors tend to only have a short live um impact on the price of gold and right now of course we've got a pretty scary situation with a war in Europe um the most dangerous war in the Middle East for probably 40 years and we've got what's happening in the Gulf which is associated with the Red Sea which is associated with with the Middle East so there's a risk of the Middle East um uh conflict expanding um and and yet I think that's

a very shortlived impact on the price of gold historically it's always only lasted a couple of months at the most and we are we're an election year and I I want to bring it up I I have a feeling you're going to tell us that it probably isn't very meaningful for M but I'm I'm going to mention it anyway and just see what you have to say if that's if that's something we should have to consider yeah no definitely I think it is I mean I think the monetary the monetary factors are the underlying

factors but there's a lot of other things that can affect go uh affect gold now I've got to be careful how I say this don't want to get a lot of but you know if you look at the look at the us today and you've got you've got Biden and Trump it's not so much Biden and Trump you look at the you look at the supporters uh a recent survey This was um actually at the end of the year in asked of a question do you believe it would be right to use violence to stop the other people um taking control

of government if they win the election 42% of democrat voters said it would be right to use violence to stop Donald Trump taking office even if he wins now that's pretty astonishing now I suppose if you genuinely think that Trump is the second incarnation of Hitler then using violence is appropriate but almost half and and for de for Republicans it was about 370% so I mean well over a third of a population thinks it is appropriate use violence to stop the other side taking office so even if you have the

cleanest possible election out there which we're not going to have um people still think it would be right to use violence now if you have elections where people think ballot was stolen or the Russians influence social media or whatever it is that that only exaggerates your feeling that only heightens your feeling but but it's right so I I'm afraid that we're going I mean I'm not the only one saying this of course but I'm afraid we're going to see some pretty nasty violence you know in

the streets um you know as we get closer to the election well we'll have to we'll have to keep an eye on that I I hadn't heard that statistic that you mentioned aling it's shocking it's alarming and that is again it's a geopolitical event that is a positive for gold it's not the overwhelmingly positive factor but it's a positive not a negative and I'm just going through my list of possible gold factors for 2024 central banks very strong buying the last years yeah 2024 are you expecting

similar I think we're going to see continue Central Bank buying we well obviously that'll level flow a little bit and obviously they can't go over 100% to reserves in Gold um mean but no that's a that's a we've seen a fundamental that's a long-term fundamental s the closable weaponization of the US dollar uh central banks are buying gold was a defensive measure against that and the US can't say the US can't say you know what I know we' sort of try to tell you guys what to do for

the last for years but we're not going to do it anymore so everything was okay now I mean no one's going to believe it uh whoever says it that's s a political point I mean the US for 40 years ra it has been telling other countries how to run the business we saw the attack onr banking privacy we saw the multi-billion dollar fines on B paraba when they when they financed a Spanish company building a hotel in Cuba which under French law and under Spanish law was legal but the US SS on the US law is not legal and so

they fine than harab I mean this is astonish when you think about it that's astonishing arrogance and interference and other people's and other people's um um you know right to do business the way they see fit then of course more recently of course I've seen the confiscation of Russian Assets Now whatever you think about Russia and Ukraine there should be in my view there should be a judicial process uh the government shouldn't just be able to confiscate the assets of Russian olig DS

which is a very very broad term remember they weren't confiscating the yachts and the Chelsea Apartments of Putin and Putin's generals they were confiscating the assets of wealthy Russians without without due process I think that that puts the Central Bank buying into context one thing that I'm wondering is at what point or at any point will we see Western central banks maybe start to add their gold reserv Western Banks Western central banks of course already have a very high allocation to Gold whether

it's us Germany France um Italy they all have a very high allocation to Gold Canada doesn't of course uh Britain doesn't of course um Britain famously sold the last of his gold right to the absolute bottom in 2000 um yeah ouch um I I don't think we're going to see I I I'm not expecting a Resurgence of of Western Central Bank buying the gold no but I am expecting a Resurgence of of of Institutions on retail buying of gold which has been Absol we've talked about that I mean the latest numbers I've seen

on global gold ETFs right Globe all of them added up together this year you're still seeing every single week you've had net outflows we've had 44 tons outflow from gold ETFs this year which is significantly more than the outlow for all of last year so western western investors far from actually buying gold are still selling it and that's going to change pretty soon I think and and what what do you think will be the Catalyst um simple it'll be a high gold price because Western investors typically painting

with a very broad brush people people chase price uh they do not buy when things are cheap but they chase price so you see gold over 2100 that's which is coming very soon we hope we only need one more day like Friday um but you see gold go over 2100 as do getting people to ion goes to 2150 and doesn't drop below 21 I I think increasingly more people will start buying but it's a higher price that will'll get people to buy do you so 2100 2150 I I just I feel like we used to or I used to hear 2,000 was the

number and that wouldn't do it yeah so it feels like we've moved the goal post so or somebody has moved a little bit well we went backwards and forwards on 2000 so many times bumping up against it falling back yeah I mean I think to I mean it's it's a Continuum it's not something that well one day nobody's buying and the next day okay were there is a Continuum so frankly staying above 2,000 is very very significant very important need okay so I thought we can take a brief look at the Gold stocks

as well just as we're getting toward War the end and I know that you've told us before they're very undervalued right now now is the time to get in I was think thinking often you talk about royalty and streaming stocks as a way to get lower risk exposure and we can talk about your thoughts on go thoughts right now but I have a specific question on Franco Nevada because they have their the Cobra PL roating going on and I thought you can wait in on that because this is you know it's a little risk but

things like this can't happen so I thought you might have yeah well no absolutely I mean the thing about the royalty the royalty model the royalty companies say that it's low risk they're not exposed to the same risks as the mining companies but it's certainly not no risk and we saw that clearly with with cobry Panama you look at franker Nevada for example and some of the other Ro to comp Wheaten you could save the same and Royal um but you look at frankco Nevada uh Cobra Panama was about

16% of that Nev when Cobra Panama shut down uh Frank Franken noada lost about 26% of its of its market cap within a month at at the same time the Wheaten this closest pier went up 12% so as a spread of 30 over 36% but Franken NADA lost compared with wheat when the when the mine is only worth 16% of our even if the mine goes is zero which I don't think it will be um because at worst they'll gain something back in arbitration right though that's at worst that's even if the mind doesn't restart now remember if

if after the election in Panama in May or whenever it is the government decides to renegotiate with first Quantum I'm not saying you well I'm just saying if they start to renegotiate and first Quantum has to make a lot of concessions but the mine restarts well those concessions all uh all are on first Quantum you know they don't affect the stream that Franco has that's the beauty of the streaming model when you look up when you look at Franken NADA as I say 16% of their n that's their largest single asset after

that they've got three asset that are 10% 10 to 12% and then after that they've got over a 100 different revenu producing assets so very very well Diversified they've also got a pipeline they've got about 300 over 300 royalties or streams on as it's you know not in production some are close to some are in development three three new ones coming on this year three big ones coming on this year uh which I think will move the stock price a little bit but three big Big M coming on this year including cot

and um um uh I'm sorry sorry it slipped on my end of a second um and some some of those 300 miles will probably never come into production but none less it's it's very well Diversified and most important of all they've got $1.2 billion in cash so they're not going anywhere you know you don't have to worry is Franco going to go out of business that's just not even a concern whereas potentially I mean potentially it's a concern with first Quantum I'm not saying it's going to happen but first

Quantum doesn't have 1.2 billion in cash they have a lot of debt so you you know that and now they're having to sell some of their assets sell interest in some of their assets just in order to to you know reduce the debt or service the debt so that's a huge difference between the prod the operating mine the operating company and the royalty company yeah I think I think that was very well explained and I I just brought it up so that we could kind of see a case study of how that works to V yeah the model so

I think that was good to go over for investors sure sure I think as we're finishing up I know I know last time you Tau us this is a real opportunity in the gold stocks and you told us I've said it before but it's still true I don't want to make you repeat yourself too much but are there any thoughts that you would add on either gold or the gold stocks as we move forward yeah I mean I think the the thing that I would add is that um I think this is going to change very very very very soon but more importantly it's

going to change very very dramatically but at the moment it seems as though in investors are looking for the bad news when a company when a company comes out with a when a company like panamerican or Fortuner or or or Barrack or Newman or whatever a company with a lot of mines in different places when they come out with their annual results there's always going to be something that went wrong always you you know um Murphy you know Murphy's Law anything that can go wrong will go wrong and Robert Freedom

famously said Murphy works over in the gold mining business so things are always going wrong that's just a that's just a fact of life in the mining business and I get the sense that the the investing Community is searching out for thing in the company's quarterly results or any results for his role so barck for example they came they pre-announced their production they had a Miss on their production frankly from very very aggressive production num but most analysts were saying repeatedly

for 3 months they're never going to make they're never going to make lo and behold they didn't make them and the stock dropped 14% but everybody who follows the company knew they weren't going to make their earnings then they came out with their full financials and they showed free cash flow up 50% for the year that's nothing to sneeze at and the market kind of just ignored it so I think the market and and we could go through Pan-American Royal go I mean Royal gold had a great Royal gold had a

good fourth quarter very good fourth quarter but they missed their annual guidance Royal is one of those companies that doesn't continually update their guidance now they miss their guidance because pens skito one of their large one of our large streams had what a six seven week stoppage because of a strike everybody who follows Royal gold should know the penis was down for seven weeks I mean this is all they talked about on their third quarter earnings so what makes people think that their

fourth that that what makes people think that that annual guidance is going to be met the annual production guidance is going to be met of course it's not one of their large royalties was was down one of their large Street royalties rather was down for six or seven weeks um so but the stock went down when they came out and said we missed eil quarter even though they had a great fourth Mr annual guidance even though they had a good fourth quarter and they had good good 20124 guidance so so I I think

that's a sign that to me is a sign of almost capitulation among remember anyone who still owns a Gold stock you know is is a Hardy a Hardy person and so we're now seeing capitulation among the last remaining survivors in the sector that's a signal that we're very very close to an end in my view okay I think that's a nice place to wrap it up for today but we we'll check we'll check back in with you later and see how it's going thank you so much for coming today well thank you very much Charlotte for

having me thank you of course and once again I'm Charlotte cloud with investing.com and this is Adrien Dave of Adrien Dave Asset Management [Music]