[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 good to see thank you very much for having me sh good to see you again yes excited to talk to you about what's going on in the markets and with gold and I think we'll start with the fed and if I am remembering properly from previous comments that you've made we we should be now approaching the point where good really starts to perform so I


think you said it will move if and when the FED Cuts rates without properly curbing inflation correct or what I actually said was I think when the market believes that the FED is going to cut rates without uh taming inflation I think we're at a sort of yes we're we're we're at the pivot point if you want right now um because you know the fed's not going to cut in January but March are they going to cut or not it's 50/50 on the fit funds Futures and I would put the odds at 50/50 right now frankly um I


think the market is the gold market is a little bit ahead of itself in expectations for the number of fed of rate cuts and how soon they're going to start but I think I I think on balance I think it'll you know things will change over the next few weeks and I I suspect we'll get a rate cut in March once the FED Cuts rates without inflation being being quashed then gold really starts to take off and you can see that in the last you know four or five examples where the FED has started cutting rates


um gold really takes off and let's not forget you know bof Landing Camp talks about how much inflation CPI is not really inflation different issue but anyway how the CPI numbers and the CPE numbers have come down but let's not forget even according to the fed's own preferred measure the measure they picked core CPE right which means we don't eat and we don't um go anywhere but a core CPE we're still 60% above their target so they haven't hit their target by any means uh and I think


there's a risk frankly of seeing what we saw in in 197 you know in the mid 1970s when they slow down too soon and then inflation starts picking up again oh yes that's exactly what I was going to ask you is if if this happens do we get a Resurgence in inflation I wouldn't use the word Resurgence frankly there's a couple of things going on that make me think that um you know there's a lot going on now price of housing in the SE the way they measure it in CPI is probably going to continue coming down


for a few more months oil is a key because obviously the price of oil determines the price helps determine I should say influences the price of every good in store every good in store has to be transported so the price of oil is a factor and the price of oil obviously is reasonably low right now um uh so that's a big factor if the price of oil picks up then I think we'll start to see uh inflation pick up but at the minimum I would say inflation is going to be stubborn is the way I put it


and will likely end the year with higher numbers than we have now okay and in terms of what the FED is going to be up to in 2024 so no hike at or sorry no cut at the end of January March looking pretty likely is it worth it at this point to try to project further than March or is that still is it too much oh I think by the time we come to May they'll definitely cut um there's a lot of people on the FED I mean the last fed meeting as you know was Powell was remarkably doish he didn't push back


against any of the questions that he received he he had plenty of openings to say you know inflation is still our Prime blah blah blah and he didn't do it um since then as you know a lot of other fed spokesmen either voting members or non-voting members more non-voting members but nonetheless they've come out and suggested that you know the Market's ahead of itself I agree with that and you know we still need to watch inflation so I don't think they're going to be too aggressive at one early but


you know once they start cutting then the trend for the next year or so will be to cut they're not going to cut in March and then raise in May that's not going to happen and what do you think what happens to the General stock market during this this fed pivit you know it's really interesting because people you just assume okay lower interest rates good for the St stock market but that's not actually true if you look back historically when the FED pivots I don't like the word


pivot because it implies you go up and then go down sometimes you can go up and stay up for 6 months and then go down but when the FED starts to cut rates it's normally because the recession is getting weaker and so when the re when the when the economy I mean when the economy is getting weaker and when the economy gets weaker and falls into recession um corporate earnings go down particularly of course if inflation is still high so they have cost pressures and they have um demand pressures so


corporate earnings go down so that's bad for the stock market it's not that the FED cutting rates is bad it's because the FED cuts when things are bad so I I I suspect I suspect the scenario I'm looking for is we we'll get a week I'm not looking for a crash but we'll get a weak stock market this year yeah and certainly some rotation out of the leaders particularly the Magnificent 7 but out of the leaders generally and into smaller cap stugs value stugs away from the grow stugs and you you were


very clear in our last conversation that we will see a recession in 24 so I wondered if we could talk a little bit more about that maybe the severity the the length of that yeah well we talked about um you know I think everybody talks about these long and variable Lags from when the spread starts raising rates until when we have a recession but as human beings when we see something coming and is this is true in life I think as well as in the in the in in investing when you see something coming you expect it to happen sooner but it


does and so I think we're definitely on track for a recession all the indicators suggest a recession coming and you know the lack period from when the FED started raising rates until now is lower than the normal lower than the average going back to 1950 so 1950s so yeah so to say we'd escaped a recession because we haven't had one yet I think it's just it's just nonsense um you know it's difficult to say there's so many people at the lower half shall we say with no savings and excessive


amounts of debt which suggests that the recession could be fairly long because I think it'll be long but not necessarily deep is the way I'm looking at it um especially as the FED starts uh cutting rates and ending QT on the balance sheet um we'll probably see a long recession but not a particularly deep one but it'll be it'll be painful as I say for people I hate to use the word lower half that's not a moral judgment it's an economic assessment people at the lower half who have no savings who have credit


cut debt you know credit cut debt is at all-time highs now credit cut defaults have shut up amazingly uh discover and Capital One which would both be seen as cards that serve um the less wealthy you know they've got default default rates of over 5% this is astonishing um no savings and then you lose a job I mean so it's going to be very painful for some people and okay so you've given us a very good idea of what you see coming from the FED but I wonder you know to what extent do we have to pay attention


to what other central banks are around the world are doing no absolutely you know in the US we I shouldn't say we I'm not I'm not American but in the US they are so um uh you know American Centric um so well we won't need we don't need to go into that um it always makes me laugh when you have a World Series of baseball and there aren't too many countries of other than America that are in the World Series but anyway that's a side um yeah what other what other central banks are doing is important I mean the


US is obviously still the world's largest economy so it's important um Europe is going to have to start cutting rates soon um you know you see what's happening in in the economy see what's happening in Germany which was the PowerHouse they're going to have to start uh cutting rates soon I don't see more rate hikes there Britain is probably going to keep where they are for a little while cuzz um inflation just jumped up but the next major move will be down Canada um you know they


kept rate steady for the last few meetings um and I suspect that um you know there's been commentary that you know we're looking for rate Cuts in 2024 so pretty much in all of the Western countries the exceptions of course of Japan where they're increasing rates I think it's up to negative of half a percent Now isn't it or whatever but they're they're increasing rates uh from very very low base and and China is also an interesting case because China in the last year or


two year or 18 months has had very very targeted stimulus but not broad economy stimulus I think they want to avoid cutting rates too much so we'll see what happens there but yeah you're absolutely right right but generally let's say generally the trend other than Japan the trend is certainly not to raise rates and more likely to lower rates Brazil loow rates for example okay and we should we should put it all together in terms of what this means for the gold price in in 2024 what you see coming there I know that rates


and and central banks are not the only thing that's going on for gold so you can mention other factors if you'd like but essentially looking for what's coming for gold this year yeah well I do think the monetary factors are the most important they're the most important fundamentally and you know for any sort of long-term move geopolitics if we as we've said before everybody focuses on geopolitics because typically when you have a geopolitical event gold will Spike but it's very shortlived it's not


sustained um and that's even true when there something out of a blue like 911 you know gold shot moved up but it didn't hold up and and I was certainly true of a Russian invasion of Ukraine last year and this year with with uh Israel's response to the Hamas terrorist attack um there were other things going on there were monetary things going on this so the monetary is much more important um you know if we have a stack flation which I'm expecting a slow or a slow economy or a recession along with stubborn inflation


doesn't have to be accelerating inflation just stubborn inflation uh gold gold and other Commodities historically in particularly oil historically have been the best performing assets in that environment if you look at simply um recession again you think in a recession gosh do we really want to own gold stocks but if you look at the history uh for the last nine recessions going back to the end of the 1960s for the last nine recessions gold has gone up in everyone except one and that was in the 200000 recession when the


European central banks if you remember were dumping their gold gold was down less than half % in that one recession but in the other eight recessions it was up if you look at gold stocks gold stocks are up in the majority of recessions and interestingly in the three where they were down they were down by 2 3 4 5% the ones that they were up they were up by 30 50 187% and the other thing that I find very interesting is that the gold stocks outperform the S&P in every recession which goes back to what we were saying


earlier about you know corporate earnings being being squeezed so I think the lesson from that is if I'm right if if for people who if you expect a recession coming particularly if you expect uh a stationary period Then you really want to you definitely want to have gold you definitely don't want to be in the S&P and you probably want to be in Gold stocks and I think that answers or at least starts to answer kind of the question of the hour the question of the conference which is people are wondering okay when will my


gold stocks move given that G is close to our term highs anyway yeah and and part of that question infers the question about the disconnect we've had a huge disconnect between bullying between gold and the gold stocks um really for the last 11 years but particularly for the last two years it's really got extreme and people don't understand it I think you know looking back I think it's really quite easy to understand um you have to look at who was buying gold at assets gold assets


and why were they buying so central banks were big buyers of gold well they're buying for security they're buying for uh an insurance position long-term well that's your motive you buy bulling obviously if you're a central bank you don't buy Consolidated Ajax hoping it goes up 100 to one um very wealthy families in the Middle East were buying and very wealthy families in in Asia to a lesser extent than the Middle East again their motives are long-term and defensive so they buy bullion they don't


buy gold stocks so in a way and I'm people don't like it when I say this but in a way up until the last few up until let's say the last couple of months I would argue that it was gold that was out of kilter with economic reality not the gold stocks the gold stocks were they should have been gold should have been lower but it was this Central Bank buying that pushed up and again you only have to look at other things look at the premiums on gold coins flat nobody buying gold coins all the coin dealers I


talk to say there's no rush so so retail people are not buying gold look at ETFs money even this last month the ET gold ETFs have had outflows so and for the last 18 months other than February March last year it's been steady outflows from the ETFs so it's not it's not ordinary investors that are buying gold so it's very very clear that gold has been propped up purely or mostly by the central banks um I forgot what the question was now but when when you look at where we are now um yeah but G when


when when the FED Cuts rates and we get to the monetary factors that are pushing gold that are driving gold and the monetary factors start driving um gold goes to 2100 and stays there you know I I'm I'm convinced people will come come back into a gold market Gold stock market particularly if the broad Market starts to wobble doesn't have to crash a crash would not be good for gold stocks but wobble and people start to get out of Nvidia and look for other maybe out of Nvidia into xon or something you know


there's a bit of rotation that's good for gold so if we see a uh if we see that uh I think for scenario is a is a perfect setup for gold and let's not forget gold stocks two things not to okay one is gold stockes are incredibly undervalued right now I know I said this last time but it's even no it's even worse now you look at AO Eagle it is selling at the lowest price to cash flow multiple other than the last quarter of 2015 it's lowest price to cash flow multiple in this 40-year history that


just doesn't make sense with a great company like ago good balance sheets uh good jurisdictions you know there's no nothing you can say oh like Barrick you can say oh well they're in Pakistan that's why they're cheap no I mean there's nothing wrong with with ago gold is at over 2,000 uh they're making good money and yet the stock is selling at its lowest price to cash flow for 40 in its history Barrack is trading at its lowest uh Price to Book value to net asset value I should say uh in 40 years


so I mean you know these stocks are just remarkably undervalued right now in my view and let's not forget we've been through this so many times in the past gold stars can languish for a long time then when they take off first of all they take off suddenly and secondly the returns are dramatic you look at 1976 1980 the Gold stock index and I'm just only index so obviously there's always some that do a lot better but the index was up 800% in those four years you look at 2000 to 2008 Quint tled 2009 to 2001


quadrupled just look at 2020 which was a sort of recession I guess um but 2020 when covid came in 4 months the gold stocks more than doubled so for returns when they move are dramatic I think that's a perfect place we're ending on dramatic and perfect setup I think that's a great place to wrap it up thank you very muched thank you thank you very much really good to have you as always and we'll check back in and see how everything's going please do of course and once again I'm


Charlotte McLoud with investing news.com and this is Adrien Dave thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next [Music] time