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Adrian Day: Fed’s New Faces Present an even more Favorable Situation for Gold

Tom welcomes back Adrian day to the show. Adrian discusses the market’s reaction to the Fed’s policy changes. He says, “The Fed’s bark is worse than it’s bite.” When the Fed starts talking about tightening in any way it spooks the gold market. However, when the Fed starts to taper the market typically recognizes this effort as too little too late. Tapering means they only want to reduce the amount of buying. In nine months they will likely have a larger balance sheet.

Adrian critiques the recent gold price action and how it was primed for a fall. The Powell nomination means a continued dovish Fed and this is hardly bad for gold. We’re seeing more Fed officials come out and say perhaps we should taper faster and raise rates. The market is increasingly cautious around tightening concerns.

Adrian notes that the recent members of the Fed that stepped down were of the hawkish variety. We can expect further doves to be added to the board.

China’s monetary policy has tended to be much more directed than the west. They haven’t inflated as many bubbles they have tended to be more cautious. However, the real estate market there is in an enormous bubble. Other countries shouldn’t have much exposure to Chinese mortgage debt.

He notes that on a relative basis gold underperforms during inflationary periods but tends to be one of the best-performing assets during deflation. Gold’s function is as a hedge against monetary instability.

Adrian believes we are just moving thru a modest mid-cycle correction for gold. The mining sector is tiny and undervalued compared to other markets.

ESG policies have sparked a recession in the energy markets in Europe and shortages of natural gas. The politicians in Europe continue to exclude nuclear in their green energy plans. They’ve even put a hold on the Nord Stream gas pipeline. It seems the plan is to let people freeze this winter. The focus is all on cutting production without solving the demand issue first.

Lastly, he discusses his concerns with the uranium market and thoughts on the copper supply.

Timestamp References:
0:00 – Introduction
0:39 – Powell & Taper Talks
9:03 – Fed, Rates & Inflation
13:15 – FOMC & Doves
16:20 – China Concerns
20:30 – Slow Growth & Supercycle
22:12 – Gold & Inflation/Deflation
25:06 – Gold Cycle Correction
30:20 – Miners & Valuations
32:13 – Gold Equities
36:00 – Tax Loss Selling
39:34 – Europe Energy & ESG
44:04 – Nuclear Risk/Reward
48:13 – Uranium Outlook
53:20 – Copper Supply
57:55 – Wrap Up

Talking Points From This Week’s Episode

  • Fed policies and why the trend remains dovish.
  • China’s monetary policies and their real estate bubble.
  • Gold’s performance and a mid-cycle correction.
  • Thoughts on energy in Europe and the outlook for nuclear energy.

Guest Links:

Adrian Day is considered a pioneer in promoting the benefits of global investing in the United Kingdom. A native of London, after graduating with honors from the London School of Economics, Mr. Day spent many years as a financial investment writer, where he gained a large following for his expertise in searching out unusual investment opportunities around the world. He has also authored two books on the subject of global investing: International Investment Opportunities: How and Where to Invest Overseas Successfully and Investing Without Borders. His latest book, widely praised by readers, is Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks (Wiley, 2010). Mr. Day is a recognized authority in both global and resource investing. He is frequently interviewed by the press, domestically and abroad. He is a popular speaker and is frequently invited to lecture at financial conferences and seminars around the world. His pleasures include fine dining, reading (especially history), and the opera.

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