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Adrian Day: Gold Will Soar Once Investors Realize Inflation is Beyond Feds Control

Tom welcomes back Adrian Day, CEO of Adrian Day Asset Management to discuss the current state of the economy and investor expectations. Day believes that the effects of the Fed’s aggressive rate hikes in January 2020 will soon be felt, but he does not predict a market crash. However, there is a tug of war in place and valuations are high, primarily due to a handful of stocks.

The economy is showing signs of slowing, with lower consumer spending, a low labor participation rate, and slowing manufacturing. Day believes this may lead to a potential recession. He also mentions the failure of the US to issue 50-year and 100-year bonds, which could have been done at lower interest rates and signaled confidence in the economy. The lack of appetite for US treasuries has resulted in pressure on interest rates to go up, as there are fewer buyers.

Adrian recommends reducing most holdings, but is not sold on the idea of a market crash. He advises investors to be prudent and take time to analyze potential opportunities. Day also discusses the BRIC Summit and alternative currencies, noting that they are unlikely to replace the US dollar as the world’s reserve currency in the near future.

He believes that the shift of power from the US to China is not being viewed as a peaceful transfer of power, unlike the situation between Britain and the US many years ago. In terms of the gold price, Day believes that the Fed’s aggressive tightening and prospects for future tightening have caused it to go up, but investors are still not satisfied. He also notes a disconnect between the gold price and gold stock prices, with gold stocks being viewed as the best value in decades.

In conclusion, Day predicts that gold prices will rise significantly when investors believe the Fed has lost control.

Time Stamp References:
0:00 – Introduction
0:45 – Expectations Vs. Reality
3:40 – Equity Valuations
5:30 – Lags & Consumer Metrics
13:06 – Maturities & Debt Service
16:30 – Fed & Long-Term Bonds
18:57 – Treasury Sentiment
21:30 – Maturities & Bank Failures
25:35 – U.K. GILT Yields
32:05 – BRICS Currency & Dollar
42:20 – Gold Drivers Outlook
48:24 – C.B. Gold Buying
50:55 – Market Fatigue & Trading
54:28 – Sentiment at Gold Shows
1:00:35 – Positive Setup for Gold
1:04:13 – Wrap Up

Talking Points:

  • Monetary policy changes take 18-24 months to be felt, making now a key time for watching economic trends.
  • The dwindling reliance on the US dollar raises questions about its future status as the reserve currency and possible replacement by a BRIC currency.
  • Gold prices are predicted to appreciate significantly when investors recognize the Federal Reserve has lost control of inflation.

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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