Crash Alert Or Wild Upside Next? Fund Manager Reveals What's Next For Gold, Miners | Adrian Day
Summary
Gold Thesis: Guest argues there is no mania; gold’s rally is driven by central bank, Chinese non-official, and Middle Eastern buying, which is price-inelastic and defensive.
Miners Valuation: Gold miners remain fundamentally cheap with expanding margins (AISC around $2,100–$2,200) and have not shown typical leverage to gold yet.
2011 vs. Today: Unlike 2011’s manic top, M&A is rational, ETF premiums are muted, and flows into miners ETFs are negative, suggesting no public-driven bubble.
Positioning: Not taking profits after the pullback; buying miners for underweight/new accounts while keeping cash reserves; for others, hold and be selective.
Allocation Shift: Trim bullion and add miners, which are undervalued versus gold; he notes copper and oil/gas appear even more undervalued relative to gold.
ETF Flows Signal: Heavy outflows and lack of premiums in GDX indicate limited public participation, reducing the risk of a near-term top.
Macro Drivers: Potential end of QT and a path toward QE would be bullish for gold; even steady rates with weaker growth could support gold.
Companies Cited: Operational discipline highlighted at Agnico (AEM) and Fortuna (FSM); broader mentions include Barrick (GOLD), Newmont (NEM), Kinross (KGC), AngloGold (AU), Franco-Nevada (FNV), Wheaton (WPM), and Royal Gold (RGLD), with GDX used as a market gauge.
Transcript
To me, there are no signs of a mania at the moment. No signs whatsoever. Gold has been going up for the last three years, not because of traditional economic factors. We may well get a situation where rates do not come down anymore, but at the same time, they introduce QE and that QE would be wildly bullish for gold. >> Adrien Day returns to the show. He is the president of Adri Asset Management and the uh portfolio manager of the Europacific Gold Fund. What should investors do with their gold and gold mining holdings right now? We'll find out with Adrian. Good to see you again. Welcome back >> and good to see you again, David. Thank you for having me. >> So, uh yeah, there there will be some rhetorical questions this interview, but some more practical ones as well. We'll start with the practical ones. Adrian, let's start with the fact that the the market has seen some profit taking from gold at $4,400 now to $4,000. The same thing has happened with the GDX. Are you participating in any profit taking right now with any of your own investments in the gold industry? Let's start with that. >> Yeah. Well, when Okay, so uh um we're not doing profit taking now after the decline. Um, I mean, the only profits we're taking now are in things like Probe, you know, which has just been taken over or there's been a takeover agreement with Fresno. Um, but other than that, no, we're not we're not um profit taking. Um, I mean, I over the last few weeks, I had been raising a little bit of cash. I mean, you never raise enough, but I had been raising a little bit of cash. show. Frankly, my position right now after gold, as you say, has come from 4,400 to 4,000 and the GDX is down, I don't know what about 12%. My position right now is um uh for people who are reasonably fully invested, reasonably fully invested like a gold a gold client who's got 80% invested in gold or a conservative account who's got his full allocation in gold. um we are not adding to it right now because I always I think it's a good idea to always keep some money in reserve for in case the market goes down more than you think. But if we've got a new account um or someone who's added money who's underweight, yeah, we are definitely taking advantage of these declines on the buy side. We're buying >> the idea that the GDX though has fallen like let me just pull up a chart here. Uh let's start with gold miners first. Uh the I the the the the fact that the GDS GDX rather has fallen uh 15% from its highs. Um some might say that's a buying opportunity if you're if you're bullish. But on the other hand, some might point to the fact that this looks an awfully like what happened at the beginning of the last bull market end, which was 2011. Now there's been this chart only goes back to 2007. But as you can see here inuh 2011 uh the charts uh stayed choppy sideways for quite some time for a number of months uh before yeah December all the way to June 2011 uh September. It wasn't until basically September that the GDX topped and then we had this multi-year decline and and and right now it's kind of looking like there's there's there there's some oscillation and people are just concerned about whether or not this is the top. I've talked to miners or talked to people in the industry and and uh there seems to be a lot more um prudence or I guess uh a bit more skepticism now about the bull rally than what they told me was going on 15 years ago. I wasn't around the industry, but people were saying people were the industry was doing a lot more M&A. Uh they were just buying deals left and right and then speculative money went away just overnight and now people are being a little more cautious. So um I don't know if you're seeing the same thing >> and well what you say is really interesting David this is a big topic I'll try to be brief. So number one, >> if you look at gold itself, look at gold and look at its performance, there's no question in the last 2 months, gold had gone up too far too fast. It had been um I like to say it was overbought but under own. But it was clearly overbought. It had gone up too far too fast. But look at a long-term graph and look at it in a log term. Look at it in a percentage term. This rally over the last year and a half in gold is less than the 201011 rally and it is less than the 1979 1980 rally. So this rally however dramatic it seems to us now >> and of course going up every single day for a month and hitting a new new milestones every week made it seem like it was unprecedented. It was not unprecedented in terms of percentage move. This is less than 7980 and less than 2010 12 uh 20101. So that's the first thing I'd say. Uh the second thing I'd say is that the gold stocks although they're up over 100% year to date, they were up over 100% year to date, they still had not exhibited the traditional leverage that gold stocks exhibit to gold. Um and so and they were still fundamentally cheap if you look at price to earnings, price to cash flow, price to NAV cuz of course as the price of gold moves up then the then the and the and the and the margins expand because the costs are not going up as much. You've got all in sustaining costs for the industry somewhere around 21 2200. Those are pretty astonishing margins. And of course some companies have even greater margins. Um and and so the margins were expanding and with the margin expanding that means your cash flow is increasing which means your price to cash flow multiple is not going up as much as the price of gold would make you think. So the gold stocks were still cheap. I think the most important thing I would say relative to 2011 and you hit on it David or you hit on part of it when you were saying oh in 2011 we had a lot of M&A and so on and so that's a good thing >> in 2011 the industry went crazy overpaying for marginal assets that is a classic sign of a top. We haven't had that this year. We've had a lot of M& a pick up in M&A, no question. But it's all been rational M&A. We haven't had people grossly overpaying for marginal assets. We haven't had that yet. And so what I would say the big difference between today and 2011 is the sentiment. So again, precisely the fact that in 2011 everyone was doing M&A like crazy. In 2011, you were getting new deals coming to market every single hour of every single day. In 2011, the GDX was trading at a premium in June, July, August, September, and that premium was growing as the market was topping out. In 2011, you had huge inflows into the GDX. I'll send you a graph afterwards if you want. Um but uh you had huge inflows into the GDX. Now maybe at the time you could come up with rational reasons why you didn't think it was a top. Remember Europe was blowing up at the time. Greece was bankrupt and people were thinking it might be the break up of the of of the euro. I'm not arguing that. I'm just saying that there were signs of a mania signs of a manic top which we don't have today. Look at the GDX today. You had a few You had a couple of weeks of inflows in October, but you go back two months, 3 months, four months, 5 months, and it's net outflows. Over three billion of outflows this year to date. GDX and GDXJ combined over $4 billion of net outflows this year. And you you saw a little bit of a of an increase in flows as I say in the last two in in in the beginning of October, but nothing dramatic. Look at the premiums. You had teeny weeny premiums one or two days, >> but you didn't have what we saw in 2011, which was a rising and steady premium for weeks or months, I should say, ahead of that top. To me, there are no signs of a mania at the moment. No signs whatsoever. And if you look at the GDX and see over three billion of outflows this year of outflows, that's people selling. David, that's not people not buying, that's people selling. If you have those sort of outflows and you don't have inflows, you don't have public participation because who does the public buy? If if you're not a gold expert or a very sophisticated investor like Ray Dalio or something, what do you buy? Maybe you buy Numo, maybe you buy Barrack, but you probably just buy the GDX. And so if the GDX is not getting inflows, you don't have any public participation. You cannot have a by by definition, you cannot have a manic top without public participation. We haven't had it. So I don't think I don't think the parallel with 2011 or 20 1980 holds up at all. I understand people being concerned because we've had these rallies before 2015 20 well 2016 2018 2020. We've had these rallies before little rallies where it's gone up and then come back again. Um it's not unusual to have corrections midcycle. I don't even have to go back to 197475, you know, where in a space of 10 months gold dropped 50%. 50%. Go back to 2006 where gold is back 30% in a week. Who remembers that anymore? Who remembers that? I'm sure at the time people were asking, "Is this the top? Is this the top?" But um anyway, I just don't think there's any indication of a manic top at the moment. It's just a pullback. 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The company has an experienced management team with a track record of success from exploration discovery finance to production. If you're looking for a company that will leverage the potential gains of the silver market, do your due diligence on Coupney Silver. That's ticker KTN on the TSXV. just on the uh notion of well the the the the fact that you bet the fact that people aren't the gold miners aren't uh spending as much money on M&A now as they did in 2011. You could look at it two ways. One, they're more disciplined now. Or two, they don't have the cash to execute on M&A deals, even even if they wanted to. Which is true? >> Well, David, you know the answer to that. You know that the GDX is net cash positive. for GDX. Now, that includes that includes Franco and Weaten, which have a lot of cash. Royal of course has 1.4 billion of debt, but nonetheless, it includes Franco Weeden with a lot of cash. Um, but the GDX is net cash positive. That is an astonishing astonishing for a capital intensive industry. That was not true in 2011. And so, no, they've got the cash. There's no question about that. I think there's there's still discipline in this industry. Will it change? Who knows? I'm sure it's seven or $8,000 gold. It will change, but right now there's still a lot of discipline. They have the cash. Uh most of the excess excess cash flow. I hate that word term excess cash flow. What's excess about cash flow? The more the marrier, right? Um uh let's call it free cash flow. But the free cash flow has gone primarily to paying down debt over the last two years, which in my mind is absolutely the right thing to do to pay down debt first. Um, but no, most of the miners have no debt at all. Well, if they have debt, they are still net debt, net cash positive. >> When you say there's no mania, um, let's evaluate the fundamentals of gold. So, in the past, gold has moved on, let's say, a lower dollar or in some cases a lower real interest rate. Um, in some cases, um, uh, the 10-year yield, uh, dropping significantly, uh, with the long end of the curve, uh, or inflation expectations going up. Now, most of these things are not really happening right now. inflation expectations have risen somewhat. But if you were to look at my screen now, Adrian, I can just show you gold versus uh the tip ETF, which is uh an ETF that tracks the Treasury Inflation Protection Security, which is a proxy for inflation expectations. Year-to date. Um gold has has moved a lot more. Um if if you zoom out, you can start to see this divergence. They moved in the same direction, but gold's just moving much more than inflation expectations are going up. The dollar, as you know, has gone down a lot this year, uh, that may have contributed. But if you take a look once more at gold versus the dollar, uh, once again, you'll see that the dollar kind of stayed flat after its big decline post March, yet gold kept going up. Um, real interest rates after are going up, not down, and they've held an inverse relationship in the past. So, it looks like gold is defying a lot of the fundamentals that have driven up the price before. And people might look at this fact, Adrian, and say, "Well, clearly gold's in a bubble because it's diverging from its fundamentals." How would you respond to that? >> Yeah. Um, I'm not going to say this time is different. >> Yeah. >> Because Templeton said they're the four most dangerous words in the investment lexicon. Let's just say there are some differences this time but last time. [laughter] So normally you and what everything you said is absolutely true. And if I may, it all points to supporting my fundamental thesis on gold and gold stocks which is that gold has been going up for the last three years not because of traditional economic factors. Right? So, who's we know who's been buying gold? It's the central banks. It's the nonofficial Chinese. It's wealthy families in the Middle East concerned about um you know fiscal fiscal deficits around the world and and instability. And those buyers are all of those buyers I just mentioned, but particularly the central banks and the wealthy Middle Eastern individuals and families are if not price agnostic, they're certainly price inelastic. They are not buying because they think, "Wow, this is a great time to buy gold. Look at a chart. There's a cup and handle. There's a this, there's a that, and it might, you know, we might be able to get a 20% move in the next 12 months." They're buying for insurance. They're buying for defensive reasons. They are not and we don't need to go into all the reasons. We know why those different people are buying. Um but but the point is they're not buying they're not buying for the traditional economic reasons that people have bought gold. Now North American investors because we've never had that experience of actually needing gold. the experience that China's had when the people fled to Hong Kong or the experience that Germans had after the Weimar Republic etc etc. Because of that, Americans, North Americans typically don't buy gold as a as a defensive asset. Some people say they do, but very few do. They buy gold when the economic scenario is conducive to gold. And that means a weak economy, high and rising inflation, low and declining interest rates, and a falling dollar. And that is precisely the opposite of the environment that we've had for the past 3 years or I should say is the opposite of the narrative around the economy that we've had for the past 3 years. So if I may, at the same time that central banks around the world, Chinese nonofficial sector, wealthy families in the Middle East have been buying gold for their own reasons and buying gold regardless of price. North Americans have not been buying gold because the environment has not been conducive. Right? And that's the reason that the gold stocks have lagged. When I say lag, they haven't lagged in percentage terms, but they have not exhibited the leverage to gold that they normally exhibit be a because there are other buyers of gold pushing gold up higher than it otherwise would move purely on economics and B because North American investors, ordinary everyday investors have not been participating and they're the people that buy North American gold stocks. You know, the central bank of Poland doesn't decide whether to buy Newmont or Baric, you know, Mrs. Wang or whatever in in Shanghai, she doesn't say, "hm, I'm worried about the banking system. Let me have a little piece of Agnigo today." No. So, they don't buy stocks. They buy bullion. And so I think what you what you argued um which is all true is precisely uh is precisely why I'm saying that the public has not participated why we're why we're still closer to the beginning of this move than we are to the end when the economic scenario in the US changes and we can talk about that if you want but let's just say when it changes as it clearly is you know the dollar had the strongest decline first half decline this year and even though it hasn't gone down much more let's just say the in the first the first half decline was the was the strong the largest first half decline in the dollar since 1974 and even though it has not gone down much more since then we can agree I think that the recovery rally has been very very anemic so you've got a weak dollar relatively weak dollar you've an economy that is clearly showing signs of weakness particularly on the labor front. You know, if if even Jerome Powell, who two months ago said the labor market in the US was solid, if if if even he is thinking that there's weakness, there's weakness there, there's pick up in inflation. At the minimum, we can say that inflation has not been conquered. Inflation remains not only above the Fed's arbitrary target, but it also remains above where it was for the 5 years before COVID, which was a spike in inflation. Um and of course interest rates are moving down slowly, stubbornly um but but they're moving down. They're not moving up. And so the economic scenario is changing to one the North American economic scenario is changing to one that is conducive uh for gold and gold assets. In my view, >> I I I think it's just a um precarious part of human nature to always find a reason for why things have happened. But here I am looking for a reason for why this massive rally happened this summer. Everything you've talked about, Adrian, has happened over the course of several months, if not years. It's not just overnight inflation happened or overnight the labor market weakened or you know overnight we've had um a deficit and debt uh rising. Uh look at the gold pricing r the gold price rising from 2024 all the way up to the beginning of 2025. It's up already 70% before we had another massive move early in the summer. So remember, recall that gold stayed relatively flat around $3,400 uh from April to August and then we had this parabolic move. I mean, if we were to if I were to push you to explain what all of a sudden drove it up in in in a matter of weeks, uh what would that be? Because like like you said, all these changes happened over time and it would make a lot of sense if gold just steadily rose over time. Um but it it seems to have happened all very suddenly. Uh now one could argue that this is just a consolidating pattern. This was just a longer bull rally. Um and it did gradually rise but uh it still happened. I mean you look at it 114% over the course of a year and a half is rather sudden for gold standard right. >> No absolutely. Well first of all I think you you are 1,000% if such a thing exists. you're absolutely correct in saying, you know, that as humans, we're always looking for an explanation. You think there has to be a fundamental explanation or if you're a technician there has to be a technical explanation but um and it sometimes amuses me frankly when I look at headlines you know you'll see on Bloomberg or not to pick on Bloomberg but you know at 11:00 they'll say gold down because of interest rate fears and then at 12:00 they'll say gold up because of interest rate fears. I mean, you know, markets move up and down, right? Especially in the short, especially in the short term. And sometimes, frankly, and I don't I don't know if this is what you were driving at, but sometimes there really is no specific explanation. Sometimes markets rallies, they just die of exhaustion. you know, at at 4,400 after that kind of rally, even the most dedicated gold bull was probably saying, I think I'll pull back and wait for a week or two. You know, you a market just a a bull a bull move dies of exhaustion, you know, when there's no more people willing to pay those higher prices. Not willing to pay those higher prices at that time. So, there doesn't always have to be a reason. I mean if if you want what happened in the last two months well it wasn't a huge increase in central bank buying we know that the central the last month we've got numbers for or the last month we've got comprehensive numbers for August and in August central bank buying was up on June there was a pause in the couple of months or slowdown in the couple of months before that but but that's August so did central banks suddenly resume buying in September, October? I don't I don't know. I have no reason to think they did. There's nothing to suggest they did. If you look at individual banks that have reported, there's not a huge spike. There was a huge spike in Chinese nonofficial buying. That became a little bit of a mania. So, a a a huge increase there and you can see that by the um premiums on the Shanghai exchange, by the lines outside jewelry shops, by the pick up in imports, you know, which come through Hong Kong. So, you've got numbers. You don't have numbers on how many ounces were bought by, you know, Chinese consumers, but you do have indications that suggest that there was a huge a huge spike um from that source. Um but but you know I mean clearly it had gone too far too fast and it was it was just waiting for a pause. And again the pause when you think about it wasn't caused by anything. I mean you know we had the Gaza peace deal which was 2 weeks before gold peaked and it was actually beginning to look as though it might fall apart the day that gold topped. you had China and and and Trump at it that week. So there was no reason for it to decline because of Now it's changed that that scenario has changed. But so what I'm saying is I don't think there were any fundamental reasons why gold went up the way it did in in October, September, October. And I don't think there were any fundamental reasons why it stopped going up on the 19th or 23rd or whatever the date was. >> Let's go back to miners. I had a guest on my show who said that uh you know he doesn't like gold miners because no matter how far the gold price runs up, miners always find a way to lose money. Can you just comment on that? >> The uh margins right now. How are they doing? >> Well, don't tell me who your guest was because I might. [laughter] >> No, I won't. If I don't know who he is, I'll insult him. Well, maybe he was just buying the wrong stocks. Can I just say that? >> Probably. Yeah, that's possibly. >> Okay. Even Barrack's up 100% this year. Newman's up. Even Newman's up. Agra is up. Kinas is up. Anglo Gold is up. They're all up 100%. >> Yeah, but are they up because of better company performance or just because the gold price is up? I think that's the point this guy was making is that you know these margins are just margins are great. >> Yeah. If if you're a miner producing gold, then the gold price is the number one determinant of how well your company does. No question about that. You know, just as if everybody suddenly stopped eating and living off air, Nestle would no longer be a very good company to own. So, there's no question that the price of gold is is a, you know, the price of gold can forgive a lot of sins. Um, and in a bad market, there's only so much any company can do. But I don't think you can I I honestly don't think you can say that it's all No, I don't think you can say that it's it's all a gold price at all. I mean, you look at a company like Enego, which is, you know, obviously the gold standard, but you look at a company like a keeping costs, well, most of the companies, but keeping costs well under control. little bit up in the last quarter but down in the quarter before. Uh you know very very disciplined. Um no I I don't think you can say it's all the gold price but but clearly clearly if gold goes back to 2000 um all of the gold stocks are going to drop. >> All right. So that goes back to the fundamental question of how you pick a good mining company. So yes the gold price is up some outperform others. How do you pick the outperformers? What are the outperformers doing that are that are helping them maintain better margins, for example? >> Well, no, that's a good question. And I think um I I think you have to ask what you're looking for. If you're looking primarily for beta, you want to buy something, you want to own something that will go up if the gold price goes up, um you're going to buy something different. And if you're looking for alpha, I want the maximum return. If gold goes up, I want a maximum return. You're going to buy something different if you want the lowest risk return, etc., etc. So, um, I mean, I think an awful lot go comes back to management and history. You know, if you look at what management has done in the past, let's face it, all of the pretty much every man, well, that's not true because Newton and Barry both have new management, but the management of most of the companies today, they went through the COVID period. Um, let's just look at how they did during CO. Um, we don't even have to go back, you know, 20 years to see how they performed in a bare market. just how did they perform during COVID? What decisions did they make? Um so I think the key is to look at the management and and what their track record is. Um, and there are companies, whether it's Aigo, uh, whether it's, you know, a smaller company like Fortuna, companies that have just an extremely solid track record of financial discipline, not overpaying, buying at the right time, keeping a strong balance sheet, um, you know, not overlevering, not going crazy on acquisitions, having good mine performance. I mean, good mine performance is critical because you can have a mine and uh I I wouldn't be able to run a mine. I don't know about you, David, but if they you put me in charge of the best mine in the world, we'd be losing money pretty quickly, pretty soon. Um Sure. But some teams like like Aigo, like the Fortuna people um have proven themselves to be very very good at operating mines and getting the most out of those mines. >> Some people have asked me personally, I I own some gold or precious metals or silver. Now that gold has run up a little bit, I want to take some profits and allocate more to other assets. Should I, you know, should I should I take some of that and buy some miners? And that got me thinking, your portfolio allocation of bullion versus miners, does that change when the price of the gold uh runs up considerably? In other words, we're in a bull market or a bare market for that matter. Does your allocation change? And if so, how? >> Oh, definitely. No question. I mean, first of all, I think people should have some gold that is more or less permanent as a defensive position, as an offset to the as a hedge on the rest of the portfolio and so on. So, we're not talking about that permanent insurance position. If you've got gold as an investment, depending on when you bought it, of course, you have done better than you could rationally expect to do from an inert substance that doesn't pay a dividend, right? >> Yeah. >> As as its detractors keep telling us. And I think it is definitely. So what I would say is definitely this will be a good time uh to shift to to shift meaning to sell some of the gold bullion or gold ETFs and move it into the miners that are on a historical basis uh undervalued [clears throat] relative to gold. So the gold stocks are undervalued relative to gold. Now you could go further and say if you look at other commodities like copper, natural gas, oil, um you could argue that those are even more undervalued relative to gold because they've hardly I even though copper's basically at a high but I mean you could pick a handful of copper stocks and even though they've gone up, they are still fundamentally undervalued relative to gold. That's even more true for oil and gas, which of course has just been, you know, that the the it's been anime to own to own those assets. Um, but to answer your question, I certainly think right now would be a good time to trim the gold, take some profits. Of course, there's tax considerations. I'm not getting into that. Um, to to to trim the gold and to buy the gold stock. Some of the gold stocks are still very very undervalued. >> I want to just finish off on the Federal Reserve FOMC decision this week to cut rates by 25 basis points is widely expected. Uh well was not widely expected with Jerome Powell's statement that the December cut is not a foregone conclusion. As soon as he said that the chance of a cut by December uh on the CME Fed watch tool drop from 90 something% to 66%. And um I I wonder if well I'll let you evaluate his statement, but I wonder if uh there should be more hikes or cuts rather. There should be more cuts right now given where the economy is headed. Um basically uh let's just evaluate what the Fed is doing right now. >> Yeah. Well, no, that that well there were two really interesting things from Pal's uh comments. Um uh the second one was about the balance sheet. We can mention that if we remember. >> Yes. >> But I think well what seems clear to me what seems clear is that there is growing dissension in the Fed. So you've got Mirin put on and Trump, you know, um on the sidelines telling them to cut cut cut and there has to be some push back among certain members on the board about that and maybe that has stiffened their senus as Henry V said before the battle of Azakore maybe that has stiffened their senus and so now you've got three fed officers come out in the last 24 powers saying they don't think there should be a cut in December. There was only one one disscent of course on on the quarter point cut that they did this week, but three of them have come out and said there shouldn't. And so I think what Powell was doing, he knows he's now got a divided board, right? Which is unusual for the Fed. He's got a divided board and not only does he have um uh Mirin uh Trump's nominee, but he's got other people who want to be Trump's nominee for chairman, and they're going to obviously be on the on the easing side, and he's got other people who are on the hawkish side. But when you say what should they do, I mean I I think they should abolish themselves, but that's that's perhaps a little more radical than we're looking for right now. The problem is, as we all know, with the dual mandate, they they're fighting a battle on two fronts, and increasingly they have to emphasize one front or the other. They cannot fight on both fronts equally without losing on both fronts like Hitler in the second world war. So you got to pick your battle I think and you know is it inflation which suggests you keep rates where they are or even move them up or is it uh the labor market that is you know slowly deteriorating. people will point to evidence from the states that there hasn't been a big increase in new claims. Uh that doesn't necessarily mean that the labor econom labor market is strong of course because you've also got an increase in continuing claims and you've got an extension of the amount of time that it takes people on unemployment to find new jobs. And so if I were an employee, a dissatisfied employee, not very happy, and I look at that evidence and say, "All my friends tell me it takes them over a year to find a new job. I'm probably not going to go into the boss and have a quit." >> Yeah. >> So, I'm not going to show up on the new claims. I'm going to do everything I can to try to keep that position. But there's no question that there's huge layoffs. um uh you know we've seen that we've seen those announced in the last couple of weeks huge layoffs UPS um or Nestle that's mostly foreign of course but anyway um so the the the problem is that the Fed is fighting two battles um essentially with the same tools and it's really got to emphasize one or the other at some point >> and I'll end on this final question the fact that there were two descents one of them came from the Kansas City president who didn't want any rate cuts at all highlights the fact that within the Fed uh there may not be a go right ahead and cut no matter what mentality. POW himself said that forgot conclusion >> about that. >> What does that mean for gold if let's say there's a little more hesitancy to be dovish going into 2026? Um well remember the other the other thing I said I mentioned uh was the end of the uh QT. So yes uh the Fed announced a QT would officially end December the 1st but it has essentially ended 5 billion a month >> on 6.5 bill trillion dollar balance sheet is is a rounding error. It's essentially ended. So they are going to stop it on December the 1st and all mortgage securities that are running off are being put back into treasuries now, right? All of the mortgage back securities that are running off, the proceeds are going into treasuries. What does that sound like to you, David? It sounds like to me that they are getting ready for QE again. They won't call it QE, but they're getting ready for QE again. And so we might well have a situation and until panel goes and Trump replaces people on the board. We may well get a situation where rates do not come down anymore. But at the same time they introduce QE and that QE would be wildly bullish for gold. Other things being equal, rates not coming down would not be bullish for gold. But I suspect that if they keep rates where they are and don't introduce QE, you're probably going to get the economy slow more rapidly than it otherwise would, which again will be bullish for gold. >> I think we can end it here. Thank you very much, Adrian. Uh we can follow up soon. Plenty more to discuss um in the coming months. Where can we follow you right now? >> It's uh adrienday.com. That's the website. >> All right, simple enough. Go to adrienday.com to stay uptodate and uh we'll see you next time, Adrien. Take care. >> See you. Thank you so much. Thank you. >> Thank you. And thank you for watching. Don't forget to like, subscribe.
Crash Alert Or Wild Upside Next? Fund Manager Reveals What's Next For Gold, Miners | Adrian Day
Summary
Transcript
To me, there are no signs of a mania at the moment. No signs whatsoever. Gold has been going up for the last three years, not because of traditional economic factors. We may well get a situation where rates do not come down anymore, but at the same time, they introduce QE and that QE would be wildly bullish for gold. >> Adrien Day returns to the show. He is the president of Adri Asset Management and the uh portfolio manager of the Europacific Gold Fund. What should investors do with their gold and gold mining holdings right now? We'll find out with Adrian. Good to see you again. Welcome back >> and good to see you again, David. Thank you for having me. >> So, uh yeah, there there will be some rhetorical questions this interview, but some more practical ones as well. We'll start with the practical ones. Adrian, let's start with the fact that the the market has seen some profit taking from gold at $4,400 now to $4,000. The same thing has happened with the GDX. Are you participating in any profit taking right now with any of your own investments in the gold industry? Let's start with that. >> Yeah. Well, when Okay, so uh um we're not doing profit taking now after the decline. Um, I mean, the only profits we're taking now are in things like Probe, you know, which has just been taken over or there's been a takeover agreement with Fresno. Um, but other than that, no, we're not we're not um profit taking. Um, I mean, I over the last few weeks, I had been raising a little bit of cash. I mean, you never raise enough, but I had been raising a little bit of cash. show. Frankly, my position right now after gold, as you say, has come from 4,400 to 4,000 and the GDX is down, I don't know what about 12%. My position right now is um uh for people who are reasonably fully invested, reasonably fully invested like a gold a gold client who's got 80% invested in gold or a conservative account who's got his full allocation in gold. um we are not adding to it right now because I always I think it's a good idea to always keep some money in reserve for in case the market goes down more than you think. But if we've got a new account um or someone who's added money who's underweight, yeah, we are definitely taking advantage of these declines on the buy side. We're buying >> the idea that the GDX though has fallen like let me just pull up a chart here. Uh let's start with gold miners first. Uh the I the the the the fact that the GDS GDX rather has fallen uh 15% from its highs. Um some might say that's a buying opportunity if you're if you're bullish. But on the other hand, some might point to the fact that this looks an awfully like what happened at the beginning of the last bull market end, which was 2011. Now there's been this chart only goes back to 2007. But as you can see here inuh 2011 uh the charts uh stayed choppy sideways for quite some time for a number of months uh before yeah December all the way to June 2011 uh September. It wasn't until basically September that the GDX topped and then we had this multi-year decline and and and right now it's kind of looking like there's there's there there's some oscillation and people are just concerned about whether or not this is the top. I've talked to miners or talked to people in the industry and and uh there seems to be a lot more um prudence or I guess uh a bit more skepticism now about the bull rally than what they told me was going on 15 years ago. I wasn't around the industry, but people were saying people were the industry was doing a lot more M&A. Uh they were just buying deals left and right and then speculative money went away just overnight and now people are being a little more cautious. So um I don't know if you're seeing the same thing >> and well what you say is really interesting David this is a big topic I'll try to be brief. So number one, >> if you look at gold itself, look at gold and look at its performance, there's no question in the last 2 months, gold had gone up too far too fast. It had been um I like to say it was overbought but under own. But it was clearly overbought. It had gone up too far too fast. But look at a long-term graph and look at it in a log term. Look at it in a percentage term. This rally over the last year and a half in gold is less than the 201011 rally and it is less than the 1979 1980 rally. So this rally however dramatic it seems to us now >> and of course going up every single day for a month and hitting a new new milestones every week made it seem like it was unprecedented. It was not unprecedented in terms of percentage move. This is less than 7980 and less than 2010 12 uh 20101. So that's the first thing I'd say. Uh the second thing I'd say is that the gold stocks although they're up over 100% year to date, they were up over 100% year to date, they still had not exhibited the traditional leverage that gold stocks exhibit to gold. Um and so and they were still fundamentally cheap if you look at price to earnings, price to cash flow, price to NAV cuz of course as the price of gold moves up then the then the and the and the and the margins expand because the costs are not going up as much. You've got all in sustaining costs for the industry somewhere around 21 2200. Those are pretty astonishing margins. And of course some companies have even greater margins. Um and and so the margins were expanding and with the margin expanding that means your cash flow is increasing which means your price to cash flow multiple is not going up as much as the price of gold would make you think. So the gold stocks were still cheap. I think the most important thing I would say relative to 2011 and you hit on it David or you hit on part of it when you were saying oh in 2011 we had a lot of M&A and so on and so that's a good thing >> in 2011 the industry went crazy overpaying for marginal assets that is a classic sign of a top. We haven't had that this year. We've had a lot of M& a pick up in M&A, no question. But it's all been rational M&A. We haven't had people grossly overpaying for marginal assets. We haven't had that yet. And so what I would say the big difference between today and 2011 is the sentiment. So again, precisely the fact that in 2011 everyone was doing M&A like crazy. In 2011, you were getting new deals coming to market every single hour of every single day. In 2011, the GDX was trading at a premium in June, July, August, September, and that premium was growing as the market was topping out. In 2011, you had huge inflows into the GDX. I'll send you a graph afterwards if you want. Um but uh you had huge inflows into the GDX. Now maybe at the time you could come up with rational reasons why you didn't think it was a top. Remember Europe was blowing up at the time. Greece was bankrupt and people were thinking it might be the break up of the of of the euro. I'm not arguing that. I'm just saying that there were signs of a mania signs of a manic top which we don't have today. Look at the GDX today. You had a few You had a couple of weeks of inflows in October, but you go back two months, 3 months, four months, 5 months, and it's net outflows. Over three billion of outflows this year to date. GDX and GDXJ combined over $4 billion of net outflows this year. And you you saw a little bit of a of an increase in flows as I say in the last two in in in the beginning of October, but nothing dramatic. Look at the premiums. You had teeny weeny premiums one or two days, >> but you didn't have what we saw in 2011, which was a rising and steady premium for weeks or months, I should say, ahead of that top. To me, there are no signs of a mania at the moment. No signs whatsoever. And if you look at the GDX and see over three billion of outflows this year of outflows, that's people selling. David, that's not people not buying, that's people selling. If you have those sort of outflows and you don't have inflows, you don't have public participation because who does the public buy? If if you're not a gold expert or a very sophisticated investor like Ray Dalio or something, what do you buy? Maybe you buy Numo, maybe you buy Barrack, but you probably just buy the GDX. And so if the GDX is not getting inflows, you don't have any public participation. You cannot have a by by definition, you cannot have a manic top without public participation. We haven't had it. So I don't think I don't think the parallel with 2011 or 20 1980 holds up at all. I understand people being concerned because we've had these rallies before 2015 20 well 2016 2018 2020. We've had these rallies before little rallies where it's gone up and then come back again. Um it's not unusual to have corrections midcycle. I don't even have to go back to 197475, you know, where in a space of 10 months gold dropped 50%. 50%. Go back to 2006 where gold is back 30% in a week. Who remembers that anymore? Who remembers that? I'm sure at the time people were asking, "Is this the top? Is this the top?" But um anyway, I just don't think there's any indication of a manic top at the moment. It's just a pullback. 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The company has an experienced management team with a track record of success from exploration discovery finance to production. If you're looking for a company that will leverage the potential gains of the silver market, do your due diligence on Coupney Silver. That's ticker KTN on the TSXV. just on the uh notion of well the the the the fact that you bet the fact that people aren't the gold miners aren't uh spending as much money on M&A now as they did in 2011. You could look at it two ways. One, they're more disciplined now. Or two, they don't have the cash to execute on M&A deals, even even if they wanted to. Which is true? >> Well, David, you know the answer to that. You know that the GDX is net cash positive. for GDX. Now, that includes that includes Franco and Weaten, which have a lot of cash. Royal of course has 1.4 billion of debt, but nonetheless, it includes Franco Weeden with a lot of cash. Um, but the GDX is net cash positive. That is an astonishing astonishing for a capital intensive industry. That was not true in 2011. And so, no, they've got the cash. There's no question about that. I think there's there's still discipline in this industry. Will it change? Who knows? I'm sure it's seven or $8,000 gold. It will change, but right now there's still a lot of discipline. They have the cash. Uh most of the excess excess cash flow. I hate that word term excess cash flow. What's excess about cash flow? The more the marrier, right? Um uh let's call it free cash flow. But the free cash flow has gone primarily to paying down debt over the last two years, which in my mind is absolutely the right thing to do to pay down debt first. Um, but no, most of the miners have no debt at all. Well, if they have debt, they are still net debt, net cash positive. >> When you say there's no mania, um, let's evaluate the fundamentals of gold. So, in the past, gold has moved on, let's say, a lower dollar or in some cases a lower real interest rate. Um, in some cases, um, uh, the 10-year yield, uh, dropping significantly, uh, with the long end of the curve, uh, or inflation expectations going up. Now, most of these things are not really happening right now. inflation expectations have risen somewhat. But if you were to look at my screen now, Adrian, I can just show you gold versus uh the tip ETF, which is uh an ETF that tracks the Treasury Inflation Protection Security, which is a proxy for inflation expectations. Year-to date. Um gold has has moved a lot more. Um if if you zoom out, you can start to see this divergence. They moved in the same direction, but gold's just moving much more than inflation expectations are going up. The dollar, as you know, has gone down a lot this year, uh, that may have contributed. But if you take a look once more at gold versus the dollar, uh, once again, you'll see that the dollar kind of stayed flat after its big decline post March, yet gold kept going up. Um, real interest rates after are going up, not down, and they've held an inverse relationship in the past. So, it looks like gold is defying a lot of the fundamentals that have driven up the price before. And people might look at this fact, Adrian, and say, "Well, clearly gold's in a bubble because it's diverging from its fundamentals." How would you respond to that? >> Yeah. Um, I'm not going to say this time is different. >> Yeah. >> Because Templeton said they're the four most dangerous words in the investment lexicon. Let's just say there are some differences this time but last time. [laughter] So normally you and what everything you said is absolutely true. And if I may, it all points to supporting my fundamental thesis on gold and gold stocks which is that gold has been going up for the last three years not because of traditional economic factors. Right? So, who's we know who's been buying gold? It's the central banks. It's the nonofficial Chinese. It's wealthy families in the Middle East concerned about um you know fiscal fiscal deficits around the world and and instability. And those buyers are all of those buyers I just mentioned, but particularly the central banks and the wealthy Middle Eastern individuals and families are if not price agnostic, they're certainly price inelastic. They are not buying because they think, "Wow, this is a great time to buy gold. Look at a chart. There's a cup and handle. There's a this, there's a that, and it might, you know, we might be able to get a 20% move in the next 12 months." They're buying for insurance. They're buying for defensive reasons. They are not and we don't need to go into all the reasons. We know why those different people are buying. Um but but the point is they're not buying they're not buying for the traditional economic reasons that people have bought gold. Now North American investors because we've never had that experience of actually needing gold. the experience that China's had when the people fled to Hong Kong or the experience that Germans had after the Weimar Republic etc etc. Because of that, Americans, North Americans typically don't buy gold as a as a defensive asset. Some people say they do, but very few do. They buy gold when the economic scenario is conducive to gold. And that means a weak economy, high and rising inflation, low and declining interest rates, and a falling dollar. And that is precisely the opposite of the environment that we've had for the past 3 years or I should say is the opposite of the narrative around the economy that we've had for the past 3 years. So if I may, at the same time that central banks around the world, Chinese nonofficial sector, wealthy families in the Middle East have been buying gold for their own reasons and buying gold regardless of price. North Americans have not been buying gold because the environment has not been conducive. Right? And that's the reason that the gold stocks have lagged. When I say lag, they haven't lagged in percentage terms, but they have not exhibited the leverage to gold that they normally exhibit be a because there are other buyers of gold pushing gold up higher than it otherwise would move purely on economics and B because North American investors, ordinary everyday investors have not been participating and they're the people that buy North American gold stocks. You know, the central bank of Poland doesn't decide whether to buy Newmont or Baric, you know, Mrs. Wang or whatever in in Shanghai, she doesn't say, "hm, I'm worried about the banking system. Let me have a little piece of Agnigo today." No. So, they don't buy stocks. They buy bullion. And so I think what you what you argued um which is all true is precisely uh is precisely why I'm saying that the public has not participated why we're why we're still closer to the beginning of this move than we are to the end when the economic scenario in the US changes and we can talk about that if you want but let's just say when it changes as it clearly is you know the dollar had the strongest decline first half decline this year and even though it hasn't gone down much more let's just say the in the first the first half decline was the was the strong the largest first half decline in the dollar since 1974 and even though it has not gone down much more since then we can agree I think that the recovery rally has been very very anemic so you've got a weak dollar relatively weak dollar you've an economy that is clearly showing signs of weakness particularly on the labor front. You know, if if even Jerome Powell, who two months ago said the labor market in the US was solid, if if if even he is thinking that there's weakness, there's weakness there, there's pick up in inflation. At the minimum, we can say that inflation has not been conquered. Inflation remains not only above the Fed's arbitrary target, but it also remains above where it was for the 5 years before COVID, which was a spike in inflation. Um and of course interest rates are moving down slowly, stubbornly um but but they're moving down. They're not moving up. And so the economic scenario is changing to one the North American economic scenario is changing to one that is conducive uh for gold and gold assets. In my view, >> I I I think it's just a um precarious part of human nature to always find a reason for why things have happened. But here I am looking for a reason for why this massive rally happened this summer. Everything you've talked about, Adrian, has happened over the course of several months, if not years. It's not just overnight inflation happened or overnight the labor market weakened or you know overnight we've had um a deficit and debt uh rising. Uh look at the gold pricing r the gold price rising from 2024 all the way up to the beginning of 2025. It's up already 70% before we had another massive move early in the summer. So remember, recall that gold stayed relatively flat around $3,400 uh from April to August and then we had this parabolic move. I mean, if we were to if I were to push you to explain what all of a sudden drove it up in in in a matter of weeks, uh what would that be? Because like like you said, all these changes happened over time and it would make a lot of sense if gold just steadily rose over time. Um but it it seems to have happened all very suddenly. Uh now one could argue that this is just a consolidating pattern. This was just a longer bull rally. Um and it did gradually rise but uh it still happened. I mean you look at it 114% over the course of a year and a half is rather sudden for gold standard right. >> No absolutely. Well first of all I think you you are 1,000% if such a thing exists. you're absolutely correct in saying, you know, that as humans, we're always looking for an explanation. You think there has to be a fundamental explanation or if you're a technician there has to be a technical explanation but um and it sometimes amuses me frankly when I look at headlines you know you'll see on Bloomberg or not to pick on Bloomberg but you know at 11:00 they'll say gold down because of interest rate fears and then at 12:00 they'll say gold up because of interest rate fears. I mean, you know, markets move up and down, right? Especially in the short, especially in the short term. And sometimes, frankly, and I don't I don't know if this is what you were driving at, but sometimes there really is no specific explanation. Sometimes markets rallies, they just die of exhaustion. you know, at at 4,400 after that kind of rally, even the most dedicated gold bull was probably saying, I think I'll pull back and wait for a week or two. You know, you a market just a a bull a bull move dies of exhaustion, you know, when there's no more people willing to pay those higher prices. Not willing to pay those higher prices at that time. So, there doesn't always have to be a reason. I mean if if you want what happened in the last two months well it wasn't a huge increase in central bank buying we know that the central the last month we've got numbers for or the last month we've got comprehensive numbers for August and in August central bank buying was up on June there was a pause in the couple of months or slowdown in the couple of months before that but but that's August so did central banks suddenly resume buying in September, October? I don't I don't know. I have no reason to think they did. There's nothing to suggest they did. If you look at individual banks that have reported, there's not a huge spike. There was a huge spike in Chinese nonofficial buying. That became a little bit of a mania. So, a a a huge increase there and you can see that by the um premiums on the Shanghai exchange, by the lines outside jewelry shops, by the pick up in imports, you know, which come through Hong Kong. So, you've got numbers. You don't have numbers on how many ounces were bought by, you know, Chinese consumers, but you do have indications that suggest that there was a huge a huge spike um from that source. Um but but you know I mean clearly it had gone too far too fast and it was it was just waiting for a pause. And again the pause when you think about it wasn't caused by anything. I mean you know we had the Gaza peace deal which was 2 weeks before gold peaked and it was actually beginning to look as though it might fall apart the day that gold topped. you had China and and and Trump at it that week. So there was no reason for it to decline because of Now it's changed that that scenario has changed. But so what I'm saying is I don't think there were any fundamental reasons why gold went up the way it did in in October, September, October. And I don't think there were any fundamental reasons why it stopped going up on the 19th or 23rd or whatever the date was. >> Let's go back to miners. I had a guest on my show who said that uh you know he doesn't like gold miners because no matter how far the gold price runs up, miners always find a way to lose money. Can you just comment on that? >> The uh margins right now. How are they doing? >> Well, don't tell me who your guest was because I might. [laughter] >> No, I won't. If I don't know who he is, I'll insult him. Well, maybe he was just buying the wrong stocks. Can I just say that? >> Probably. Yeah, that's possibly. >> Okay. Even Barrack's up 100% this year. Newman's up. Even Newman's up. Agra is up. Kinas is up. Anglo Gold is up. They're all up 100%. >> Yeah, but are they up because of better company performance or just because the gold price is up? I think that's the point this guy was making is that you know these margins are just margins are great. >> Yeah. If if you're a miner producing gold, then the gold price is the number one determinant of how well your company does. No question about that. You know, just as if everybody suddenly stopped eating and living off air, Nestle would no longer be a very good company to own. So, there's no question that the price of gold is is a, you know, the price of gold can forgive a lot of sins. Um, and in a bad market, there's only so much any company can do. But I don't think you can I I honestly don't think you can say that it's all No, I don't think you can say that it's it's all a gold price at all. I mean, you look at a company like Enego, which is, you know, obviously the gold standard, but you look at a company like a keeping costs, well, most of the companies, but keeping costs well under control. little bit up in the last quarter but down in the quarter before. Uh you know very very disciplined. Um no I I don't think you can say it's all the gold price but but clearly clearly if gold goes back to 2000 um all of the gold stocks are going to drop. >> All right. So that goes back to the fundamental question of how you pick a good mining company. So yes the gold price is up some outperform others. How do you pick the outperformers? What are the outperformers doing that are that are helping them maintain better margins, for example? >> Well, no, that's a good question. And I think um I I think you have to ask what you're looking for. If you're looking primarily for beta, you want to buy something, you want to own something that will go up if the gold price goes up, um you're going to buy something different. And if you're looking for alpha, I want the maximum return. If gold goes up, I want a maximum return. You're going to buy something different if you want the lowest risk return, etc., etc. So, um, I mean, I think an awful lot go comes back to management and history. You know, if you look at what management has done in the past, let's face it, all of the pretty much every man, well, that's not true because Newton and Barry both have new management, but the management of most of the companies today, they went through the COVID period. Um, let's just look at how they did during CO. Um, we don't even have to go back, you know, 20 years to see how they performed in a bare market. just how did they perform during COVID? What decisions did they make? Um so I think the key is to look at the management and and what their track record is. Um, and there are companies, whether it's Aigo, uh, whether it's, you know, a smaller company like Fortuna, companies that have just an extremely solid track record of financial discipline, not overpaying, buying at the right time, keeping a strong balance sheet, um, you know, not overlevering, not going crazy on acquisitions, having good mine performance. I mean, good mine performance is critical because you can have a mine and uh I I wouldn't be able to run a mine. I don't know about you, David, but if they you put me in charge of the best mine in the world, we'd be losing money pretty quickly, pretty soon. Um Sure. But some teams like like Aigo, like the Fortuna people um have proven themselves to be very very good at operating mines and getting the most out of those mines. >> Some people have asked me personally, I I own some gold or precious metals or silver. Now that gold has run up a little bit, I want to take some profits and allocate more to other assets. Should I, you know, should I should I take some of that and buy some miners? And that got me thinking, your portfolio allocation of bullion versus miners, does that change when the price of the gold uh runs up considerably? In other words, we're in a bull market or a bare market for that matter. Does your allocation change? And if so, how? >> Oh, definitely. No question. I mean, first of all, I think people should have some gold that is more or less permanent as a defensive position, as an offset to the as a hedge on the rest of the portfolio and so on. So, we're not talking about that permanent insurance position. If you've got gold as an investment, depending on when you bought it, of course, you have done better than you could rationally expect to do from an inert substance that doesn't pay a dividend, right? >> Yeah. >> As as its detractors keep telling us. And I think it is definitely. So what I would say is definitely this will be a good time uh to shift to to shift meaning to sell some of the gold bullion or gold ETFs and move it into the miners that are on a historical basis uh undervalued [clears throat] relative to gold. So the gold stocks are undervalued relative to gold. Now you could go further and say if you look at other commodities like copper, natural gas, oil, um you could argue that those are even more undervalued relative to gold because they've hardly I even though copper's basically at a high but I mean you could pick a handful of copper stocks and even though they've gone up, they are still fundamentally undervalued relative to gold. That's even more true for oil and gas, which of course has just been, you know, that the the it's been anime to own to own those assets. Um, but to answer your question, I certainly think right now would be a good time to trim the gold, take some profits. Of course, there's tax considerations. I'm not getting into that. Um, to to to trim the gold and to buy the gold stock. Some of the gold stocks are still very very undervalued. >> I want to just finish off on the Federal Reserve FOMC decision this week to cut rates by 25 basis points is widely expected. Uh well was not widely expected with Jerome Powell's statement that the December cut is not a foregone conclusion. As soon as he said that the chance of a cut by December uh on the CME Fed watch tool drop from 90 something% to 66%. And um I I wonder if well I'll let you evaluate his statement, but I wonder if uh there should be more hikes or cuts rather. There should be more cuts right now given where the economy is headed. Um basically uh let's just evaluate what the Fed is doing right now. >> Yeah. Well, no, that that well there were two really interesting things from Pal's uh comments. Um uh the second one was about the balance sheet. We can mention that if we remember. >> Yes. >> But I think well what seems clear to me what seems clear is that there is growing dissension in the Fed. So you've got Mirin put on and Trump, you know, um on the sidelines telling them to cut cut cut and there has to be some push back among certain members on the board about that and maybe that has stiffened their senus as Henry V said before the battle of Azakore maybe that has stiffened their senus and so now you've got three fed officers come out in the last 24 powers saying they don't think there should be a cut in December. There was only one one disscent of course on on the quarter point cut that they did this week, but three of them have come out and said there shouldn't. And so I think what Powell was doing, he knows he's now got a divided board, right? Which is unusual for the Fed. He's got a divided board and not only does he have um uh Mirin uh Trump's nominee, but he's got other people who want to be Trump's nominee for chairman, and they're going to obviously be on the on the easing side, and he's got other people who are on the hawkish side. But when you say what should they do, I mean I I think they should abolish themselves, but that's that's perhaps a little more radical than we're looking for right now. The problem is, as we all know, with the dual mandate, they they're fighting a battle on two fronts, and increasingly they have to emphasize one front or the other. They cannot fight on both fronts equally without losing on both fronts like Hitler in the second world war. So you got to pick your battle I think and you know is it inflation which suggests you keep rates where they are or even move them up or is it uh the labor market that is you know slowly deteriorating. people will point to evidence from the states that there hasn't been a big increase in new claims. Uh that doesn't necessarily mean that the labor econom labor market is strong of course because you've also got an increase in continuing claims and you've got an extension of the amount of time that it takes people on unemployment to find new jobs. And so if I were an employee, a dissatisfied employee, not very happy, and I look at that evidence and say, "All my friends tell me it takes them over a year to find a new job. I'm probably not going to go into the boss and have a quit." >> Yeah. >> So, I'm not going to show up on the new claims. I'm going to do everything I can to try to keep that position. But there's no question that there's huge layoffs. um uh you know we've seen that we've seen those announced in the last couple of weeks huge layoffs UPS um or Nestle that's mostly foreign of course but anyway um so the the the problem is that the Fed is fighting two battles um essentially with the same tools and it's really got to emphasize one or the other at some point >> and I'll end on this final question the fact that there were two descents one of them came from the Kansas City president who didn't want any rate cuts at all highlights the fact that within the Fed uh there may not be a go right ahead and cut no matter what mentality. POW himself said that forgot conclusion >> about that. >> What does that mean for gold if let's say there's a little more hesitancy to be dovish going into 2026? Um well remember the other the other thing I said I mentioned uh was the end of the uh QT. So yes uh the Fed announced a QT would officially end December the 1st but it has essentially ended 5 billion a month >> on 6.5 bill trillion dollar balance sheet is is a rounding error. It's essentially ended. So they are going to stop it on December the 1st and all mortgage securities that are running off are being put back into treasuries now, right? All of the mortgage back securities that are running off, the proceeds are going into treasuries. What does that sound like to you, David? It sounds like to me that they are getting ready for QE again. They won't call it QE, but they're getting ready for QE again. And so we might well have a situation and until panel goes and Trump replaces people on the board. We may well get a situation where rates do not come down anymore. But at the same time they introduce QE and that QE would be wildly bullish for gold. Other things being equal, rates not coming down would not be bullish for gold. But I suspect that if they keep rates where they are and don't introduce QE, you're probably going to get the economy slow more rapidly than it otherwise would, which again will be bullish for gold. >> I think we can end it here. Thank you very much, Adrian. Uh we can follow up soon. Plenty more to discuss um in the coming months. Where can we follow you right now? >> It's uh adrienday.com. That's the website. >> All right, simple enough. Go to adrienday.com to stay uptodate and uh we'll see you next time, Adrien. Take care. >> See you. Thank you so much. Thank you. >> Thank you. And thank you for watching. Don't forget to like, subscribe.