Adrian Day: Gold Far from Top, Two Triggers for Next Price Move
Summary
Gold Outlook: Guest views the recent pullback as a normal correction within a broader bull market, far from a long-term top due to lack of public mania and fund inflows.
Macro Triggers: Potential catalysts for the next leg up include a stock market rollover driven by rising unemployment and reduced 401(k) flows, renewed inflation pressures, and a weaker dollar.
Policy Shift: The end of QT and likely progression toward QE over the next six months are highlighted as strongly bullish for gold, regardless of imminent Fed leadership changes.
Portfolio Strategy: Stagger entries and keep cash for opportunities; for underweight investors start building positions in quality names like Franco-Nevada (FNV) and value plays like Fortuna Silver Mines (FSM).
Royalty Companies: Bullish on consolidation in gold royalties, where scale lowers cost of capital and diversifies risk; cites Franco-Nevada’s resilience during Cobre Panama shutdown as an example of size benefits.
New Capital Entrants: Fresh money entering royalty space is positive, but discipline and valuation remain crucial; concerns raised that some newcomers prioritize size and speed over value.
Big Tech Risks: Notes potential rotation from mega-cap tech as companies like NVDA, AAPL, MSFT, AMZN, and META face AI capex risks and passive flow dynamics, which could indirectly support gold.
Overall Stance: Remains bullish on gold and gold equities with valuations still attractive; recommends patience, risk discipline, and selective accumulation.
Transcript
[music] I'm Charlotte Mloud with investingnews.com and here today with me is Adrien Day, president of Adrien Day Asset Management. Thank you so much for being here. Great to have you. >> Thank you for asking me again, Charlotte. >> Of course, it's always good to catch up with you and we've made it to nearly the end of the third day at the New Orleans Investment Conference. I think at this point it's fair to ask you about sentiment on the show floor. Any key takeaways you have? >> Yeah, I mean look, um, sentiment of the New Orleans Gold Conference, I'm not quite sure how much that tells us about sentiment in general, but it's certainly a a a very upbeat crowd. It's a good crowd. um meaning in terms of numbers it's good but also um New Orleans always gets good people and sophisticated people and um but the mood is really good. It's it's a lot more upbeat than it has been um in some years past and and people for the largest part don't seem overly concerned about the pullback. >> That is where I wanted to start with the pullback because we since we last spoke we've seen the big runup in gold. Now we're in this pullback and I'm wondering if we can talk about how how you're seeing that. Is that just a natural correction that we needed? >> Yeah, I I think so. I mean, look, the truth is, and we all know this, even if we only know it in retrospect, but gold just ran up far too far, far too fast. Particularly, you know, since August, I mean, frankly, even if you look back at the last two years, it's it's been an extraordinary run for gold. But particularly in August and September um of September, October, gold just moved too far too fast and you [clears throat] were beginning to see some sort of indications um that we were going to have a temporary top. Um but I don't I mean personally I just don't think it's anything to be overly concerned about. Of course, you know, when you look at your statement and it's down 15% from what it was, you know, a month ago, that is of concern. I don't think it's going to be a very shallow I don't think it's going to be a very deep um correction but it's clearly you know not clearly but it's probably going to last you know it could easily last a couple of months but I say all that because I mean first of all you have to look is is this a top that's the fundamental question is have we seen the top and I I think we are so far from the top um and there is just no evidence you know when when you're at a top you get huge public participation. You get a manic feel. So, you hear about gold at dinner parties. You hear about gold on CNBC every night. Um, you know, there's massive inflows into into uh uh the gold funds. You're not seeing we haven't seen any of that. So, I think we're so far from from a from a top. Um, and you know, compare it with 2011 or 1980, uh, where you could see massive inflows coming in at the top. We're not we're not there yet at all. >> So, that that's very reassuring to hear. So, we're in this pullback could last a couple of months, but not likely to be very deep. I think people are are looking at it then and wondering, all right, so what would be the trigger for the next move up in the gold price in that case? And I think we talked about the western investor coming into the the market when we were speaking in the summer. So any any thoughts there on that? Yeah, I I I I think um what's going Yes, I think the western investor typically will move into gold when the economic environment when the economic factors favor gold. the North American investor unlike you know uh central banks unlike Chinese investors, Asian investors, Middle East investors and even European investors. We have no real experience of gold being really valuable as an asset of last resort. You know in Germany they still think about the VHimar Republic and the runaway inflation. Nobody lives nobody alive today lived through it but they still think about it. You know their grandparents told them about it. Um, same with Italy, same with France, uh, and of course, you know, Hong Kong, people who fled from China carrying their gold to enable them to start, uh, start life again. We just don't have that kind of experience in the US. And so, in the US, people typically typically say they buy some gold for insurance, right? But but it's just not in the DNA. Typically people in the US buy gold as an investment when the economic environment is correct is right. And what that means is a weakening economy, low and declining interest rates, high and rising um inflation and and a weak dollar. And until recently, the narrative, at least the narrative, if not the reality, has been completely the opposite of that. And so if you think back a year with a strong economy and a strong labor market, solid, Jerome Powell told us um you know inflation coming down dramatically um and and um uh the dollar reasonably strong um that was not conducive to buying gold. So I think what the trigger might be next time is one of two things. either the stock market rolling over so people with profits in Nvidia and Microsoft start to look for somewhere else to put their money or it could be a pickup of inflation because people think of gold as an inflation hedge. You ask 100 people in the street they'll say oh well gold is a good inflation hedge. We can debate that but but that's so that's what will make people buy gold I think. Well, and when you talk about a rolling over in the stock market, what type of a a decline there are are you thinking of? >> Um, >> look, the reality is you very rarely you do sometimes, but it's unusual to get just a rotation where the market keeps on going up, but things just rotate nicely. Um, so I think if if you see I I I suspect what's going to happen with the stock market, and this is just my suspicion, what's going to trigger a decline in the stock market is a rise in unemployment. And a rise in unemployment will trigger because with a rise in unemployment, that means less contributions into 401ks, less money going into the market automatically. I mean, at the moment, all of that 401k money is going into the market automatically, right? paycheck after paycheck after paycheck. It's going in and most of that money, not all of it, but most of that money is either going into target date funds or target funds or into passive funds. And so therefore, the market becomes a self-reinforcing mechanism. The more money pours in, the more money pours into Nvidia. The more money that pours in, the higher Nvidia goes. And so now, the more money pours into Nvidia because it's just passive. It's going into market leaders. So you start to see unemployment and you start to see a reduction in 401 flows which again is automatic money and no one's making a decision as to what to buy or whether to buy. Um then I think you're going to see the market roll over. I mean if you look at I mean a company like Apple for example I mean we could talk about that a lot and I could say that it's overvalued and they've got a problem with lack of growth and they've got this and they've got that but they have a really solid balance sheet. So Apple's not going out of business unless they do something really stupid with money. Do you look at a company like, excuse me, like Nvidia, which is lending money to people to buy their product, you know, that never ends well. That never We've been there before back in the dot bubble, and it just doesn't end well. I'm not going to call it a Ponzi scheme, but I mean, um, or illegal, in fact, or unethical, but it just doesn't lend. If you have to lend people money to buy your product, that's just not a good sign. So I I I think we could easily see a a 20 or 30% decline in Nvidia easily before you see that in say Apple or Microsoft even. Although yeah, I mean [clears throat] the problem with some of these companies like Amazon, but more so like um sorry, I'm not into social media. Meta Meta, sorry, like like Meta, like um u Microsoft spending an awful lot of money on AI, an awful lot of money. And how much of that is sort of going to prove to be wasted is a question mark. But I suspect that in five years time we'll look back and say, "What on earth were they thinking?" >> I can I could certainly believe that. And it it's funny you mentioned that. We were just looking earlier this afternoon at uh a graphic of all the big tech companies essentially trading money between themselves back and forth. Yeah. Related to AI. Well, then you look at some of these companies. I don't know a quote because I I'm I'm not sure which company's which, but some of them are spending as much as 30% of their revenue revenue on AI. Not their profits, but their revenue. That's an astonishing amount of capital on something that has yet to be proven in my view. And there'll probably be a new iteration in five years anyway. >> So, we took a look at that's the stock market rollover that you mentioned. And then you also pointed to inflation. So we should we should go over what's happening there as well because we did just have the latest Fed meeting where we got the interest rate cut as was expected. I think it's always helpful to ask you about reading between the lines of what Powell says and and if we can take a look at what might be coming from the Fed moving forward. >> Yeah. I mean to me there were two big takeaways from that. The first one was is clearly a divided Fed. And of course, the fact that three Fed members came out the following day and said that they didn't want a December hike just reinforce the fact that it's a def it's a divided Fed. And so Powell, you know, that's why he pushed back so much on a December cut back, a December cut because it's not a done deal at the moment. Um uh so that was one one big message that the December cut is not you know in the in the >> foregone >> not a foregone conclusion. I frankly thought we would get a December one and I thought the October one was a question mark but anyway we'll see. Um I mean personally I think the odds still favor that we will get a cut but at least it's not it's not a foregone conclusion. Um, but the second thing that I think was a really big takeaway from that meeting, apart from the fact that he looked a lot more tired than he has [panting and laughter] uh in months past, the other big takeaway was the end of QT. And you know, QT, we talked about this last time, I'm pretty sure. QT is effectively ended anyway. When they cut it in March or April, they cut it down to 5 billion a month. 5 billion a month of roll off on a uh $6.5 trillion balance sheet is is a little more than a rounding error. So effectively they had already finished it. But he actually announced as of December 1 there will be no more QT. Okay. He also said that any money that rolls over from any money from mortgage back securities that rolls over that matures will now be going will be put back into treasuries. Excuse me. Well, that begins to sound an awful lot like QE to me. The beginnings of QE. And I suspect that that's going to be the next We talked about this before. I was a bit of an outlier. I was certainly a little early on that cuz I thought we'd be seeing it in in the fall. Um I think the government shutdown kind of um delayed the timing on that because if the government shut down you don't need so much money. Um although as a tangent it's really ironic the government shut down but they still seem to be spending 99% of what they spent before. Um but anyway, cut ending QT for sure and putting money that rolls over matures in Q in in mortgage securities into treasuries really sounds like me to the beginning of QE and I think that's going to be the big story for the next 6 months. Now the big uh uh question mark or spanner in the works of course is that Powell is going to step down. So we've got a and so we'll have a bit of a new board, new composition, etc. But I think that's going to be the next big move. And that is just wildly bullish for gold. Wildly bullish. >> Yeah, it's very interesting. I do remember when we were talking previously, you you talked about effectively the end of QT. You were worried about QE. Now I am hearing more people start to talk about that. And I wonder so how how are you seeing that potential beginning of QE? Is that something that comes in tandem with the new Fed chair or or before? How? Yeah. Well, I mean, honestly, I think if Pal remained chairman for the next 12 months, which isn't going to happen, I think we would get there anyway, because he's reluctant to cut rates, both because he doesn't want to make it seem like he's just doing what Trump tells him to do, but and that's just a human natural human reaction, but equally because he doesn't want to cut rates too fast, too too much too fast, and get inflation out of control. And so as it were splitting your monetary easing between cut reducing interest rates and cub and buying and uh buying uh treasuries is a way to lift a little bit of a pressure in the near term off of off inflation. So I think we would see that anyway. Um but certainly Mirin and you know if if Trump appoints more people like him, they have absolutely no they will have no compunction about just printing money to buy treasuries. >> That's that's another topic I've been trying to ask around about who who people think may be the next Fed chair. Is it is it just too soon to tell at this point? >> Yeah, I think it's too soon to tell. Besson said he has a list of five people. he's doing final interviews and then he'll narrow that down and present the list to Trump. Um yeah, I don't have any particular I'm not betting on who it is. All I will bet on is it will be someone who wants to ease monetary policy. >> Yeah, I think I think that's >> that's an easy one, right? >> Yeah, that's fair. Fair enough. I think maybe that's all we could say at this point. All right. So, if we if we come back around to gold, we've talked about how how long this pullback may be, what may happen after. I think a lot of investors at this event are wondering, all right, so how how do I best position myself right now? Should I be buying gold and gold stocks right now? Which ones should I be looking at? Any any ideas on strategy that you could share? >> Yeah. Yeah. And it's a little bit it's not simple black and white. Um, I think if you've got an investor who's got a good gold portfolio, maybe they sold a little bit last month, so they have a little bit of cash, I don't think they need to be in that person needs to be in any rush to spend the last dollar that they've got. Or if you're a conservative investor and you've allocated 20% to gold and you did sell some and you're now at 17 or 16, no rush to invest those last percentage points of allocation for two reasons. One is unless you sold everything, you've still got more money in gold today than you did a year ago. Right? If you sold 20%, 30%. You've still got more in gold today than you did at the beginning of the year. So, you've got a good allocation. And the truth is, we never know when these markets will will will drop. I think it's always a good idea to have some money in reserve either for a a broad decline or frankly for a specific stock decline. Something happens to the stock is temporary. If you've got the money, you follow the stock, you know you want it, and something happens, you can just go in and buy it immediately. You don't have to say, "Oh, let's see. What should I sell? Oh, do I want to sell this or do Oh, I've missed it. It's gone up." So, it's always a good idea to have some cash in reserve. Now, at the same time, I would say that if you're new to this sector, if you are meaningfully underweight, I talked to a person today who said he had sold his entire gold portfolio 3 weeks ago, which is pretty close to the top. If you're in that kind of position, I would definitely say start buying and start buying um pretty much start buying a with with small amounts of the really best quality companies like Aigo and Franco which have come down a lot could come down a lot more but but um you know they're reasonable reasonable valuations and then start looking offers really good quality companies that just look cheap and there's lots of those and you know I mean I could mention like Fortuna now Fortuna has not dropped as much as some of the other stocks and the reason it hasn't is because I think people are beginning to recognize the quality and the valuation but here's a company with no debt essentially no debt uh with three solid minds none of them is going to is depleting anytime soon with another mine that's going to come into production at the end of the year next year, beginning of 27, low cash costs, really strong balance sheet, and yet it's trading a seven times cash flow. I mean, and 10 times free cash flow. Those that's those are extraordinary valuations for a gold company. Extraordinary. And so just look around and and and and and I I would say if a person came to me today whether it's with you know 20,000 or 2 million and said I'm new to gold I have nothing but I think I should have nothing. I would put 50% of that to work pretty well 30% pretty soon, pretty immediate and yeah 30% pretty immediate and then look to put another 20 or 30% you know as as opportunities present themselves as they will. >> I think that's that's very helpful. And one more point on the gold stocks because I know you like the royalty space and we've been seeing quite a bit of M&A activity there and I wonder I wonder what you make of it. I know all the deals are different, but do you like what you're seeing there in general? Anything you'd pull out for us to notice? >> Yeah, I mean you're talking primarily presumably about Tether and moving into the space. >> That's definitely interesting. >> That's definitely interesting. That's a good way of putting it. Look, I think it's really good that the space is getting some new money. You know, not from traditional gold investors, but we're getting some new money into the space. That's definitely a positive. And frankly, consolidating the juniors is really a positive. um you know there's too many junior royalty companies and as I've said and there's too many expiration companies but with royalty companies size really does matter because not only do you have those large GNAs which you would also have an expiration company so you have large GNA but also the bigger you get then the lower your cost of capital so if for example Metalla and EMX X and O Cisco are all chasing a particular deal and they all want it. O Cisco has so much lower capital costs than the other two so it can afford to pay more and get the same returns. That's really critical that people understand that and that is a huge advantage. And so that means that the the smaller companies, unless they have some some niche way of sourcing royalties, which some of them do, it means they're always at a disadvantage. Uh the other thing, of course, is that the larger you get, the more diversified you can be, which means a one mine having a problem. Remember, Very companies don't control the mines, they don't run them. Something happens, it's someone else doing it. uh for good or bad it may not have been the operator's fault but I mean the royalty company can do nothing about it and um yeah the the larger you are then the less any one problem is to your portfolio and and just a really clear example of that of course is Cobre Panama which was Franco's largest royalty and when Cobra Panama was shut down by the government it hurt Franco's stock But the company was at no risk. There was no risk of Franco going out of business because their largest mine was shut down. But if I won't name names now, but if one or two companies I can think of right now, smaller companies, if their largest mine shut down, that will put the company at risk because it would be 80 or 100% of their revenue. So um size matters in in um in in royalty companies. Anyway, we were talking about Teddler. Yes. So, I think I think the fact that they're coming in with fresh money, they have lots of money, lots of capital, and they're trying to consolidate the business. I think all of that is good and it's going to be good for the sector and good for the individual companies. The bad thing, frankly, and I'm probably going to get some push back from some of my friends, but um I think the bad thing is twofold. One is I think it's fair to say that if you asked Juan Centuri from Tether what are your priorities when you're looking for a royalty deal or a royalty company what are your priorities it's is it big can we do it can we do it fast he's not saying how much is it going to cost us is it good value whereas in the royalty business I won't name names but if you ask the CEO of Franco and Weeden and a Cisco what are your priorities they don't say well is it something big that we can do soon. They say is a good value and I'm not sure that Tether I'm I'm not sure that they put value and discipline at the top of their list. Um that may not have much of a negative impact, you know, for a year or two, but at some point that will have a that'll have an impact. >> Yeah, I I think that's a fair concern. So, thank you for outlining that. and it's time for me to send you back out onto the show floor, but any final thoughts you would leave investors with? >> Yeah, I mean the first thought, and it doesn't apply to people at this show, I don't think, but I I know it generally it does. Just don't let this don't let this correction spook you. Can we say spook? >> I guess we're in New Orleans and it's Halloween, so we can Yeah. Okay. um uh you know it's perfectly normal in the middle of a bull market to have a significant correction. This really isn't even a correction yet. Let's not forget that. This is just a pullback. But we haven't had a correction in this bull market since gold bottomed in in in well if you go back just to 3 years. We haven't had a correction and and it's perfectly normal to get corrections. So, you think back to 2006 where the price of gold gold dropped about 30% in in in a week. Does anyone remember that? I mean, nobody remembers that anymore. It's just a blip on the chart. Now, when you were living through it, it was awful. But nobody it it's just meaningless at this point. So, these sort of things are normal. So, what you really have to decide the critical I'm sorry, this was a closing thought, wasn't it? >> Nope. Just keep going. >> The thing you really have to decide is, do I think this is the top like 2011, like 1980, and we're going to go into the wilderness for another 10 or 15 years, or is it just a correction? If it's just a correction, you absolutely do not panic and do not even think of selling stuff after they've already dropped like this. And on the other side, I mean, if you really honestly think this is a top, I feel sorry for you. But there's no No, seriously, what is the evidence for thinking this is a top other than the fact that I remember 2011 and I don't want to live through it again? Well, that's if I may and that's what I hear from so many people, but if I may, that is not, you know, rational analysis. That's just emotion. So, what is if you analyze a market, what what what are the reasons to say this is the top? And in my view, there are no reasons whatsoever. The fundamentals are still positive for gold. The people who have been buying gold are still buying it for the same reasons. The reasons haven't gone away. The valuations of the gold stocks are still very, very cheap. And lastly, and this will be my last, if you look at a log graph, right? Okay. So, for the last two months, we've said, "Oh my gosh, look at gold. It goes up $100 every day. Oh my gosh, another new high. Oh my gosh, another new high." Look at look at it on a log graph. It is I won't say insignificant but it is a small rally relative to uh 201011 and 1979 1980. So relative to the previous blowoff tops this is a meaningless rally. We only look at it in a log graph. That's what we should always do because that tells us what the percentage gains are which is what's important. Um so yeah um bottom line I don't think this is a top. I don't think this is anywhere near a top. And if I may use my cricket analogy again, it's as though the opening batsmen have now been bowled out and you got number three and number four batsmen come out to play. >> Very good. >> And for context, there's 11 batsmen. >> That helps. I've been hearing so many baseball ones, so I appreciate a different one to to close off on. Well, thank you so much. Very reassuring for me as always and hopefully for the audience as well. Thank you very much. Well, thank you Charlotte for having me and thank you for listening people. >> Of course. >> Of course. >> No, of course. And and once again, I'm Charlotte Mloud with investingnews.com and this is Adrien Day.
Adrian Day: Gold Far from Top, Two Triggers for Next Price Move
Summary
Transcript
[music] I'm Charlotte Mloud with investingnews.com and here today with me is Adrien Day, president of Adrien Day Asset Management. Thank you so much for being here. Great to have you. >> Thank you for asking me again, Charlotte. >> Of course, it's always good to catch up with you and we've made it to nearly the end of the third day at the New Orleans Investment Conference. I think at this point it's fair to ask you about sentiment on the show floor. Any key takeaways you have? >> Yeah, I mean look, um, sentiment of the New Orleans Gold Conference, I'm not quite sure how much that tells us about sentiment in general, but it's certainly a a a very upbeat crowd. It's a good crowd. um meaning in terms of numbers it's good but also um New Orleans always gets good people and sophisticated people and um but the mood is really good. It's it's a lot more upbeat than it has been um in some years past and and people for the largest part don't seem overly concerned about the pullback. >> That is where I wanted to start with the pullback because we since we last spoke we've seen the big runup in gold. Now we're in this pullback and I'm wondering if we can talk about how how you're seeing that. Is that just a natural correction that we needed? >> Yeah, I I think so. I mean, look, the truth is, and we all know this, even if we only know it in retrospect, but gold just ran up far too far, far too fast. Particularly, you know, since August, I mean, frankly, even if you look back at the last two years, it's it's been an extraordinary run for gold. But particularly in August and September um of September, October, gold just moved too far too fast and you [clears throat] were beginning to see some sort of indications um that we were going to have a temporary top. Um but I don't I mean personally I just don't think it's anything to be overly concerned about. Of course, you know, when you look at your statement and it's down 15% from what it was, you know, a month ago, that is of concern. I don't think it's going to be a very shallow I don't think it's going to be a very deep um correction but it's clearly you know not clearly but it's probably going to last you know it could easily last a couple of months but I say all that because I mean first of all you have to look is is this a top that's the fundamental question is have we seen the top and I I think we are so far from the top um and there is just no evidence you know when when you're at a top you get huge public participation. You get a manic feel. So, you hear about gold at dinner parties. You hear about gold on CNBC every night. Um, you know, there's massive inflows into into uh uh the gold funds. You're not seeing we haven't seen any of that. So, I think we're so far from from a from a top. Um, and you know, compare it with 2011 or 1980, uh, where you could see massive inflows coming in at the top. We're not we're not there yet at all. >> So, that that's very reassuring to hear. So, we're in this pullback could last a couple of months, but not likely to be very deep. I think people are are looking at it then and wondering, all right, so what would be the trigger for the next move up in the gold price in that case? And I think we talked about the western investor coming into the the market when we were speaking in the summer. So any any thoughts there on that? Yeah, I I I I think um what's going Yes, I think the western investor typically will move into gold when the economic environment when the economic factors favor gold. the North American investor unlike you know uh central banks unlike Chinese investors, Asian investors, Middle East investors and even European investors. We have no real experience of gold being really valuable as an asset of last resort. You know in Germany they still think about the VHimar Republic and the runaway inflation. Nobody lives nobody alive today lived through it but they still think about it. You know their grandparents told them about it. Um, same with Italy, same with France, uh, and of course, you know, Hong Kong, people who fled from China carrying their gold to enable them to start, uh, start life again. We just don't have that kind of experience in the US. And so, in the US, people typically typically say they buy some gold for insurance, right? But but it's just not in the DNA. Typically people in the US buy gold as an investment when the economic environment is correct is right. And what that means is a weakening economy, low and declining interest rates, high and rising um inflation and and a weak dollar. And until recently, the narrative, at least the narrative, if not the reality, has been completely the opposite of that. And so if you think back a year with a strong economy and a strong labor market, solid, Jerome Powell told us um you know inflation coming down dramatically um and and um uh the dollar reasonably strong um that was not conducive to buying gold. So I think what the trigger might be next time is one of two things. either the stock market rolling over so people with profits in Nvidia and Microsoft start to look for somewhere else to put their money or it could be a pickup of inflation because people think of gold as an inflation hedge. You ask 100 people in the street they'll say oh well gold is a good inflation hedge. We can debate that but but that's so that's what will make people buy gold I think. Well, and when you talk about a rolling over in the stock market, what type of a a decline there are are you thinking of? >> Um, >> look, the reality is you very rarely you do sometimes, but it's unusual to get just a rotation where the market keeps on going up, but things just rotate nicely. Um, so I think if if you see I I I suspect what's going to happen with the stock market, and this is just my suspicion, what's going to trigger a decline in the stock market is a rise in unemployment. And a rise in unemployment will trigger because with a rise in unemployment, that means less contributions into 401ks, less money going into the market automatically. I mean, at the moment, all of that 401k money is going into the market automatically, right? paycheck after paycheck after paycheck. It's going in and most of that money, not all of it, but most of that money is either going into target date funds or target funds or into passive funds. And so therefore, the market becomes a self-reinforcing mechanism. The more money pours in, the more money pours into Nvidia. The more money that pours in, the higher Nvidia goes. And so now, the more money pours into Nvidia because it's just passive. It's going into market leaders. So you start to see unemployment and you start to see a reduction in 401 flows which again is automatic money and no one's making a decision as to what to buy or whether to buy. Um then I think you're going to see the market roll over. I mean if you look at I mean a company like Apple for example I mean we could talk about that a lot and I could say that it's overvalued and they've got a problem with lack of growth and they've got this and they've got that but they have a really solid balance sheet. So Apple's not going out of business unless they do something really stupid with money. Do you look at a company like, excuse me, like Nvidia, which is lending money to people to buy their product, you know, that never ends well. That never We've been there before back in the dot bubble, and it just doesn't end well. I'm not going to call it a Ponzi scheme, but I mean, um, or illegal, in fact, or unethical, but it just doesn't lend. If you have to lend people money to buy your product, that's just not a good sign. So I I I think we could easily see a a 20 or 30% decline in Nvidia easily before you see that in say Apple or Microsoft even. Although yeah, I mean [clears throat] the problem with some of these companies like Amazon, but more so like um sorry, I'm not into social media. Meta Meta, sorry, like like Meta, like um u Microsoft spending an awful lot of money on AI, an awful lot of money. And how much of that is sort of going to prove to be wasted is a question mark. But I suspect that in five years time we'll look back and say, "What on earth were they thinking?" >> I can I could certainly believe that. And it it's funny you mentioned that. We were just looking earlier this afternoon at uh a graphic of all the big tech companies essentially trading money between themselves back and forth. Yeah. Related to AI. Well, then you look at some of these companies. I don't know a quote because I I'm I'm not sure which company's which, but some of them are spending as much as 30% of their revenue revenue on AI. Not their profits, but their revenue. That's an astonishing amount of capital on something that has yet to be proven in my view. And there'll probably be a new iteration in five years anyway. >> So, we took a look at that's the stock market rollover that you mentioned. And then you also pointed to inflation. So we should we should go over what's happening there as well because we did just have the latest Fed meeting where we got the interest rate cut as was expected. I think it's always helpful to ask you about reading between the lines of what Powell says and and if we can take a look at what might be coming from the Fed moving forward. >> Yeah. I mean to me there were two big takeaways from that. The first one was is clearly a divided Fed. And of course, the fact that three Fed members came out the following day and said that they didn't want a December hike just reinforce the fact that it's a def it's a divided Fed. And so Powell, you know, that's why he pushed back so much on a December cut back, a December cut because it's not a done deal at the moment. Um uh so that was one one big message that the December cut is not you know in the in the >> foregone >> not a foregone conclusion. I frankly thought we would get a December one and I thought the October one was a question mark but anyway we'll see. Um I mean personally I think the odds still favor that we will get a cut but at least it's not it's not a foregone conclusion. Um, but the second thing that I think was a really big takeaway from that meeting, apart from the fact that he looked a lot more tired than he has [panting and laughter] uh in months past, the other big takeaway was the end of QT. And you know, QT, we talked about this last time, I'm pretty sure. QT is effectively ended anyway. When they cut it in March or April, they cut it down to 5 billion a month. 5 billion a month of roll off on a uh $6.5 trillion balance sheet is is a little more than a rounding error. So effectively they had already finished it. But he actually announced as of December 1 there will be no more QT. Okay. He also said that any money that rolls over from any money from mortgage back securities that rolls over that matures will now be going will be put back into treasuries. Excuse me. Well, that begins to sound an awful lot like QE to me. The beginnings of QE. And I suspect that that's going to be the next We talked about this before. I was a bit of an outlier. I was certainly a little early on that cuz I thought we'd be seeing it in in the fall. Um I think the government shutdown kind of um delayed the timing on that because if the government shut down you don't need so much money. Um although as a tangent it's really ironic the government shut down but they still seem to be spending 99% of what they spent before. Um but anyway, cut ending QT for sure and putting money that rolls over matures in Q in in mortgage securities into treasuries really sounds like me to the beginning of QE and I think that's going to be the big story for the next 6 months. Now the big uh uh question mark or spanner in the works of course is that Powell is going to step down. So we've got a and so we'll have a bit of a new board, new composition, etc. But I think that's going to be the next big move. And that is just wildly bullish for gold. Wildly bullish. >> Yeah, it's very interesting. I do remember when we were talking previously, you you talked about effectively the end of QT. You were worried about QE. Now I am hearing more people start to talk about that. And I wonder so how how are you seeing that potential beginning of QE? Is that something that comes in tandem with the new Fed chair or or before? How? Yeah. Well, I mean, honestly, I think if Pal remained chairman for the next 12 months, which isn't going to happen, I think we would get there anyway, because he's reluctant to cut rates, both because he doesn't want to make it seem like he's just doing what Trump tells him to do, but and that's just a human natural human reaction, but equally because he doesn't want to cut rates too fast, too too much too fast, and get inflation out of control. And so as it were splitting your monetary easing between cut reducing interest rates and cub and buying and uh buying uh treasuries is a way to lift a little bit of a pressure in the near term off of off inflation. So I think we would see that anyway. Um but certainly Mirin and you know if if Trump appoints more people like him, they have absolutely no they will have no compunction about just printing money to buy treasuries. >> That's that's another topic I've been trying to ask around about who who people think may be the next Fed chair. Is it is it just too soon to tell at this point? >> Yeah, I think it's too soon to tell. Besson said he has a list of five people. he's doing final interviews and then he'll narrow that down and present the list to Trump. Um yeah, I don't have any particular I'm not betting on who it is. All I will bet on is it will be someone who wants to ease monetary policy. >> Yeah, I think I think that's >> that's an easy one, right? >> Yeah, that's fair. Fair enough. I think maybe that's all we could say at this point. All right. So, if we if we come back around to gold, we've talked about how how long this pullback may be, what may happen after. I think a lot of investors at this event are wondering, all right, so how how do I best position myself right now? Should I be buying gold and gold stocks right now? Which ones should I be looking at? Any any ideas on strategy that you could share? >> Yeah. Yeah. And it's a little bit it's not simple black and white. Um, I think if you've got an investor who's got a good gold portfolio, maybe they sold a little bit last month, so they have a little bit of cash, I don't think they need to be in that person needs to be in any rush to spend the last dollar that they've got. Or if you're a conservative investor and you've allocated 20% to gold and you did sell some and you're now at 17 or 16, no rush to invest those last percentage points of allocation for two reasons. One is unless you sold everything, you've still got more money in gold today than you did a year ago. Right? If you sold 20%, 30%. You've still got more in gold today than you did at the beginning of the year. So, you've got a good allocation. And the truth is, we never know when these markets will will will drop. I think it's always a good idea to have some money in reserve either for a a broad decline or frankly for a specific stock decline. Something happens to the stock is temporary. If you've got the money, you follow the stock, you know you want it, and something happens, you can just go in and buy it immediately. You don't have to say, "Oh, let's see. What should I sell? Oh, do I want to sell this or do Oh, I've missed it. It's gone up." So, it's always a good idea to have some cash in reserve. Now, at the same time, I would say that if you're new to this sector, if you are meaningfully underweight, I talked to a person today who said he had sold his entire gold portfolio 3 weeks ago, which is pretty close to the top. If you're in that kind of position, I would definitely say start buying and start buying um pretty much start buying a with with small amounts of the really best quality companies like Aigo and Franco which have come down a lot could come down a lot more but but um you know they're reasonable reasonable valuations and then start looking offers really good quality companies that just look cheap and there's lots of those and you know I mean I could mention like Fortuna now Fortuna has not dropped as much as some of the other stocks and the reason it hasn't is because I think people are beginning to recognize the quality and the valuation but here's a company with no debt essentially no debt uh with three solid minds none of them is going to is depleting anytime soon with another mine that's going to come into production at the end of the year next year, beginning of 27, low cash costs, really strong balance sheet, and yet it's trading a seven times cash flow. I mean, and 10 times free cash flow. Those that's those are extraordinary valuations for a gold company. Extraordinary. And so just look around and and and and and I I would say if a person came to me today whether it's with you know 20,000 or 2 million and said I'm new to gold I have nothing but I think I should have nothing. I would put 50% of that to work pretty well 30% pretty soon, pretty immediate and yeah 30% pretty immediate and then look to put another 20 or 30% you know as as opportunities present themselves as they will. >> I think that's that's very helpful. And one more point on the gold stocks because I know you like the royalty space and we've been seeing quite a bit of M&A activity there and I wonder I wonder what you make of it. I know all the deals are different, but do you like what you're seeing there in general? Anything you'd pull out for us to notice? >> Yeah, I mean you're talking primarily presumably about Tether and moving into the space. >> That's definitely interesting. >> That's definitely interesting. That's a good way of putting it. Look, I think it's really good that the space is getting some new money. You know, not from traditional gold investors, but we're getting some new money into the space. That's definitely a positive. And frankly, consolidating the juniors is really a positive. um you know there's too many junior royalty companies and as I've said and there's too many expiration companies but with royalty companies size really does matter because not only do you have those large GNAs which you would also have an expiration company so you have large GNA but also the bigger you get then the lower your cost of capital so if for example Metalla and EMX X and O Cisco are all chasing a particular deal and they all want it. O Cisco has so much lower capital costs than the other two so it can afford to pay more and get the same returns. That's really critical that people understand that and that is a huge advantage. And so that means that the the smaller companies, unless they have some some niche way of sourcing royalties, which some of them do, it means they're always at a disadvantage. Uh the other thing, of course, is that the larger you get, the more diversified you can be, which means a one mine having a problem. Remember, Very companies don't control the mines, they don't run them. Something happens, it's someone else doing it. uh for good or bad it may not have been the operator's fault but I mean the royalty company can do nothing about it and um yeah the the larger you are then the less any one problem is to your portfolio and and just a really clear example of that of course is Cobre Panama which was Franco's largest royalty and when Cobra Panama was shut down by the government it hurt Franco's stock But the company was at no risk. There was no risk of Franco going out of business because their largest mine was shut down. But if I won't name names now, but if one or two companies I can think of right now, smaller companies, if their largest mine shut down, that will put the company at risk because it would be 80 or 100% of their revenue. So um size matters in in um in in royalty companies. Anyway, we were talking about Teddler. Yes. So, I think I think the fact that they're coming in with fresh money, they have lots of money, lots of capital, and they're trying to consolidate the business. I think all of that is good and it's going to be good for the sector and good for the individual companies. The bad thing, frankly, and I'm probably going to get some push back from some of my friends, but um I think the bad thing is twofold. One is I think it's fair to say that if you asked Juan Centuri from Tether what are your priorities when you're looking for a royalty deal or a royalty company what are your priorities it's is it big can we do it can we do it fast he's not saying how much is it going to cost us is it good value whereas in the royalty business I won't name names but if you ask the CEO of Franco and Weeden and a Cisco what are your priorities they don't say well is it something big that we can do soon. They say is a good value and I'm not sure that Tether I'm I'm not sure that they put value and discipline at the top of their list. Um that may not have much of a negative impact, you know, for a year or two, but at some point that will have a that'll have an impact. >> Yeah, I I think that's a fair concern. So, thank you for outlining that. and it's time for me to send you back out onto the show floor, but any final thoughts you would leave investors with? >> Yeah, I mean the first thought, and it doesn't apply to people at this show, I don't think, but I I know it generally it does. Just don't let this don't let this correction spook you. Can we say spook? >> I guess we're in New Orleans and it's Halloween, so we can Yeah. Okay. um uh you know it's perfectly normal in the middle of a bull market to have a significant correction. This really isn't even a correction yet. Let's not forget that. This is just a pullback. But we haven't had a correction in this bull market since gold bottomed in in in well if you go back just to 3 years. We haven't had a correction and and it's perfectly normal to get corrections. So, you think back to 2006 where the price of gold gold dropped about 30% in in in a week. Does anyone remember that? I mean, nobody remembers that anymore. It's just a blip on the chart. Now, when you were living through it, it was awful. But nobody it it's just meaningless at this point. So, these sort of things are normal. So, what you really have to decide the critical I'm sorry, this was a closing thought, wasn't it? >> Nope. Just keep going. >> The thing you really have to decide is, do I think this is the top like 2011, like 1980, and we're going to go into the wilderness for another 10 or 15 years, or is it just a correction? If it's just a correction, you absolutely do not panic and do not even think of selling stuff after they've already dropped like this. And on the other side, I mean, if you really honestly think this is a top, I feel sorry for you. But there's no No, seriously, what is the evidence for thinking this is a top other than the fact that I remember 2011 and I don't want to live through it again? Well, that's if I may and that's what I hear from so many people, but if I may, that is not, you know, rational analysis. That's just emotion. So, what is if you analyze a market, what what what are the reasons to say this is the top? And in my view, there are no reasons whatsoever. The fundamentals are still positive for gold. The people who have been buying gold are still buying it for the same reasons. The reasons haven't gone away. The valuations of the gold stocks are still very, very cheap. And lastly, and this will be my last, if you look at a log graph, right? Okay. So, for the last two months, we've said, "Oh my gosh, look at gold. It goes up $100 every day. Oh my gosh, another new high. Oh my gosh, another new high." Look at look at it on a log graph. It is I won't say insignificant but it is a small rally relative to uh 201011 and 1979 1980. So relative to the previous blowoff tops this is a meaningless rally. We only look at it in a log graph. That's what we should always do because that tells us what the percentage gains are which is what's important. Um so yeah um bottom line I don't think this is a top. I don't think this is anywhere near a top. And if I may use my cricket analogy again, it's as though the opening batsmen have now been bowled out and you got number three and number four batsmen come out to play. >> Very good. >> And for context, there's 11 batsmen. >> That helps. I've been hearing so many baseball ones, so I appreciate a different one to to close off on. Well, thank you so much. Very reassuring for me as always and hopefully for the audience as well. Thank you very much. Well, thank you Charlotte for having me and thank you for listening people. >> Of course. >> Of course. >> No, of course. And and once again, I'm Charlotte Mloud with investingnews.com and this is Adrien Day.