Gold Should Be Soaring… So Why Isn’t It? | Adrian Day
Summary
Gold Bull Market: The guest argues gold remains in a bull market, driven by safe-haven demand and shifting macro expectations.
Geopolitical Drivers: Gold’s recent volatility reflects buy-the-rumor-sell-the-news dynamics and a strong inverse correlation with the surging US dollar during Middle East tensions.
Central Bank Activity: Discussion highlights Turkey’s sizable gold sales for currency defense and broader central bank flows as key near-term price factors.
Rates and Dollar: A more hawkish global rate outlook and higher Treasury yields have weighed on gold, with sentiment flipping from expected cuts to potential hikes.
Mining Margins: Despite higher oil, miners’ margins remain attractive; a $10 oil rise adds ~2% to costs on average, but many operations still enjoy wide spreads.
Cost Variability: Cost impacts differ by region and mine type, with open-pit and certain base-metal operations more exposed, while some producers hedge diesel to mitigate volatility.
ETF Flows: GDX saw significant outflows, then brief inflows on weakness, suggesting sentiment is fragile but opportunistic among investors.
Rotation Potential: A sustained US equity drawdown could catalyze broader retail and advisor-driven allocations into gold and gold miners.
Transcript
So, as soon as the bombing started, the dollar I'm looking at my screen now, excuse my eyes going. Uh, the dollar started moving up. So, what happened to the dollar? It collapsed. You look at things that are highly liquid, that's gold. You also, frankly, look at things that have gone up. So, if your target for gold was 10%. And now, and you bought 3 years ago and is now 20%. Well, that's natural that you sell that asset to bring it down. And that's what exactly what Turkey is doing. Gold is an interesting metal right now. It is a monetary metal of course as well, but it is really reacting on a daily basis to what's happening on the geopolitical front. Or is it? Well, we'll discuss this with our guest Adrien Day. He's the president of Adrien Day Asset Management. And we'll dissect the moves in the precious metals. We'll throw silver in there, of course, for good measure as well. And then we'll also take a look at the mining stocks. How is the oil price affecting margins? Should we be worried about the margins being squeezed in the mining stocks? We'll discuss in a few short seconds. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously, bringing guests like Adrian onto the program. Thank you so much for doing that. Now, Adrian, it's always a pleasure to have you back on the program. It's good to see you again, my friend. >> Well, thank you. Good to see you again. Yeah, we we keep running into each other at conferences here, Adrian. We saw each other at V-Rick, Pedak in Toronto recently, but we haven't had a chance to really sit down and chat. So, I'm really looking forward to this conversation cuz we haven't really talked gold and silver specifically on this channel. It was, you know, conversations were dictated by geopolitical events obviously, but we we need to understand a little better what is happening in the precious metals. Adrian, maybe we'll we'll start at the top like what is really driving prices right now? What's the the macro framework here? >> Yeah. No, excellent question. And and I think spec most, you know, even more specifically than that, if I may, is the questions that I'm getting and still getting and probably that you're getting is gosh, with a war in the Middle East, why isn't gold moving higher? A lot of people expected gold to move dramatically higher um with with this conflict in in Iran. And you know, it's interesting. There's a couple of well a few things I'll say if I may because I think it's worth it's worth spending a bit of time on this. Um I did a kind of um study I guess studies a bit pretentious but I did a I did a look at how gold had reacted to geopolitical events negative effects. I'm not talking about the wall coming down or anything like that but negative geopolitical events particularly conflicts military conflicts over the last 50 years. uh 70 years and 50 years, sorry. And what is interesting is that as often as not as often as not, gold actually declines very shortly after the conflict begins. Now, why is that? And and that's a that's not unusual. In in in the majority of cases, gold declined after shortly after the military conflict began. Ukra Russian invasion of Ukraine is a perfect example and of course Iran is a perfect example. So why is that? Well, the first thing is that these events rarely come out of a blue, right? The Iran hostage situation in 1979 or 911, you could argue they were completely out of a blue. But um I don't think anyone could argue that the Russian invasion of Ukraine was just oh my gosh, I wasn't seeing that coming. Or Iran. We were speculating about whether Israel and the US would would attack um Iran for at least a week, but for weeks and it was the crescendo was building and gold reacted. So in in the eight days before the bombing started, gold was up over $500. So it's and then of course the Monday after the bombing was actually the peak and then it fell since then. So it's it's number one it's a matter it's a question of um buy the rumor, sell the news, which happens in all sorts of markets all the time, right? It's not unusual for a company to have good earnings and the stock goes down. You say why was that? Well, it was because everyone was anticipating better than expected earnings, if that makes sense. Investors can expect better than analyst expectations, right? Um, so buy the buy the room and sell the news. That's number one. The other thing that's critical for people to think about is in a geopolitical event, yes, gold is a safe haven, but there's another safe haven asset, and that's the dollar. Now if you look at the last three months in the buildup to the invasion and then or not invasion sorry in the buildup to the bombing and then afterwards gold has been an almost mirror image of the dollar. So as soon as the bombing started the dollar I'm looking at my screen now excuse my eyes going uh the dollar started moving up and it's a mirror image. So, that's another thing to remember. And of course, not only did the dollar go up, but yields around the world went up for reasons we can't get into unless I'm talking for too long. So, you had the yield on US treasury bills now being very very competitive with gold and so uh you know gold fell for those reasons. The the the third reason to think about is that typically in in a geopolitical event there is a liquidity crisis. It may not be global. It may only be regional but of course a regional liquidity event can still have an impact on prices. Prices as they famously say are set at the margin. So in this particular conflict, you had gold selling for large or let's say significant discounts in Dubai and the rest of the Gulf because people were wanting to dump their gold. You know, if you're in Dubai with your family, you may stay, but you want to get your family out. Maybe if the whole family moves, you say, "Well, do I really want to keep my gold in in Dubai? let's just sell it, buy the ticket at the exorbitant price and get out. So you you had this rush for liquidity and and frankly if if Iran is bombing different places in in in Dubai and not being particularly accurate with their missiles, who knows whether my storage will blow up at some point. So there was a rush to liquidity in the Gulf area and and gold always takes a brunt always takes a brunt of a rush to liquidity because it's an asset that's immediately liquid 24 well it's got a price 24 hours a day it trades 24 hours a day you know it's immediately liquid and I I think that's another important factor that people people overlook now talking about the rush liquidity we also now know that Turkey uh it's now last week it was reported not just 60 tons but about 120 tons was sold by Turkey to defend the LRA and they were defending the Lera because of the conflict in Iran if there had been no conflict they wouldn't have had to sell well like most people when you have a a a crisis you need money immediately you look at things that are highly liquid That's gold. You also frankly look at things that have gone up. So if your target for gold was 10%. And now and you bought three years ago and it's now 20%. Well that's natural that you sell that asset to bring it down. And that's what exactly what Turkey is doing. But let's let's really think about this. 120 tons which is the last number I saw that they sold in March. That's to sell that all in the space of two weeks is meaningful when all central banks around the world only I use only in quotes um let's not say only then they bought 860 I think 863 tons last year so for that's on the course of a whole year so to sell 120 tons in two weeks is clearly a very significant event now I'm I would say when that news first came out, originally they said 60, then they moved it up. But when that first came out, the market immediately took a bit of a dip. But I said, "Whoa, whoa, whoa, wait a minute. This is actually positive. Now we know why gold dropped so much, right?" And so unless you think the conflict, I mean, it all depends, and I'll stop here if I may, Kai. Sorry. It really so much depends on what we're going to talk about today. So much depends on how long this conflict lasts. Does it extend and get worse? Does it extend to other countries? The Gulf countries are talking about joining the war against Iran militarily. Uh and does it extend in depth? You know, does Iran blow up the desalination plants, for example? So all of these things, the extent, the duration, and and the depth of this conflict really determine the answers to pretty much everything you're going to ask me today. K. >> Yeah, absolutely. No, I really appreciate that. A lot of lot of color, a lot of insights because a lot of very like maybe maybe one main takeaway is Adrian, there's not one single threat that it's pulling on on the gold price right now. It's a liquidity crisis. it's retail perhaps dumping um you know and and for liquidity reasons but it's also nations having to sell and we we can discuss like how they're actually selling because they're not really selling into the market because I I just heard this morning actually France picked up 120 tons in the market as well cuz they got a check apparently from the US that they use to buy that gold as well. >> Oh, I didn't see that. >> They must have gotten the discount. So I was like I haven't got the full details just something I picked up this morning. um instead of getting it delivered out of New York, apparently New York sent a check and then tur France bought gold with that money and actually cleared billions of dollars doing so. Um >> okay, >> I I got to get the details there, but it's an interesting >> have a country like Poland for example uh that is doing a swap. So from Poland's point of view, they've still got exposure to gold through their futures, >> but in the immediate term they actually sold physical gold. Yeah. >> Uh in order to build up the army. So you're getting a few things like that. Yeah. >> Yeah. Well, maybe talking about the liquidity crisis. Has that stopped though? Like gold price seems to have stabilized around $4,600 plus or minus a few bucks here. Um has it stabilized? Has that stopped now? >> Well, again, I think a lot depends on how long this conflict goes on. I think the dumping of gold in Dubai in particular and the Gulf States generally that is probably at a close that's probably ended if the conflict continues for much much longer or deteriorates you know Turkey that is kind of staying out of it at the moment but um you know that that will continue to affect the LRA which means that Turkey could continue to sell there's no indication that they are going to sell more at the moment, but if if if this conflict extends and of course if it just extends further, you know, I mean, God forbid if it brings in uh you know, Egypt or something, for example, uh then you've got a much broader conflict. I don't think that's going to happen. I'm not a geopolitical expert, but I would I would that's not my base case anyway. But you could get an extension of this. But I think I think in the near term it's probably, you know, at an end or close to an end. Yeah. Yeah. >> Okay. No, it's I'm just just curious like because gold is seems to be reacting to to headlines right now. Um meaning >> liquidity crisis in the Middle East and because of Middle East, but we've still got outflows. um you know the ETFs actually the gold ETF had an out had outflows net outflows the last the last month global global um uh ETFs so investors generally were selling gold >> uh and that's before we even get to the GDX which had you know the stocks which had massive outflows last month >> yeah we'll we'll talk mining sp stocks later here as well but just in terms of like gold seems to be reacting to headlines though whether it's Fed interest rate discussions whether it's geop politics. It's I'm I'm not used to seeing it like react on a minute-by-minute basis to to headlines, meaning ceasefire, peace deal, um interest rates, inflation fears, right? Is that something? >> But I think there's a couple of things there. Number one is this is a very very very fastmoving um and uncertain situation, but it's also one that swings from one extreme to the other. You know, I mean, >> uh, it's it's as though in in World War II, they said, "Well, the Nazis are about to invade France." No, they stopped at the border. No, no, they're moving ahead. No, no, they stopped. I mean, it's it's it's swinging from one extreme to the other. And don't forget, the dollar is reacting to that. And because the dollar is reacting, that affects the gold price, right? I think that's important to understand. You know, the other thing of course is you mentioned the Fed and and and interest rates. I mean that has been a dramatic switch from three months ago. The sentiment, the perception has been a dramatic switch from 3 months ago to today. Three months ago, people thought central banks around the world, particularly the Fed, were going to continue to lower rates dramatically throughout the multiple times throughout the year. We thought President Trump was going to control the Fed pretty soon. Uh and and the narrative was certainly what we were going to see lower interest rates not just here but overseas and suddenly that's completely changed. It's not just the Fed that is striking a more hawkish tone. Um the dot plot says only one interest rate cut this year and only one next year which is even more surprising to me. That's what the dot plot said suggests. you know, where the Fed members write down what what their forecast uh which of course is based largely on their own view. Um but it's not just the dot plot and the hawkish tone. I mean at the Fed, you look at Canada, Bank of England, European Central Bank, J Bank of Japan, they have all indicated in varying degrees that we should not expect any interest rate cuts this year. They've all indicated that they're very concerned about inflation because of a higher gold price. And we've even had some of them talk about the possibility of raising raising rates. So the the you know the the um uh the perception has has completely changed in the last 3 months. I think it'll change again but that's a different question. >> Yeah. But because bond yields are rising as well. Like how how much is that taking attention away from gold now? Because as we all know gold doesn't pay a dividend obviously. >> Oh absolutely. I think it is. I don't think it is as strong or as dominant a factor as it was say five and 10 years ago. But again, there's no question at higher rates on on especially US treasuries when the dollar itself is higher as well. There is no question that that attracts both domestic and international investors to the markets. There's no question as an alternative to gold. Yeah. What I'm puzzled about the last three years on this channel, all we've talked about is dilarization. Uh the US is in a debt spiral, debt and death spiral, right? Um that seems to be completely forgotten when events like the Middle Eastern crisis happened seemingly like all of a sudden you mentioned the US dollar is a safe haven again. We've all been poo pooing on the US dollar over the last three years here. Um like all of us on this channel more or less said, well the dollar is dead with very few exceptions. was maybe Brent Johnson. He said it's not dead until all right until a certain point. Um what do you make of that? Like why is the sentiment so different? Are we just all flaky? Are we just hypocrites? >> No. No, not at all. I think again it's a geopolitical the geopolitical um picture. Uh and again what what Iran what what what what has been shown with Iran where the US other than Israel is going it alone with very very very little support of any kind from any other country. The Gulf countries are supporting. Um but but not only are other countries not joining the effort but many of them like um Spain for example is and France is refusing to let the US use bases or to fly over. So they're actually uh opposing it um not just in words but in practice. And so I think what has happened therefore is suddenly the US uh dominance military dominance in the world comes to the four again. So the US is now and particularly on the days where the conflict seems to be going in the US direction. That's when the U that's when the dollar moves up. We're seeing a US that is dominant again. right now. Contrast that with another Iran crisis. It always seems to be Iran, doesn't it? Back in 1979, um you know, you'd already had the um uh Ayatollah come to power and overthrow the very strong Middle East ally of the US um you know, Vsha. So that was a very So that was a loss of US prestige. Then you had the taking of the embassy and the hostage taking, right? And then that was follow which is again another blow to prestige but you can't even defend your own embassy. And then we had that failed attempt um you know to rescue the hostages um I'll say poor Jimmy Carter because it it you know it wasn't really his fault but it didn't work out. So you had a failed rescue attempt and at the same time remember you had Russia invade Afghanistan and at the beginning that seemed to be going very well in in Russia's favor at the beginning and so you you had a situation in 1979 where the US seemed to be losing its military power and Russia it was a different world back then remember we still had the Berlin Wall we still were you of the cold war and Russia seemed to be advancing. So what happened to the dollar? It collapsed. So I think it's a matter of of the US has gained some prestige. Now to me again it's a matter of how long this thing lasts and I think once the war ends um if it ends in the US favor you know the US achieves it gains or is perceived to have um uh achieved its gains um without an awful lot of loss on the US side um and without other people coming in to help because that can always change then it strikes me that the US prestige its military, its political dominance will be reinforced and that will probably delay and even soften the move out of the dollar. But I don't think it will end it because again why are people why have people be moving out of the dollar? You mentioned it yourself. They the central banks in particular they don't want to and and other investors frankly they don't want concentration in a single asset which is an asset of a a fiscally proflegate government and a government that is willing to weaponize its dominance. Now think about it if the war ends even in the US favor that doesn't change. You've still got 50% of your assets in the dollar. That's concentration. You've still got a fiscally irresponsible government which is increasing the the defense budget. I mean the budget is not going the the spending is not going down. They're talking about cutting cutting spending by 10% or something. That's discretionary spending. That's meaningless. 10% is sort of peanuts and it's offset by uh the increase in military spending. But you look at just the last 5 years spending has gone up dramatically. The budget deficit has gone up dramatically. And then thinking about weaponization, just look at all those tweets or whatever they're called these days. I don't know what you call social truth. What do you call those? >> Posts. >> Posts. Thank you. Um, but look at all those posts from Trump about attacking his allies for not coming to support and getting out of NATO. So now you don't have to be North Korea or China to be thinking, hm, do I really want to be holding a lot of dollars? Maybe Britain says h maybe we should reduce it just a little bit. Spain says h maybe we should just reduce it a little bit. So I mean I don't think the situation has changed. I don't think the reason people were selling go selling the dollar for the last 25 years frankly but increasingly in the last 5 years I don't think they've changed at all. >> No I appreciate that clarity like because we're still on the same path like it hasn't changed. Maybe it has slowed down as you said, but uh >> I think it'll slow down. Well, it's going to slow down anyway because you know if you're worried at 78% of your assets in the dollar, well, there's some people that are less worried at 65 and there's some more that are less worried at 50%. So, the momentum goes, >> but I don't think it it it ends the trade. >> Adrian, I want to talk talk mining stocks with you as well, but just one final question on gold in general and the macro framework. Are we still in a gold bull market? >> Oh, no question. >> No question. Yeah, >> perfect. All right, perfect. Settled. Done. Move on. Absolutely. No, we we got to talk mining stocks here real quick as well, Adrian. We got about 8 minutes left. Um we we need to talk about um like the impact of higher oil prices, of course, margin concerns. I'm really curious what your thoughts are on the mining stocks. Should we be concerned at all? And what are you looking for hearing maybe when the Q1 numbers come out? >> Yeah. Well, um I mean Q Q1 number should be pretty good. Um you know, gold was up in January, of course, and up dramatically in January. Um you know, to be honest with you, Kai, I haven't looked at what the average gold price in the first quarter was. I I I should do that. I apologize, but I don't think it's going to be far off what it was in in the fourth quarter. um with regard to with regard to the oil price. Yeah. So, Bank of Montreal did a study where they said that the average impact on mines is about two um 2% on costs. The average input on costs is about 2% for every $10 increase in the price of oil. So if we we've gone from $60, let's just say 60 to 110. So that's about a you know it compounds. So that's about a 11 or 12% 11% increase in in the costs. Now those are the direct costs, right? The direct costs of energy for your mine. As we all know when the price of oil goes up and that's why how long this war lasts is so important. As the price of oil, as the price of oil goes up, it starts to affect everything else because to some degree or another, everything is affected by the price of oil, not just uh the energy and transportation of course, but also food, the local food that you you have at your camp, mining camp, well, that has to be transported in, so that goes up, etc., etc. We we know this. So, the price of everything will eventually start to um go up. So, it'll it'll wind up being more than 2% for $10. But that's just the direct effect on on on the energy to run a mine. Now, I have to say that different different mines are different. Uh they're different for different um uh uh minerals. So that copper, aluminum, they have much higher uh that's a much higher uh increase because the higher oil price than it is for gold. Um different regions are different. So that North America and Africa generally speaking have less of an impact from higher oil than other countries, Latin America, Asia, Europe. Um and also whether it's overground or underground. um overground and open pit sorry open pit mines the effect of the energy of the effect of the oil price is much more right but that's just so so it varies so an underground gold mine in Canada is less affected than an open pit mine in Indonesia in copper right but let's just say it's 2% for a company like for example that's all in Canada and Australia Well, and Mexico um you know their all in sustaining costs last year all in sustaining costs was $1,339. Price of gold right now is 4,600. So an 11 or 10 11% um increase in their energy consumption is obviously negative, but it is not overwhelming. It's not damaging. a 10% increase, you know, still means that they have among the widest margins, profit margins ever in the gold mining industry, right? So although it's negative, it's not it's not overwhelming. I think we can I think we can exaggerate the impact. Um, and the other thing I'll say is different companies have hedged. Ag for example hedged has has hedged over 50% of its diesel consumption for this year at 69 cents a liter. So that trade's looking pretty good right now. Um you know they're basically paying last year's price for half of their uh usage this year. So yeah I mean I think it's I think it's it's obviously negative. There's no question about that. It's negative. And as I say, it'll move into it'll flow into every other cost that they have, wages, food, everything. But it's not it's not devastating. >> Yeah. Adrian, maybe I ask like has sentiment towards the miners changed though as well given the pre the pressures now that we're seeing and the the conflict. Has sentiment towards the miners and mining stocks changed? Well, that's interesting because when the when the conflict started and the and gold collapsed and then of course the the stocks moved down initially far far more initially, you know, they they demonstrated their leverage on the downside. All right. Um well, what's interesting and very encouraging to me is that the flows into the GDX actually picked up for about five days, but they actually picked up when the stocks collapsed. Now they've gone the other direction again. Um, so has the sentiment changed? I I don't think it has changed either positive or negative. I don't think it's really changed very very dramatically. No. No. Um I think what's really going to change the sentiment among generalist investors, retail investors who are not gold bugs, um cuz most of the buying for the last two or three years has been either the traditional gold investor who's just adding or it's been large sophisticated um you know value type investors whether it's Miller or Ray Dallio or you know some family offices or so on but it's not been the generalist generally nor has it been the the the non-gold um retail investor it's not been raas for example telling their clients to increase their allocation to gold at all I think that will change for the positive when the US stock market starts to go down not just one month but two months three months in a row and people who are used to looking at statement, especially 401ks, which are just automatic inflows into the market, and most of that is just going automatically into the S&P. So, it's a self-reinforcing um event. People who are used to seeing that monthly statement go up every single month and not really looking at the internal dynamics of a market, not really looking at the fact that Nvidia has been rolling over for six months now, but it doesn't matter because it's a statement, own statement. it's going up. You see that go down for two or three months and people are going to be calling their broker or advisor or whatever saying, "Hey, should we be changing what we're doing?" And if they change what they're doing, some of that money is going to flow into into gold without a shadow of doubt. >> Absolutely. And the gold mining stocks in particular. >> And the gold mining stocks. Yes. Yes. >> Absolutely. Fantastic. Adrian, on that positive note, we're going to end the conversation. like really like ending on positive notes here. Um really we always appreciate your time. Your insights are excellent. You're so deep into the market or in the gold market. It's it's great to hear from you. Um any anywhere or or where can we send our audience to follow more of your work? >> Yeah, the best place to go is adriendave.com and that has information on their money management and their newsletter. >> Fantastic. Awesome. Adrian, really appreciate your time. Uh happy Easter again. Uh yes, markets are open. It's Easter Monday. Uh I'm German. It's usually a big holiday for us still. Well, they're closed in some places. You know, London's closed. Most of Europe, I think, is closed. >> Yeah, >> Western Canada is open. So, absolutely. >> So, well, happy Easter anyway. Enjoy the Easter. And we'll we'll talk soon. Always appreciate catching up with you. Always a pleasure. And uh take care, Adrian, and everybody else. >> Thanks so much for tuning in to Soore Financially. If you enjoyed this conversation, hit that like and subscribe button. Helps us out tremendously bringing guests like Adrian onto the program. Also, let me know your thoughts. Has your sentiment towards the mining stocks changed at all? Are you still buying? Are you selling? Are you using it as liquidity? Really curious what your thoughts are here as well. Put that down in the comments. We read all of them. Thank you so much for tuning in. Take care.
Gold Should Be Soaring… So Why Isn’t It? | Adrian Day
Summary
Transcript
So, as soon as the bombing started, the dollar I'm looking at my screen now, excuse my eyes going. Uh, the dollar started moving up. So, what happened to the dollar? It collapsed. You look at things that are highly liquid, that's gold. You also, frankly, look at things that have gone up. So, if your target for gold was 10%. And now, and you bought 3 years ago and is now 20%. Well, that's natural that you sell that asset to bring it down. And that's what exactly what Turkey is doing. Gold is an interesting metal right now. It is a monetary metal of course as well, but it is really reacting on a daily basis to what's happening on the geopolitical front. Or is it? Well, we'll discuss this with our guest Adrien Day. He's the president of Adrien Day Asset Management. And we'll dissect the moves in the precious metals. We'll throw silver in there, of course, for good measure as well. And then we'll also take a look at the mining stocks. How is the oil price affecting margins? Should we be worried about the margins being squeezed in the mining stocks? We'll discuss in a few short seconds. But before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously, bringing guests like Adrian onto the program. Thank you so much for doing that. Now, Adrian, it's always a pleasure to have you back on the program. It's good to see you again, my friend. >> Well, thank you. Good to see you again. Yeah, we we keep running into each other at conferences here, Adrian. We saw each other at V-Rick, Pedak in Toronto recently, but we haven't had a chance to really sit down and chat. So, I'm really looking forward to this conversation cuz we haven't really talked gold and silver specifically on this channel. It was, you know, conversations were dictated by geopolitical events obviously, but we we need to understand a little better what is happening in the precious metals. Adrian, maybe we'll we'll start at the top like what is really driving prices right now? What's the the macro framework here? >> Yeah. No, excellent question. And and I think spec most, you know, even more specifically than that, if I may, is the questions that I'm getting and still getting and probably that you're getting is gosh, with a war in the Middle East, why isn't gold moving higher? A lot of people expected gold to move dramatically higher um with with this conflict in in Iran. And you know, it's interesting. There's a couple of well a few things I'll say if I may because I think it's worth it's worth spending a bit of time on this. Um I did a kind of um study I guess studies a bit pretentious but I did a I did a look at how gold had reacted to geopolitical events negative effects. I'm not talking about the wall coming down or anything like that but negative geopolitical events particularly conflicts military conflicts over the last 50 years. uh 70 years and 50 years, sorry. And what is interesting is that as often as not as often as not, gold actually declines very shortly after the conflict begins. Now, why is that? And and that's a that's not unusual. In in in the majority of cases, gold declined after shortly after the military conflict began. Ukra Russian invasion of Ukraine is a perfect example and of course Iran is a perfect example. So why is that? Well, the first thing is that these events rarely come out of a blue, right? The Iran hostage situation in 1979 or 911, you could argue they were completely out of a blue. But um I don't think anyone could argue that the Russian invasion of Ukraine was just oh my gosh, I wasn't seeing that coming. Or Iran. We were speculating about whether Israel and the US would would attack um Iran for at least a week, but for weeks and it was the crescendo was building and gold reacted. So in in the eight days before the bombing started, gold was up over $500. So it's and then of course the Monday after the bombing was actually the peak and then it fell since then. So it's it's number one it's a matter it's a question of um buy the rumor, sell the news, which happens in all sorts of markets all the time, right? It's not unusual for a company to have good earnings and the stock goes down. You say why was that? Well, it was because everyone was anticipating better than expected earnings, if that makes sense. Investors can expect better than analyst expectations, right? Um, so buy the buy the room and sell the news. That's number one. The other thing that's critical for people to think about is in a geopolitical event, yes, gold is a safe haven, but there's another safe haven asset, and that's the dollar. Now if you look at the last three months in the buildup to the invasion and then or not invasion sorry in the buildup to the bombing and then afterwards gold has been an almost mirror image of the dollar. So as soon as the bombing started the dollar I'm looking at my screen now excuse my eyes going uh the dollar started moving up and it's a mirror image. So, that's another thing to remember. And of course, not only did the dollar go up, but yields around the world went up for reasons we can't get into unless I'm talking for too long. So, you had the yield on US treasury bills now being very very competitive with gold and so uh you know gold fell for those reasons. The the the third reason to think about is that typically in in a geopolitical event there is a liquidity crisis. It may not be global. It may only be regional but of course a regional liquidity event can still have an impact on prices. Prices as they famously say are set at the margin. So in this particular conflict, you had gold selling for large or let's say significant discounts in Dubai and the rest of the Gulf because people were wanting to dump their gold. You know, if you're in Dubai with your family, you may stay, but you want to get your family out. Maybe if the whole family moves, you say, "Well, do I really want to keep my gold in in Dubai? let's just sell it, buy the ticket at the exorbitant price and get out. So you you had this rush for liquidity and and frankly if if Iran is bombing different places in in in Dubai and not being particularly accurate with their missiles, who knows whether my storage will blow up at some point. So there was a rush to liquidity in the Gulf area and and gold always takes a brunt always takes a brunt of a rush to liquidity because it's an asset that's immediately liquid 24 well it's got a price 24 hours a day it trades 24 hours a day you know it's immediately liquid and I I think that's another important factor that people people overlook now talking about the rush liquidity we also now know that Turkey uh it's now last week it was reported not just 60 tons but about 120 tons was sold by Turkey to defend the LRA and they were defending the Lera because of the conflict in Iran if there had been no conflict they wouldn't have had to sell well like most people when you have a a a crisis you need money immediately you look at things that are highly liquid That's gold. You also frankly look at things that have gone up. So if your target for gold was 10%. And now and you bought three years ago and it's now 20%. Well that's natural that you sell that asset to bring it down. And that's what exactly what Turkey is doing. But let's let's really think about this. 120 tons which is the last number I saw that they sold in March. That's to sell that all in the space of two weeks is meaningful when all central banks around the world only I use only in quotes um let's not say only then they bought 860 I think 863 tons last year so for that's on the course of a whole year so to sell 120 tons in two weeks is clearly a very significant event now I'm I would say when that news first came out, originally they said 60, then they moved it up. But when that first came out, the market immediately took a bit of a dip. But I said, "Whoa, whoa, whoa, wait a minute. This is actually positive. Now we know why gold dropped so much, right?" And so unless you think the conflict, I mean, it all depends, and I'll stop here if I may, Kai. Sorry. It really so much depends on what we're going to talk about today. So much depends on how long this conflict lasts. Does it extend and get worse? Does it extend to other countries? The Gulf countries are talking about joining the war against Iran militarily. Uh and does it extend in depth? You know, does Iran blow up the desalination plants, for example? So all of these things, the extent, the duration, and and the depth of this conflict really determine the answers to pretty much everything you're going to ask me today. K. >> Yeah, absolutely. No, I really appreciate that. A lot of lot of color, a lot of insights because a lot of very like maybe maybe one main takeaway is Adrian, there's not one single threat that it's pulling on on the gold price right now. It's a liquidity crisis. it's retail perhaps dumping um you know and and for liquidity reasons but it's also nations having to sell and we we can discuss like how they're actually selling because they're not really selling into the market because I I just heard this morning actually France picked up 120 tons in the market as well cuz they got a check apparently from the US that they use to buy that gold as well. >> Oh, I didn't see that. >> They must have gotten the discount. So I was like I haven't got the full details just something I picked up this morning. um instead of getting it delivered out of New York, apparently New York sent a check and then tur France bought gold with that money and actually cleared billions of dollars doing so. Um >> okay, >> I I got to get the details there, but it's an interesting >> have a country like Poland for example uh that is doing a swap. So from Poland's point of view, they've still got exposure to gold through their futures, >> but in the immediate term they actually sold physical gold. Yeah. >> Uh in order to build up the army. So you're getting a few things like that. Yeah. >> Yeah. Well, maybe talking about the liquidity crisis. Has that stopped though? Like gold price seems to have stabilized around $4,600 plus or minus a few bucks here. Um has it stabilized? Has that stopped now? >> Well, again, I think a lot depends on how long this conflict goes on. I think the dumping of gold in Dubai in particular and the Gulf States generally that is probably at a close that's probably ended if the conflict continues for much much longer or deteriorates you know Turkey that is kind of staying out of it at the moment but um you know that that will continue to affect the LRA which means that Turkey could continue to sell there's no indication that they are going to sell more at the moment, but if if if this conflict extends and of course if it just extends further, you know, I mean, God forbid if it brings in uh you know, Egypt or something, for example, uh then you've got a much broader conflict. I don't think that's going to happen. I'm not a geopolitical expert, but I would I would that's not my base case anyway. But you could get an extension of this. But I think I think in the near term it's probably, you know, at an end or close to an end. Yeah. Yeah. >> Okay. No, it's I'm just just curious like because gold is seems to be reacting to to headlines right now. Um meaning >> liquidity crisis in the Middle East and because of Middle East, but we've still got outflows. um you know the ETFs actually the gold ETF had an out had outflows net outflows the last the last month global global um uh ETFs so investors generally were selling gold >> uh and that's before we even get to the GDX which had you know the stocks which had massive outflows last month >> yeah we'll we'll talk mining sp stocks later here as well but just in terms of like gold seems to be reacting to headlines though whether it's Fed interest rate discussions whether it's geop politics. It's I'm I'm not used to seeing it like react on a minute-by-minute basis to to headlines, meaning ceasefire, peace deal, um interest rates, inflation fears, right? Is that something? >> But I think there's a couple of things there. Number one is this is a very very very fastmoving um and uncertain situation, but it's also one that swings from one extreme to the other. You know, I mean, >> uh, it's it's as though in in World War II, they said, "Well, the Nazis are about to invade France." No, they stopped at the border. No, no, they're moving ahead. No, no, they stopped. I mean, it's it's it's swinging from one extreme to the other. And don't forget, the dollar is reacting to that. And because the dollar is reacting, that affects the gold price, right? I think that's important to understand. You know, the other thing of course is you mentioned the Fed and and and interest rates. I mean that has been a dramatic switch from three months ago. The sentiment, the perception has been a dramatic switch from 3 months ago to today. Three months ago, people thought central banks around the world, particularly the Fed, were going to continue to lower rates dramatically throughout the multiple times throughout the year. We thought President Trump was going to control the Fed pretty soon. Uh and and the narrative was certainly what we were going to see lower interest rates not just here but overseas and suddenly that's completely changed. It's not just the Fed that is striking a more hawkish tone. Um the dot plot says only one interest rate cut this year and only one next year which is even more surprising to me. That's what the dot plot said suggests. you know, where the Fed members write down what what their forecast uh which of course is based largely on their own view. Um but it's not just the dot plot and the hawkish tone. I mean at the Fed, you look at Canada, Bank of England, European Central Bank, J Bank of Japan, they have all indicated in varying degrees that we should not expect any interest rate cuts this year. They've all indicated that they're very concerned about inflation because of a higher gold price. And we've even had some of them talk about the possibility of raising raising rates. So the the you know the the um uh the perception has has completely changed in the last 3 months. I think it'll change again but that's a different question. >> Yeah. But because bond yields are rising as well. Like how how much is that taking attention away from gold now? Because as we all know gold doesn't pay a dividend obviously. >> Oh absolutely. I think it is. I don't think it is as strong or as dominant a factor as it was say five and 10 years ago. But again, there's no question at higher rates on on especially US treasuries when the dollar itself is higher as well. There is no question that that attracts both domestic and international investors to the markets. There's no question as an alternative to gold. Yeah. What I'm puzzled about the last three years on this channel, all we've talked about is dilarization. Uh the US is in a debt spiral, debt and death spiral, right? Um that seems to be completely forgotten when events like the Middle Eastern crisis happened seemingly like all of a sudden you mentioned the US dollar is a safe haven again. We've all been poo pooing on the US dollar over the last three years here. Um like all of us on this channel more or less said, well the dollar is dead with very few exceptions. was maybe Brent Johnson. He said it's not dead until all right until a certain point. Um what do you make of that? Like why is the sentiment so different? Are we just all flaky? Are we just hypocrites? >> No. No, not at all. I think again it's a geopolitical the geopolitical um picture. Uh and again what what Iran what what what what has been shown with Iran where the US other than Israel is going it alone with very very very little support of any kind from any other country. The Gulf countries are supporting. Um but but not only are other countries not joining the effort but many of them like um Spain for example is and France is refusing to let the US use bases or to fly over. So they're actually uh opposing it um not just in words but in practice. And so I think what has happened therefore is suddenly the US uh dominance military dominance in the world comes to the four again. So the US is now and particularly on the days where the conflict seems to be going in the US direction. That's when the U that's when the dollar moves up. We're seeing a US that is dominant again. right now. Contrast that with another Iran crisis. It always seems to be Iran, doesn't it? Back in 1979, um you know, you'd already had the um uh Ayatollah come to power and overthrow the very strong Middle East ally of the US um you know, Vsha. So that was a very So that was a loss of US prestige. Then you had the taking of the embassy and the hostage taking, right? And then that was follow which is again another blow to prestige but you can't even defend your own embassy. And then we had that failed attempt um you know to rescue the hostages um I'll say poor Jimmy Carter because it it you know it wasn't really his fault but it didn't work out. So you had a failed rescue attempt and at the same time remember you had Russia invade Afghanistan and at the beginning that seemed to be going very well in in Russia's favor at the beginning and so you you had a situation in 1979 where the US seemed to be losing its military power and Russia it was a different world back then remember we still had the Berlin Wall we still were you of the cold war and Russia seemed to be advancing. So what happened to the dollar? It collapsed. So I think it's a matter of of the US has gained some prestige. Now to me again it's a matter of how long this thing lasts and I think once the war ends um if it ends in the US favor you know the US achieves it gains or is perceived to have um uh achieved its gains um without an awful lot of loss on the US side um and without other people coming in to help because that can always change then it strikes me that the US prestige its military, its political dominance will be reinforced and that will probably delay and even soften the move out of the dollar. But I don't think it will end it because again why are people why have people be moving out of the dollar? You mentioned it yourself. They the central banks in particular they don't want to and and other investors frankly they don't want concentration in a single asset which is an asset of a a fiscally proflegate government and a government that is willing to weaponize its dominance. Now think about it if the war ends even in the US favor that doesn't change. You've still got 50% of your assets in the dollar. That's concentration. You've still got a fiscally irresponsible government which is increasing the the defense budget. I mean the budget is not going the the spending is not going down. They're talking about cutting cutting spending by 10% or something. That's discretionary spending. That's meaningless. 10% is sort of peanuts and it's offset by uh the increase in military spending. But you look at just the last 5 years spending has gone up dramatically. The budget deficit has gone up dramatically. And then thinking about weaponization, just look at all those tweets or whatever they're called these days. I don't know what you call social truth. What do you call those? >> Posts. >> Posts. Thank you. Um, but look at all those posts from Trump about attacking his allies for not coming to support and getting out of NATO. So now you don't have to be North Korea or China to be thinking, hm, do I really want to be holding a lot of dollars? Maybe Britain says h maybe we should reduce it just a little bit. Spain says h maybe we should just reduce it a little bit. So I mean I don't think the situation has changed. I don't think the reason people were selling go selling the dollar for the last 25 years frankly but increasingly in the last 5 years I don't think they've changed at all. >> No I appreciate that clarity like because we're still on the same path like it hasn't changed. Maybe it has slowed down as you said, but uh >> I think it'll slow down. Well, it's going to slow down anyway because you know if you're worried at 78% of your assets in the dollar, well, there's some people that are less worried at 65 and there's some more that are less worried at 50%. So, the momentum goes, >> but I don't think it it it ends the trade. >> Adrian, I want to talk talk mining stocks with you as well, but just one final question on gold in general and the macro framework. Are we still in a gold bull market? >> Oh, no question. >> No question. Yeah, >> perfect. All right, perfect. Settled. Done. Move on. Absolutely. No, we we got to talk mining stocks here real quick as well, Adrian. We got about 8 minutes left. Um we we need to talk about um like the impact of higher oil prices, of course, margin concerns. I'm really curious what your thoughts are on the mining stocks. Should we be concerned at all? And what are you looking for hearing maybe when the Q1 numbers come out? >> Yeah. Well, um I mean Q Q1 number should be pretty good. Um you know, gold was up in January, of course, and up dramatically in January. Um you know, to be honest with you, Kai, I haven't looked at what the average gold price in the first quarter was. I I I should do that. I apologize, but I don't think it's going to be far off what it was in in the fourth quarter. um with regard to with regard to the oil price. Yeah. So, Bank of Montreal did a study where they said that the average impact on mines is about two um 2% on costs. The average input on costs is about 2% for every $10 increase in the price of oil. So if we we've gone from $60, let's just say 60 to 110. So that's about a you know it compounds. So that's about a 11 or 12% 11% increase in in the costs. Now those are the direct costs, right? The direct costs of energy for your mine. As we all know when the price of oil goes up and that's why how long this war lasts is so important. As the price of oil, as the price of oil goes up, it starts to affect everything else because to some degree or another, everything is affected by the price of oil, not just uh the energy and transportation of course, but also food, the local food that you you have at your camp, mining camp, well, that has to be transported in, so that goes up, etc., etc. We we know this. So, the price of everything will eventually start to um go up. So, it'll it'll wind up being more than 2% for $10. But that's just the direct effect on on on the energy to run a mine. Now, I have to say that different different mines are different. Uh they're different for different um uh uh minerals. So that copper, aluminum, they have much higher uh that's a much higher uh increase because the higher oil price than it is for gold. Um different regions are different. So that North America and Africa generally speaking have less of an impact from higher oil than other countries, Latin America, Asia, Europe. Um and also whether it's overground or underground. um overground and open pit sorry open pit mines the effect of the energy of the effect of the oil price is much more right but that's just so so it varies so an underground gold mine in Canada is less affected than an open pit mine in Indonesia in copper right but let's just say it's 2% for a company like for example that's all in Canada and Australia Well, and Mexico um you know their all in sustaining costs last year all in sustaining costs was $1,339. Price of gold right now is 4,600. So an 11 or 10 11% um increase in their energy consumption is obviously negative, but it is not overwhelming. It's not damaging. a 10% increase, you know, still means that they have among the widest margins, profit margins ever in the gold mining industry, right? So although it's negative, it's not it's not overwhelming. I think we can I think we can exaggerate the impact. Um, and the other thing I'll say is different companies have hedged. Ag for example hedged has has hedged over 50% of its diesel consumption for this year at 69 cents a liter. So that trade's looking pretty good right now. Um you know they're basically paying last year's price for half of their uh usage this year. So yeah I mean I think it's I think it's it's obviously negative. There's no question about that. It's negative. And as I say, it'll move into it'll flow into every other cost that they have, wages, food, everything. But it's not it's not devastating. >> Yeah. Adrian, maybe I ask like has sentiment towards the miners changed though as well given the pre the pressures now that we're seeing and the the conflict. Has sentiment towards the miners and mining stocks changed? Well, that's interesting because when the when the conflict started and the and gold collapsed and then of course the the stocks moved down initially far far more initially, you know, they they demonstrated their leverage on the downside. All right. Um well, what's interesting and very encouraging to me is that the flows into the GDX actually picked up for about five days, but they actually picked up when the stocks collapsed. Now they've gone the other direction again. Um, so has the sentiment changed? I I don't think it has changed either positive or negative. I don't think it's really changed very very dramatically. No. No. Um I think what's really going to change the sentiment among generalist investors, retail investors who are not gold bugs, um cuz most of the buying for the last two or three years has been either the traditional gold investor who's just adding or it's been large sophisticated um you know value type investors whether it's Miller or Ray Dallio or you know some family offices or so on but it's not been the generalist generally nor has it been the the the non-gold um retail investor it's not been raas for example telling their clients to increase their allocation to gold at all I think that will change for the positive when the US stock market starts to go down not just one month but two months three months in a row and people who are used to looking at statement, especially 401ks, which are just automatic inflows into the market, and most of that is just going automatically into the S&P. So, it's a self-reinforcing um event. People who are used to seeing that monthly statement go up every single month and not really looking at the internal dynamics of a market, not really looking at the fact that Nvidia has been rolling over for six months now, but it doesn't matter because it's a statement, own statement. it's going up. You see that go down for two or three months and people are going to be calling their broker or advisor or whatever saying, "Hey, should we be changing what we're doing?" And if they change what they're doing, some of that money is going to flow into into gold without a shadow of doubt. >> Absolutely. And the gold mining stocks in particular. >> And the gold mining stocks. Yes. Yes. >> Absolutely. Fantastic. Adrian, on that positive note, we're going to end the conversation. like really like ending on positive notes here. Um really we always appreciate your time. Your insights are excellent. You're so deep into the market or in the gold market. It's it's great to hear from you. Um any anywhere or or where can we send our audience to follow more of your work? >> Yeah, the best place to go is adriendave.com and that has information on their money management and their newsletter. >> Fantastic. Awesome. Adrian, really appreciate your time. Uh happy Easter again. Uh yes, markets are open. It's Easter Monday. Uh I'm German. It's usually a big holiday for us still. Well, they're closed in some places. You know, London's closed. Most of Europe, I think, is closed. >> Yeah, >> Western Canada is open. So, absolutely. >> So, well, happy Easter anyway. Enjoy the Easter. And we'll we'll talk soon. Always appreciate catching up with you. Always a pleasure. And uh take care, Adrian, and everybody else. >> Thanks so much for tuning in to Soore Financially. If you enjoyed this conversation, hit that like and subscribe button. Helps us out tremendously bringing guests like Adrian onto the program. Also, let me know your thoughts. Has your sentiment towards the mining stocks changed at all? Are you still buying? Are you selling? Are you using it as liquidity? Really curious what your thoughts are here as well. Put that down in the comments. We read all of them. Thank you so much for tuning in. Take care.