Markets 'Primed To Fall': Which Assets Will Survive Coming Wipeout? | Adrian Day
Summary
Gold: Guest argues gold offers the best risk-reward, driven by price-agnostic buyers (central banks and stablecoin issuers) focused on fiat debasement and global uncertainty rather than traditional economic factors.
Gold Miners: Miners are viewed as deeply undervalued with strong operating leverage as costs have barely risen while gold prices surged, and sentiment remains muted with GDX showing net outflows.
Market Flows: GLD’s historic 2011 premium and today’s GDX outflows suggest we are far from a speculative top, indicating broad generalist capital has not yet returned to the space.
Oil and Gas: The guest highlights a decade-plus of underinvestment, peaking U.S. shale, and ongoing demand growth, pointing to upstream supply constraints and opportunities in places like Canadian oil sands and Venezuela.
Commodity Cycles: Commodity cycles are tied to investment, not the economy; copper and other metals have been underinvested, supporting a multi-year bullish setup across select commodities.
International Markets: Foreign equities (ex-US) began outperforming in the last year, with the guest expecting a 5–6 year cycle of outperformance due to extreme valuation gaps versus the U.S.
United Kingdom: UK equities are singled out as attractive given low P/E and P/B, high dividends, quality companies, and currency dynamics that benefit exporters.
Macro Risks/Policy: Long-duration U.S. Treasuries are seen as unattractive; looser Fed policy is expected, and stablecoins may underpin Treasury demand, while inflation expectations could rise alongside metals.
Transcript
I still think gold has the best riskreward. People who've been buying gold for the last 3 years have not been looking at the economic factors and they've been price agnostic. Central banks are not looking at the daily chart to decide whether to buy or not. That traditional correlation between gold moving up equals higher risk equals more volatile stock market. I I I don't think it's logical. But are you really wanting to hold a US Treasury for 30 years? Commodity cycles are not the same as economic cycles. Commodity cycles are tied to >> Adrien Day, president of Adrian Day Asset Management and the portfolio manager of the Europe Pacific Gold Fund joins us once more at the VRIC. Adrien, welcome back to the show. >> Thank you, David, for having me. >> Good to always see you in person. My first question is, how do we know as investors whether or not gold and silver are topping? For context, for the viewers who have been not following this channel or other channels, gold's at 5,000. We're near 5,000. Silver is still above $100 as we filmed today. And so many people have come up to my booth here at the conference live saying, "Hey, you know, it's a great time for all of us, but this is the top. I'm worried about that. I don't want to get into the market right now if you feel like this is the top." Some people have made 40 in slips and said, "You know what's funny? They they timed this conference with a market top." And I said, "How do you know it's a market top? How do you know, Adrian?" Look, I'll I'll start with the conclusion which is we are so far from the top in my view. So gold is a is a strange asset because as its critics keep telling us it doesn't have earnings and it pays no dividend. And so it's difficult to value in and of itself. We tend to value gold relative to something else. We value gold relative to the stock market. We we value gold relative to the amount of debt in the world or relative um to the money supply in the world. But it's difficult to value gold in and of itself again because it has no earnings and doesn't pay a dividend. So how do you know it's at the top? You look at fundamentals obviously. More than that you look at flows uh and you look at sentiment. Now uh you go back to 2011 the last major top or 1980 the top the major top before that you were getting massive flows into the gold funds in 2011 GLD itself the physical gold ETF was trading at a premium not just a one day premium of half a percent but 4% premium for weeks on end that shouldn't happen to a gold ETF and the inflows were just massive. If I said to you that the GDX had net outflows for the past month, would you believe me? Most people are astonished when I tell him that. It's easy to verify the GDX has net outflows for the last month and net outflows for the last two and 3 months. >> Do you think that translated into higher share prices for the miners because that money went to the miners? Maybe that's what happened or no? >> There's some of that. There's some of that. But the GDX is a vehicle that is used primarily by generalist and retail investors, not gold people like this. People at this show are already involved in the gold market, right? And it's wonderful to see the audience here, the the participation so high, much higher than last year. But these are people who've already been in involved in gold. I'm talking about the non- gold investor, the dentist in Oklahoma who's probably never owned a gold stock in his life or the last time he owned it was 2011 or the financial planner of Schwab who has no allocation to gold. When those people want to buy gold stocks, what do they do? They buy the GDX. So in flows, you can see and you saw this in 2011. You saw massive inflows starting at about May, April, May and they just increased all the way to the top in October when the thing was trading at a massive premium. So I don't think the sentiment if you look at sentiment I just don't think that this is a this is not an overwhelmingly bullish sentiment among among broad the broad investor mass. >> Okay. Can you maybe just start by telling us what you're doing with your gold funds? Are you buying more equities, selling, taking profits, or holding? >> Well, a gold fund, of course, a US gold fund has to be fully invested. Yeah. >> At all times. So, let's say what I'm doing with my with my separately managed accounts. You know, it's all very client specific. Frankly, if I've got a conservative client who's 65 years old, 5 years ago, he was 65 years old when he opened the account and he had a 20% allocation to gold, I'm trimming that to get him back to 25 or 20%. No question. But if I've got an aggressive investor who says here's 10% of my ass is for gold, we are buying. So, I mean, I think the gold stocks are still very, very undervalued. Um and and you know the thing is as the price but stock prices have moved up dramatically but if the stock prices have moved up less than the increase in cash flow and the increase in the value of reserves then they they're not keeping pace. >> Yeah. And so if you look at a company whether it's Aigo or whatever I would say that Aigo today is better value than it was two years ago at half the price or less than half a price and that's because the cost of mining we're very fortunate right now the cost of mining has hardly budged and so when you've got the price of the product you sell go up you know two and a half three times yet your costs of mining have hardly moved moved then you have tremendous leverage on the price of gold. So if the price of gold doubles your cash flow has gone up far more than twofold and the the value of the reserves obviously this ounce of reserves has doubled but when the price of gold doubles you can bring more resource into reserves. So your reserves are growing and so all these companies are much more valuable today than they were a year ago. And on on various metrics, you know, valuation metrics, they are cheaper today than they were 2 years ago. >> Let's go back to miners just a bit. Let's talk about the markets overall. I've heard the opinion just now on my own show. Somebody said to me, $5,000 goal where any gold price movement above $5,000 signifies or implies much higher equities valuation, sorry, equities volatility overall. And I'm just wondering, well, golden stock markets have moved pretty much in tandem ever since 2011, uh, 2021 rather, in the last couple years at least. It's gone down together in 2022. It's gone up together since 2022. If higher gold prices implied gold uh higher e uh equities volatility, why hasn't it happened last year when gold went up 50% since the previous year? >> I I'm not sure that I understand the correlation to be honest. I'm not sure why gold of 5,000 >> because well I think the logic here is that higher gold signifies more risk in the world therefore more risk off for stocks because traditionally gold is seen as a riskoff play a safety play and all that. >> Yeah I would look at it in two two separate two separate baskets and then you bring them together. >> Yeah. The reason gold has been going up over the last 3 years, the the people who've been buying and the reason they've been buying are totally different from the traditional reasons, the traditional people have been buying gold and the reasons they've been buying gold. Okay? So if you go back to 2000, obviously we had a lot of uh new demand from China, but people were buying gold for economic reasons, weakness in the dollar, um you know, low interest rates, uh um uh higher inflation. People who've been buying gold for the last 3 years have not been looking at the economic factors and they've been price agnostic. That's very important. So I don't think um price agnostic meaning they they'll buy at any price. You know the central banks are not looking at the daily chart to decide whether to buy or not. Tether which as you probably know for the second or third quarter of the year last year bought more gold than any other central bank than any central bank. >> Yeah. >> Excuse me. And they're price agnostic. Obviously they want to get a better price if they can. Um and so and so the traditional that traditional correlation between gold moving up equals higher risk equals more volatile stock market I I I don't think is logical. Now, having said that, I certainly think that the US stock market is is is primed to fall. And the reason it hasn't fallen is simply because there is so much automatic money coming into the US stock market that's going into passive funds. Yeah. All that 401k money, over half of it is in the S&P funds, right? 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Scan the QR code here on screen or visit stellargold.com/davidlin to learn more. Take a look at this chart then. If it doesn't mean higher equities volatility, what does it mean for inflation? So, this is the 5year break even inflation rate versus the metals price. uh if the five-year break even as you know is uh proxy for inflation expectations not actual CPI and so with higher metals prices do you think inflation expectations will rise I think so I do think so but I don't again I don't think the traditional economic criteria that people use to decide whether or not to buy gold that's not why people are buying gold now they're buying gold because they're afraid of what's happening in the world the uncertain certainty uh shall we say chaos but the uncertainty in the world um and and the fact of fiat currencies around the world including the dollar but fiat currencies are losing their purchasing power and so people are buying the dollar and it's nothing to do with inflation expectations in my view that may come but it's not the central bank of doesn't say what's my what's my forecast of US inflation that'll will determine whether I buy gold or not. Right? But people have been buying gold and tether doesn't say, "hm, inflation's going up, let's buy gold." Huh, inflation's going down, let's not buy gold. >> So the people buying gold are not concerned with the traditional economic criteria. >> Would you say they're using it as either a treasury asset or a hedge against chaos? >> Abs. Absolutely. Absolutely. and and and and to to to preserve value in the face of deteriorating purchasing power of all fiat currencies. And this is not new. This didn't happen last year with the new US administration. >> This has been going on for years. But I think it's fair to say I don't think anyone would disagree that nothing that Trump has done has assuaged concerns. But this started years ago. Well, do do you think that maybe higher gold prices and higher bond uh bond yields rather they've been moving in the same direction that relationship will persist? I think probably long bonds. Yeah, because look, nobody is buy nobody wants US dollar. Nobody wants long-term US treasury, US bonds right now. That's why Yellen issued all pretty much everything at the short end and that's why Bessant is doing the same thing because yeah, it's one thing to take a 3 month or 6 month and get 4 and a half% on a six month, but are you really wanting to hold a US Treasury for 30 years at the current yield? I I would say no one's going to buy that as an investment. They buy it because they have liabilities that they have to match >> uh like insurance companies, pension funds, but nobody's buying a 30-year Treasury because they think it's a good investment. >> Okay. whether you think it's going to be uh Kevin Hasset or Wars or now I think there's um speculation that maybe somebody else will take the Fed chair. Uh either way, uh what is the direction of Fed monetary policy this year and how will that impact the rest in this rally that we've seen in the medals? >> Is that a softball? >> Um >> one once in a while I got to throw one of these. I mean, monetary policy is clearly going to be looser and even without Trump and his new team, even under Powell who's been relatively relatively >> sort of trying to hold the line, um money monetary policy has been easing um particularly in December when they when they reinstituted the noeq. >> How about this? Will they institute yield curve control such that they limit the long end of the 10 year and the 30-year? >> I I'm not sure because at this point I don't think they're overly concerned about the long end because they're issuing everything at the short end. They can sell everything they want at the short end. Bessant is a smart character. They're going to try and come up with other ways to get demand for US treasuries. Most obvious one being stable coins. You know, that's what the Genius Act was all about. >> Yeah. >> Was in finding a new source of buyers for treasuries. So when Tether issues a stable coin, a US stable coin, they go out and buy treasury, right? And so promoting stable coins is a backdoor way of promoting buying for used treasuries from a new new audience, >> right? Um something interesting just I've noticed maybe you can comment on this. Previously uh we had Janet Yellen was Fed chair then she was secretary Treasury uh sorry secretary of the treasur treasury and then and then um so there was good relationship between the Treasury and the Fed during her term. Yeah. >> Uh there's open friction now between Bent and Powell. Have that has that dynamic impacted markets at all? I think it definitely has. I mean there is this um theory that I don't actually go along with but that's a different discussion. >> Sure. >> But monetary polic policy should be independent of the administration and so the independence of the Fed and the independence of central banks has been held as a sacred cow. Now look, the reality is that every president for the last 20 presidents all the way back to 1914 has tried to browbe the Fed in one way or another. Not quite as openly as Trump and Bessant have, you know, um Biden didn't call him a and so on, but >> um what's his name? LBJ Johnson, he took Arthur Miller by the by the lapels and shook him and put him up against the wall. Now, this only came out 20 years later, right? But I mean, this friction Trump hasn't done that yet, but I know >> come out 20 years later. That's true. Um but but so friction between friction between the the administration, the Treasury and and the Fed is nothing new, but normally it's been a should we say it's been a little more subtle. >> Yeah. >> Um or behind closed doors. >> Have you noticed that most of the central bank, let's go back to gold for just a minute. Have you noticed that most of the central bank buying of gold that you commented earlier came from the eastern central banks and Asian central banks? I didn't see the US Fed add to their gold reserves. >> No. Well, you've seen some from Latin America as well, but I mean the obvious reason for that is that most Western countries, Western European and and and the US already have significant gold reserves. So if you've got if you're Germany with 70% of your reserves in gold, you don't really need to own anymore. >> All right. >> Um so it's the Eastern countries, the Middle Eastern countries, the East the Asian countries that were underweight gold to begin with. >> So maybe we should look at capital or not say capital but but flows in and out of central banks as an indicator of market tops once central bank buying eases maybe that's when the market eases as well for gold I think so but as I say there's other things there's tether buying now >> now tether Juan Santoi the chief of global projects for tether who is in charge of this gold drive for tether >> he thinks that the the gold stable coin will grow as rapidly in the next 5 years as the US stable coin backed by treasury ries grew in the last 5 years. >> Yeah, >> that's their goal. That's their target. Even if he's only halfway, right, that means Tether is going to be buying significant amounts of gold quarter after quarter after quarter. >> The fact that a lot of the hard metals have gone up, platinum, palladium, copper, gold, silver, new all-time highs for silver, gold, and copper. Have you shifted your allocation of the types of miners that you've that you're investing in because of these price movements? >> Yeah. Well, first of all, have I I'll answer a different question first if I may. >> Have I shifted the commodities that I'm emphasizing? Yes. >> And the answer to that is definitely yes. So, we're still buying gold, but I mean um copper is relative relatively undervalued to gold, but I mean oil and gas, oil is the most hated commodity on the planet. And I think the narrative around oil is just plain wrong, right? >> We're still going to be using fossil fuels in 20, 30, 40 years. Yeah. >> I mean, the idea that we're going to be fossil free in 20 in 10 years, it's just nonsense is just not going to happen unless we want to go back to the dark ages, which weren't so dark. But anyway, that's a different subject. Um, so oil, the narrative around oil is just completely wrong. But because it is so hated, because there's this narrative we're not going to be having any in 10 or 15 years time, because the banks up until Trump came in would not lend to oil companies because government pension funds and so on would not invest in oil companies. What did oil companies do? They did the rational thing and didn't invest in oil exploration. So oil has been incredibly underinvested. There's been underinvested underinvestment in in oil and gas for the last 1015 years. And the thing about commodities we have to remember is that the commodity cycles are not the same as economic cycles. Commodity cycles are tied to the investment cycle. Co uh copper has been very underinvested for the last 15 years which is why the copper price has moved as dramatically as it has. Oil and gas have been dramatically significantly underinvested for the last 15 years because of this narrative which is wrong. And the narrative that there is which is put out by the International Energy Authority >> because the narrative that there's excess supply. Yes. >> Is not true. >> You're talking about oil now. >> I'm talking about oil. Sorry. Yes. Thank you. I'm talking about oil. Over 100% over 100% of the growth in oil in the last decade for growth in global oil over 100% came from US shale. US shale has peaked. That's a fact. That's not speculation or you know wild talk or >> you look at field after field after field. They peaked. Production has peaked and they're on the way on the way down. used to be thought that the the downward slopes in shale would be very very sharp and the tails would be very short relative to conventional fields. We don't know that yet, but we're going to find out. But regardless, they've peaked and it's on the way down. So, the big question is where is the where is the future growth in supply coming from? >> Venezuela. Venezuela's won, but we're going to have to go back to the Canadian or Sands and Venezuela's one. But you look at a lot of the the conventional fields, Cantrell North Sea, you know, they're they're a shadow of their former self and now shale, which was for growth, I is declining. And yet demand for oil just consistently goes up 2% 2 and a half% year after year after year. So I mean I I I think that's enough on that perhaps but I think oil is is very undervalued. You know right now lithium is very undervalued. Uh so there's a lot of commodities that are undervalued relative to gold. So we're certainly putting more money into other commodities. >> Yes. >> I'm also putting more money into overseas stock markets just generally. I don't know if you wanted to talk about that or not. Maybe you don't. >> But you look at the US market. The US market up until last year, the US market outperformed the world XUS, right? As a Morgan Stanley Capital International Index, World XUS. So the the US outperformed the non US for the last 15 years. >> Okay. >> That's a these cycles tend to be long. Before that, foreign markets outperformed the US by eight years. >> Yeah. Last year you saw the turn world x the world xus so foreign markets outperformed the US by almost 2 to1 last year almost 2 to1 >> and you you don't get that shift for one year and then it shifts back so I think we're going to see I think for the next probably five or six years we're going to see overseas markets outperform the US by how much let me just give you an example The you the overseas markets would have to go up two and a half times from where they are today. Two and a half times to get back to their last cycle low value relative valuation. Their last cycle low. So the potential for global markets to move up >> relative to the US relative to the US I think is very very strong. Let me just say, you know, January the 1st, global markets had never been as cheap as they were relative to the US market. >> As a fund manager, how do you differentiate between something that is undervalued and has potential versus a value trap because it's cheap? >> Good question. And there's also the question of timing. Of course, you can be right, but your timing can be off because I could have looked at a graph of US markets versus versus the foreign markets, and 3 years ago, I could have said, "Wow, they've never been as cheap as they are now." Um, yeah, that's that's always that's always an important point and you just have to look at fundamentals. We're a bottom we're bottom-up investors, right? We're bottom up investors. So, we look at individual companies from the bottom up. But as Warren Buffett said, you know, I like to fish in a well stock pond. So you you go to look for bottomup opportunities in markets that look cheap. Brit the British stock market right now, for example, up until last year, the British stock market had gone nowhere for 20 years. Nowhere for 20 years. Yeah. >> While the rest of the world was moving ahead, but of course the US was zooming to the moon. So the British market relative to other markets is certainly very undervalued but dividend yield the price to earnings and the price to book of a British market is one of the cheapest in the world. It's a wellestablished market well established companies. Most of the companies there are exporters so a week a pound is not uh to their detriment. So, we're finding a lot of good value there, for example. But there's other markets, Brazil, Singapore, Hong Kong, they're all markets that are lag the rest of the world, have good valuations, and have good internal fundamentals. >> Well, uh, let's end it on this note. If you had to distill everything down to maybe your highest conviction buy for 2026, asset class or sector. Well, look, everything I've said, notwithstanding everything I've said, I still think gold has the best riskreward for the next >> on that note, the fact that the gold silver ratio went down in a vertical line from 100 to 45 in a matter of weeks. What's your reaction to that? You know, I'm not a huge follower of the gold silver ratio, and I'm sorry if I offend anyone, but but you can look at it over the last 10, maybe 20 years, but if you I hear people looking at the gold silver ratio in 1900, it's it's it's meaningless to compare it with where we are now because the dynamics of the internal fundamentals of the silver market are just so dramatically different today than they were even 25 years years ago you look at the supply side of silver where 25 years ago 75 to 80% of silver was from primary silver mines today 3 the reverse is true 3/4 of silver production is byproduct and it's mostly byproduct of base metal mines right >> so the the market uh fundamentals >> and dynamics are completely different >> okay >> but um >> yeah I mean it's it's it's I And clearly we all know this. Silver has moved meaningfully more rapidly than has gold. But again, if you look at silver on an inflation adjusted price, it's still well below well 50% below its its 1980 and 2011 highs. >> Okay. Okay. Great. Um Adrian, let's wrap it up here. This is a great summary. Uh where can we follow you for more information? >> Uh adrienday.com is the best place. >> Okay. Adrienday.com. We'll put that in the description down below. So, make sure to follow Adrian down there. Always a pleasure to speak to you with Adrian. >> Well, thank you so much, David. Thank you for having me. >> Thank you for watching. Don't forget to like and subscribe.
Markets 'Primed To Fall': Which Assets Will Survive Coming Wipeout? | Adrian Day
Summary
Transcript
I still think gold has the best riskreward. People who've been buying gold for the last 3 years have not been looking at the economic factors and they've been price agnostic. Central banks are not looking at the daily chart to decide whether to buy or not. That traditional correlation between gold moving up equals higher risk equals more volatile stock market. I I I don't think it's logical. But are you really wanting to hold a US Treasury for 30 years? Commodity cycles are not the same as economic cycles. Commodity cycles are tied to >> Adrien Day, president of Adrian Day Asset Management and the portfolio manager of the Europe Pacific Gold Fund joins us once more at the VRIC. Adrien, welcome back to the show. >> Thank you, David, for having me. >> Good to always see you in person. My first question is, how do we know as investors whether or not gold and silver are topping? For context, for the viewers who have been not following this channel or other channels, gold's at 5,000. We're near 5,000. Silver is still above $100 as we filmed today. And so many people have come up to my booth here at the conference live saying, "Hey, you know, it's a great time for all of us, but this is the top. I'm worried about that. I don't want to get into the market right now if you feel like this is the top." Some people have made 40 in slips and said, "You know what's funny? They they timed this conference with a market top." And I said, "How do you know it's a market top? How do you know, Adrian?" Look, I'll I'll start with the conclusion which is we are so far from the top in my view. So gold is a is a strange asset because as its critics keep telling us it doesn't have earnings and it pays no dividend. And so it's difficult to value in and of itself. We tend to value gold relative to something else. We value gold relative to the stock market. We we value gold relative to the amount of debt in the world or relative um to the money supply in the world. But it's difficult to value gold in and of itself again because it has no earnings and doesn't pay a dividend. So how do you know it's at the top? You look at fundamentals obviously. More than that you look at flows uh and you look at sentiment. Now uh you go back to 2011 the last major top or 1980 the top the major top before that you were getting massive flows into the gold funds in 2011 GLD itself the physical gold ETF was trading at a premium not just a one day premium of half a percent but 4% premium for weeks on end that shouldn't happen to a gold ETF and the inflows were just massive. If I said to you that the GDX had net outflows for the past month, would you believe me? Most people are astonished when I tell him that. It's easy to verify the GDX has net outflows for the last month and net outflows for the last two and 3 months. >> Do you think that translated into higher share prices for the miners because that money went to the miners? Maybe that's what happened or no? >> There's some of that. There's some of that. But the GDX is a vehicle that is used primarily by generalist and retail investors, not gold people like this. People at this show are already involved in the gold market, right? And it's wonderful to see the audience here, the the participation so high, much higher than last year. But these are people who've already been in involved in gold. I'm talking about the non- gold investor, the dentist in Oklahoma who's probably never owned a gold stock in his life or the last time he owned it was 2011 or the financial planner of Schwab who has no allocation to gold. When those people want to buy gold stocks, what do they do? They buy the GDX. So in flows, you can see and you saw this in 2011. You saw massive inflows starting at about May, April, May and they just increased all the way to the top in October when the thing was trading at a massive premium. So I don't think the sentiment if you look at sentiment I just don't think that this is a this is not an overwhelmingly bullish sentiment among among broad the broad investor mass. >> Okay. Can you maybe just start by telling us what you're doing with your gold funds? Are you buying more equities, selling, taking profits, or holding? >> Well, a gold fund, of course, a US gold fund has to be fully invested. Yeah. >> At all times. So, let's say what I'm doing with my with my separately managed accounts. You know, it's all very client specific. Frankly, if I've got a conservative client who's 65 years old, 5 years ago, he was 65 years old when he opened the account and he had a 20% allocation to gold, I'm trimming that to get him back to 25 or 20%. No question. But if I've got an aggressive investor who says here's 10% of my ass is for gold, we are buying. So, I mean, I think the gold stocks are still very, very undervalued. Um and and you know the thing is as the price but stock prices have moved up dramatically but if the stock prices have moved up less than the increase in cash flow and the increase in the value of reserves then they they're not keeping pace. >> Yeah. And so if you look at a company whether it's Aigo or whatever I would say that Aigo today is better value than it was two years ago at half the price or less than half a price and that's because the cost of mining we're very fortunate right now the cost of mining has hardly budged and so when you've got the price of the product you sell go up you know two and a half three times yet your costs of mining have hardly moved moved then you have tremendous leverage on the price of gold. So if the price of gold doubles your cash flow has gone up far more than twofold and the the value of the reserves obviously this ounce of reserves has doubled but when the price of gold doubles you can bring more resource into reserves. So your reserves are growing and so all these companies are much more valuable today than they were a year ago. And on on various metrics, you know, valuation metrics, they are cheaper today than they were 2 years ago. >> Let's go back to miners just a bit. Let's talk about the markets overall. I've heard the opinion just now on my own show. Somebody said to me, $5,000 goal where any gold price movement above $5,000 signifies or implies much higher equities valuation, sorry, equities volatility overall. And I'm just wondering, well, golden stock markets have moved pretty much in tandem ever since 2011, uh, 2021 rather, in the last couple years at least. It's gone down together in 2022. It's gone up together since 2022. If higher gold prices implied gold uh higher e uh equities volatility, why hasn't it happened last year when gold went up 50% since the previous year? >> I I'm not sure that I understand the correlation to be honest. I'm not sure why gold of 5,000 >> because well I think the logic here is that higher gold signifies more risk in the world therefore more risk off for stocks because traditionally gold is seen as a riskoff play a safety play and all that. >> Yeah I would look at it in two two separate two separate baskets and then you bring them together. >> Yeah. The reason gold has been going up over the last 3 years, the the people who've been buying and the reason they've been buying are totally different from the traditional reasons, the traditional people have been buying gold and the reasons they've been buying gold. Okay? So if you go back to 2000, obviously we had a lot of uh new demand from China, but people were buying gold for economic reasons, weakness in the dollar, um you know, low interest rates, uh um uh higher inflation. People who've been buying gold for the last 3 years have not been looking at the economic factors and they've been price agnostic. That's very important. So I don't think um price agnostic meaning they they'll buy at any price. You know the central banks are not looking at the daily chart to decide whether to buy or not. Tether which as you probably know for the second or third quarter of the year last year bought more gold than any other central bank than any central bank. >> Yeah. >> Excuse me. And they're price agnostic. Obviously they want to get a better price if they can. Um and so and so the traditional that traditional correlation between gold moving up equals higher risk equals more volatile stock market I I I don't think is logical. Now, having said that, I certainly think that the US stock market is is is primed to fall. And the reason it hasn't fallen is simply because there is so much automatic money coming into the US stock market that's going into passive funds. Yeah. All that 401k money, over half of it is in the S&P funds, right? 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Scan the QR code here on screen or visit stellargold.com/davidlin to learn more. Take a look at this chart then. If it doesn't mean higher equities volatility, what does it mean for inflation? So, this is the 5year break even inflation rate versus the metals price. uh if the five-year break even as you know is uh proxy for inflation expectations not actual CPI and so with higher metals prices do you think inflation expectations will rise I think so I do think so but I don't again I don't think the traditional economic criteria that people use to decide whether or not to buy gold that's not why people are buying gold now they're buying gold because they're afraid of what's happening in the world the uncertain certainty uh shall we say chaos but the uncertainty in the world um and and the fact of fiat currencies around the world including the dollar but fiat currencies are losing their purchasing power and so people are buying the dollar and it's nothing to do with inflation expectations in my view that may come but it's not the central bank of doesn't say what's my what's my forecast of US inflation that'll will determine whether I buy gold or not. Right? But people have been buying gold and tether doesn't say, "hm, inflation's going up, let's buy gold." Huh, inflation's going down, let's not buy gold. >> So the people buying gold are not concerned with the traditional economic criteria. >> Would you say they're using it as either a treasury asset or a hedge against chaos? >> Abs. Absolutely. Absolutely. and and and and to to to preserve value in the face of deteriorating purchasing power of all fiat currencies. And this is not new. This didn't happen last year with the new US administration. >> This has been going on for years. But I think it's fair to say I don't think anyone would disagree that nothing that Trump has done has assuaged concerns. But this started years ago. Well, do do you think that maybe higher gold prices and higher bond uh bond yields rather they've been moving in the same direction that relationship will persist? I think probably long bonds. Yeah, because look, nobody is buy nobody wants US dollar. Nobody wants long-term US treasury, US bonds right now. That's why Yellen issued all pretty much everything at the short end and that's why Bessant is doing the same thing because yeah, it's one thing to take a 3 month or 6 month and get 4 and a half% on a six month, but are you really wanting to hold a US Treasury for 30 years at the current yield? I I would say no one's going to buy that as an investment. They buy it because they have liabilities that they have to match >> uh like insurance companies, pension funds, but nobody's buying a 30-year Treasury because they think it's a good investment. >> Okay. whether you think it's going to be uh Kevin Hasset or Wars or now I think there's um speculation that maybe somebody else will take the Fed chair. Uh either way, uh what is the direction of Fed monetary policy this year and how will that impact the rest in this rally that we've seen in the medals? >> Is that a softball? >> Um >> one once in a while I got to throw one of these. I mean, monetary policy is clearly going to be looser and even without Trump and his new team, even under Powell who's been relatively relatively >> sort of trying to hold the line, um money monetary policy has been easing um particularly in December when they when they reinstituted the noeq. >> How about this? Will they institute yield curve control such that they limit the long end of the 10 year and the 30-year? >> I I'm not sure because at this point I don't think they're overly concerned about the long end because they're issuing everything at the short end. They can sell everything they want at the short end. Bessant is a smart character. They're going to try and come up with other ways to get demand for US treasuries. Most obvious one being stable coins. You know, that's what the Genius Act was all about. >> Yeah. >> Was in finding a new source of buyers for treasuries. So when Tether issues a stable coin, a US stable coin, they go out and buy treasury, right? And so promoting stable coins is a backdoor way of promoting buying for used treasuries from a new new audience, >> right? Um something interesting just I've noticed maybe you can comment on this. Previously uh we had Janet Yellen was Fed chair then she was secretary Treasury uh sorry secretary of the treasur treasury and then and then um so there was good relationship between the Treasury and the Fed during her term. Yeah. >> Uh there's open friction now between Bent and Powell. Have that has that dynamic impacted markets at all? I think it definitely has. I mean there is this um theory that I don't actually go along with but that's a different discussion. >> Sure. >> But monetary polic policy should be independent of the administration and so the independence of the Fed and the independence of central banks has been held as a sacred cow. Now look, the reality is that every president for the last 20 presidents all the way back to 1914 has tried to browbe the Fed in one way or another. Not quite as openly as Trump and Bessant have, you know, um Biden didn't call him a and so on, but >> um what's his name? LBJ Johnson, he took Arthur Miller by the by the lapels and shook him and put him up against the wall. Now, this only came out 20 years later, right? But I mean, this friction Trump hasn't done that yet, but I know >> come out 20 years later. That's true. Um but but so friction between friction between the the administration, the Treasury and and the Fed is nothing new, but normally it's been a should we say it's been a little more subtle. >> Yeah. >> Um or behind closed doors. >> Have you noticed that most of the central bank, let's go back to gold for just a minute. Have you noticed that most of the central bank buying of gold that you commented earlier came from the eastern central banks and Asian central banks? I didn't see the US Fed add to their gold reserves. >> No. Well, you've seen some from Latin America as well, but I mean the obvious reason for that is that most Western countries, Western European and and and the US already have significant gold reserves. So if you've got if you're Germany with 70% of your reserves in gold, you don't really need to own anymore. >> All right. >> Um so it's the Eastern countries, the Middle Eastern countries, the East the Asian countries that were underweight gold to begin with. >> So maybe we should look at capital or not say capital but but flows in and out of central banks as an indicator of market tops once central bank buying eases maybe that's when the market eases as well for gold I think so but as I say there's other things there's tether buying now >> now tether Juan Santoi the chief of global projects for tether who is in charge of this gold drive for tether >> he thinks that the the gold stable coin will grow as rapidly in the next 5 years as the US stable coin backed by treasury ries grew in the last 5 years. >> Yeah, >> that's their goal. That's their target. Even if he's only halfway, right, that means Tether is going to be buying significant amounts of gold quarter after quarter after quarter. >> The fact that a lot of the hard metals have gone up, platinum, palladium, copper, gold, silver, new all-time highs for silver, gold, and copper. Have you shifted your allocation of the types of miners that you've that you're investing in because of these price movements? >> Yeah. Well, first of all, have I I'll answer a different question first if I may. >> Have I shifted the commodities that I'm emphasizing? Yes. >> And the answer to that is definitely yes. So, we're still buying gold, but I mean um copper is relative relatively undervalued to gold, but I mean oil and gas, oil is the most hated commodity on the planet. And I think the narrative around oil is just plain wrong, right? >> We're still going to be using fossil fuels in 20, 30, 40 years. Yeah. >> I mean, the idea that we're going to be fossil free in 20 in 10 years, it's just nonsense is just not going to happen unless we want to go back to the dark ages, which weren't so dark. But anyway, that's a different subject. Um, so oil, the narrative around oil is just completely wrong. But because it is so hated, because there's this narrative we're not going to be having any in 10 or 15 years time, because the banks up until Trump came in would not lend to oil companies because government pension funds and so on would not invest in oil companies. What did oil companies do? They did the rational thing and didn't invest in oil exploration. So oil has been incredibly underinvested. There's been underinvested underinvestment in in oil and gas for the last 1015 years. And the thing about commodities we have to remember is that the commodity cycles are not the same as economic cycles. Commodity cycles are tied to the investment cycle. Co uh copper has been very underinvested for the last 15 years which is why the copper price has moved as dramatically as it has. Oil and gas have been dramatically significantly underinvested for the last 15 years because of this narrative which is wrong. And the narrative that there is which is put out by the International Energy Authority >> because the narrative that there's excess supply. Yes. >> Is not true. >> You're talking about oil now. >> I'm talking about oil. Sorry. Yes. Thank you. I'm talking about oil. Over 100% over 100% of the growth in oil in the last decade for growth in global oil over 100% came from US shale. US shale has peaked. That's a fact. That's not speculation or you know wild talk or >> you look at field after field after field. They peaked. Production has peaked and they're on the way on the way down. used to be thought that the the downward slopes in shale would be very very sharp and the tails would be very short relative to conventional fields. We don't know that yet, but we're going to find out. But regardless, they've peaked and it's on the way down. So, the big question is where is the where is the future growth in supply coming from? >> Venezuela. Venezuela's won, but we're going to have to go back to the Canadian or Sands and Venezuela's one. But you look at a lot of the the conventional fields, Cantrell North Sea, you know, they're they're a shadow of their former self and now shale, which was for growth, I is declining. And yet demand for oil just consistently goes up 2% 2 and a half% year after year after year. So I mean I I I think that's enough on that perhaps but I think oil is is very undervalued. You know right now lithium is very undervalued. Uh so there's a lot of commodities that are undervalued relative to gold. So we're certainly putting more money into other commodities. >> Yes. >> I'm also putting more money into overseas stock markets just generally. I don't know if you wanted to talk about that or not. Maybe you don't. >> But you look at the US market. The US market up until last year, the US market outperformed the world XUS, right? As a Morgan Stanley Capital International Index, World XUS. So the the US outperformed the non US for the last 15 years. >> Okay. >> That's a these cycles tend to be long. Before that, foreign markets outperformed the US by eight years. >> Yeah. Last year you saw the turn world x the world xus so foreign markets outperformed the US by almost 2 to1 last year almost 2 to1 >> and you you don't get that shift for one year and then it shifts back so I think we're going to see I think for the next probably five or six years we're going to see overseas markets outperform the US by how much let me just give you an example The you the overseas markets would have to go up two and a half times from where they are today. Two and a half times to get back to their last cycle low value relative valuation. Their last cycle low. So the potential for global markets to move up >> relative to the US relative to the US I think is very very strong. Let me just say, you know, January the 1st, global markets had never been as cheap as they were relative to the US market. >> As a fund manager, how do you differentiate between something that is undervalued and has potential versus a value trap because it's cheap? >> Good question. And there's also the question of timing. Of course, you can be right, but your timing can be off because I could have looked at a graph of US markets versus versus the foreign markets, and 3 years ago, I could have said, "Wow, they've never been as cheap as they are now." Um, yeah, that's that's always that's always an important point and you just have to look at fundamentals. We're a bottom we're bottom-up investors, right? We're bottom up investors. So, we look at individual companies from the bottom up. But as Warren Buffett said, you know, I like to fish in a well stock pond. So you you go to look for bottomup opportunities in markets that look cheap. Brit the British stock market right now, for example, up until last year, the British stock market had gone nowhere for 20 years. Nowhere for 20 years. Yeah. >> While the rest of the world was moving ahead, but of course the US was zooming to the moon. So the British market relative to other markets is certainly very undervalued but dividend yield the price to earnings and the price to book of a British market is one of the cheapest in the world. It's a wellestablished market well established companies. Most of the companies there are exporters so a week a pound is not uh to their detriment. So, we're finding a lot of good value there, for example. But there's other markets, Brazil, Singapore, Hong Kong, they're all markets that are lag the rest of the world, have good valuations, and have good internal fundamentals. >> Well, uh, let's end it on this note. If you had to distill everything down to maybe your highest conviction buy for 2026, asset class or sector. Well, look, everything I've said, notwithstanding everything I've said, I still think gold has the best riskreward for the next >> on that note, the fact that the gold silver ratio went down in a vertical line from 100 to 45 in a matter of weeks. What's your reaction to that? You know, I'm not a huge follower of the gold silver ratio, and I'm sorry if I offend anyone, but but you can look at it over the last 10, maybe 20 years, but if you I hear people looking at the gold silver ratio in 1900, it's it's it's meaningless to compare it with where we are now because the dynamics of the internal fundamentals of the silver market are just so dramatically different today than they were even 25 years years ago you look at the supply side of silver where 25 years ago 75 to 80% of silver was from primary silver mines today 3 the reverse is true 3/4 of silver production is byproduct and it's mostly byproduct of base metal mines right >> so the the market uh fundamentals >> and dynamics are completely different >> okay >> but um >> yeah I mean it's it's it's I And clearly we all know this. Silver has moved meaningfully more rapidly than has gold. But again, if you look at silver on an inflation adjusted price, it's still well below well 50% below its its 1980 and 2011 highs. >> Okay. Okay. Great. Um Adrian, let's wrap it up here. This is a great summary. Uh where can we follow you for more information? >> Uh adrienday.com is the best place. >> Okay. Adrienday.com. We'll put that in the description down below. So, make sure to follow Adrian down there. Always a pleasure to speak to you with Adrian. >> Well, thank you so much, David. Thank you for having me. >> Thank you for watching. Don't forget to like and subscribe.