Is gold the most compelling investment of 2025? Adrian Day, CEO of Adrian Day Asset Management, says yes, and backs it up with conviction.
In this powerful conversation with Trey Reik, Adrian explains why gold offers the best risk-reward profile in decades, and why even conservative investors should pay close attention.
Adrian breaks down the real drivers behind gold’s rise, from surging central bank demand and de-dollarization to the U.S. government’s “criminally irresponsible” handling of long-term debt. And while gold is making headlines, gold mining stocks remain deeply undervalued. Adrian shares why most investors are still on the sidelines, what’s starting to shift in 2025, and how miners now offer superior margins, strong balance sheets, and breakout potential.
Key Topics Covered:
- Why gold is rising despite a strong dollar and higher yields
- Why central banks and Asian investors are driving demand
- Why Adrian holds 30% gold in conservative portfolios
- U.S. debt policy and the risks of a fiscal crisis
- Why gold stocks have lagged, and why that’s changing in 2025
- How to build a smart gold equity portfolio
- Adrian’s strategy for picking junior miners: people and cash flow
Investment Concerns? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/44589eo
Hard Assets Alliance – The Best Way to Invest in Gold and Silver: https://www.hardassetsalliance.com/?aff=WTH
Adrian Day 0:00
We’re at about 30% gold, even in a conservative global account. And frankly, that’s because not only is gold a good counterweight to other assets, but in and of itself, it strikes me that it is the best risk reward asset out there for the next year or two.
Trey Reik 0:22
I Greetings and welcome to our wealthion show. My name is Trey Reich, a Bristol Gold Group, and today we’re here with Adrian day, CEO and chairman of Adrian day asset management, a boutique investment advisor that was launched back in 1991 and currently hails from San Juan Puerto Rico. And I’ve known Adrian for about a quarter century, and I can attest to the fact that throughout that period, his firm has remained somewhat unique in the money management industry. In so far as gold and precious metals have always been a central focus of the firm, and they’re not afraid to admit it anyway. Adrian, thanks for spending some time with us today. How are
Adrian Day 1:10
you? Well, I’m fine. Thank you, Trey, and thank you for having me. Terrific.
Trey Reik 1:13
So I’m on Cape Cod, and this weekend, we had the high 30s and rain for all 48 hours. How’s the weather down there in Puerto Rico?
Adrian Day 1:24
Well, we’re in the we’re in the mid 80s, with a nice blue sky and a nice, gentle breeze. So
Trey Reik 1:32
one of my first questions since I frankly didn’t know that you had moved down there, you know your your firm offers an array of gold focused, resource focused and general investment strategies. Can you just give us a little history on each of the strategies and how you decided to end up down in Puerto Rico? Yeah,
Adrian Day 1:56
yeah, very briefly. I mean the firm, as you may know, but just for Firm, we offer individual accounts in global markets. Frankly, we’re not, we’re not specifically just gold or resources, so most of our accounts are global accounts, but we do offer gold and resource special accounts, but I would say most of our accounts are people who who come to us because they’re conservative, they’re low risk. They want exposure to the global markets, but they also like gold, and so they come to us for that we also manage, I should say, Peter Schiff’s Euro Pacific gold fund. And we’ve been doing that since 2013 so I’ve always, we’ve all our accounts have always included some gold, because I think you know gold, obviously gold has many, many, many benefits, many attractions. It serves. It serves many purposes, fulfills many purposes. One One of them is to act as a as a counterweight to the rest of a portfolio. And so we’ve always had some gold in portfolios. Right now, I have to say, and we can get into this, obviously, but right now we have very, very high exposure to gold in even at conservative global accounts. We’re at about 30% gold even in a conservative global account. And frankly, that’s because not only is gold a good counterweight to other assets, but in and of itself, it strikes me that it is the best risk reward asset out there for the next year or two. So we’re very high quickly on Puerto Rico. I mean, when Peter Schiff asked me to manage his gold fund, he’s already in Puerto Rico. He asked if I would mind moving to Puerto Rico, give it a try for a couple of years, see how you like it, because of the tax benefits. So I get tax benefits, but also the firm gets tax benefits from having the management in Puerto Rico. And I moved down here. You know, I’m single, so I can move where I like, what I like. And frankly, it’s, you know, I love it down here, but people are super nice, really friendly people, just genuinely helpful people. Lots of good restaurants I like to eat. So that’s good.
Trey Reik 4:36
Have things fully recovered from the hurricanes a few Well, the
Adrian Day 4:41
big hurricane Maria. What was that? Seven years ago now, seven, eight years ago now, you know, in the middle of the in the middle of the island and in the more rural areas, not really, it’s, it’s been, it’s, it’s not to be on the. Review, it’s not been very good. I mean, the US government did send a lot of aid down here, but as you’ve probably read a lot, or may have read, a lot of it was stolen. I mean, directly stolen, more of it was diverted to cousins who didn’t know what they were doing. And a lot of it, frankly, was just totally wasted. It’s very, very sad, yeah. But I mean, in San Juan, yeah, it’s completely recovered you, yeah, yeah. So
Trey Reik 5:31
last question on the firm, are you half gold? Less than half gold? I got the impression you were more than half gold.
Adrian Day 5:39
I think if you look at the total, I mean, everything we do, yeah, I would say when we’re more than half gold right now. Okay, yeah,
Trey Reik 5:48
so. And then the other question that I had, I have always, you know, gold bears have a tendency to say, why don’t you start your analysis in 1980 you know when gold was 850 whereas gold bulls have a tendency to start in March of 2000 and depending on which of those starting points you choose, you know gold’s 30 year history is entirely different. And I’ve always said that there are decades to own gold, and they’re decades not to own gold. And back in 1980 interest rates were very high and falling, and inflation was very high and falling, and savings were strong, and GDP and productivity were strong. So gold wasn’t really a compelling investment thesis, pretty much the opposite of March of 2000 but the reason I give that introduction is you started your firm in 1991 right in the middle of that 20 year stretch where, quite frankly, golden, you know, it wouldn’t have necessarily been on my radar screen. So what led you to make gold one of your focus is not your only focus, but one of them in 1991 and how’d those early years go?
Adrian Day 7:09
Yeah, no, of course, you’re absolutely right. The starting point of any analysis makes a huge difference. And, yeah, yeah. I mean, I think it’s a little unfair to say we should start in 1980 which was right at the peak, but pick another date, as I say, I’ve always thought that gold acts as a gold to be acts as a foundation of a portfolio. It’s insurance. You know, it is very simple stories. It’s very base. It’s insurance and it’s, it acts. It can move in contrary directions to the broad market. So I think it’s always good to have some gold in a portfolio at any time, because we never even when this, even when the world is looking good and iron curtains come down and the stock market’s going well, things, Something can always come out of a blue and gold will, will, will tend to protect you against that. So in the early years, we didn’t have a lot of gold, I have to say. I don’t know if this violates any any SEC rules or not, but you know, in the early days, our biggest gold holding was Franco Nevada. And you know that didn’t serve us too badly. Serve clients too badly. Franco
Trey Reik 8:30
Nevada is a royalty company. Correct, correct,
Adrian Day 8:34
yes. And I should also say you know this, but I should also mention, but put up the Franco Nevada, but we bought in 1991 subsequently merged with Newmont, and then it got spun out again. So, you know, it’s a different, different stock than it was back then. But, but yeah, so, I mean, I think you’re absolutely right. There are times to own gold, and there are times, there are times, I think one should always own some gold. There are times to own a little gold. There are times to own a lot of gold. But I say to people, you know, when you’re looking at the core function of gold, which is for insurance purposes, you don’t look at your house and say, Well, you know, we haven’t had a hurricane for a few years. I think I’ll get rid of my home insurance. You always keep your home insurance. Now, there might be times to increase that, you know, depending on your financial circumstances and so on and so forth, but you always have some insurance, and I think that’s the same with gold.
Trey Reik 9:44
So in the last of my sort of bench clearing questions to begin, when you your gold, focus and forgive me for continuing to repeat that. But it’s fun for me to talk to someone who recognizes. As the advantages of gold. But do you have a framework for what you need to see that maybe takes gold to the conclusion of your investment analysis? In other words, is gold a permanent investment, or are you still owning gold because of imbalances, etc, that you perceive in the global financial structure. And is there a time when we won’t need gold again? I
Adrian Day 10:29
don’t think there’s a time, not in my lifetime, when we won’t need gold. I mean again, if you’re looking at it as insurance, even if you haven’t had a fire in your home for 50 years, right? Still a good idea to have that fire insurance, just in case. So I think we’ll always need some gold, okay, but right now, and I know we’re going to get into this, I mean, right now, with the imbalances in the world, with the huge amounts of debt at the government levels around the world, particularly in the US. Yeah, we absolutely need a higher a higher exposure to gold.
Trey Reik 11:15
And then, moving more specifically, into the recent past, 2024 I four at the beginning of the year, the Bloomberg strategist poll was forecasting a 1.7% increase in the S P, which was the most bearish in the 25 years of the survey. But by the end of the year, we had the S P up 25% and strategist predictions for 2025 are the most bullish since COVID. You follow how that progression normally works. So last year, I think it’s fair to say stocks were surprisingly strong general stock market. Yet even with 10 year yields rising 18% and the dollar hitting sort of two year highs. Gold was up even more at 27.2% so this is probably the most important question of the morning. But why do you think that was, what’s what’s taking hold here?
Adrian Day 12:20
Well, I think, I think everybody knows the main reason. I mean, certainly if you go back to the fall of 2022, for the first 18 months, it was prime of that bull market. It was primarily central banks who were buying, right? We know that it was primarily central banks who are buying then, beginning in January of last year, beginning at the beginning of last year, you started to get more interest from Chinese consumers, and it was really only in the fall, in the spring and summer of that year, but you started to get interest globally. European ETF started getting inflows. Had a lot more interest from the Middle East. And I think a lot of you still didn’t have much interest from North America, but I so I think you’ve had, I think you’ve had different drivers, different different different buyers, but also people buying for different reasons than they were buying in the 2009 to 2011 or 2001 to 2008 periods. They were not being driven by economic factors, but they were being driven by other factors. So obviously, central banks, we know what they were buying to diversify their reserves in the face of dollar weaponization, which I should sort of say didn’t start on January the 20th of this year. That’s been going on for quite a long time,
Trey Reik 13:56
right? Especially since the Russian freeze, correct?
Adrian Day 13:59
Well, I would say, even before that. But the US, you know, the US has like to exert its influence and power. That’s a nice way of putting it, for many, many years. I mean, you know, think of a way they basically told the Swiss that they had to change their whole banking system because the US didn’t like what they were doing.
Trey Reik 14:28
And this goes back to Obama with bank Perry bar, right? The fraud. There’s
Adrian Day 14:33
the bank Perry bar incident. There’s the Santander who made a loan to a Spanish company but wanted to build a hotel in Cuba? Perfectly leave legal under EU rules, perfectly legal under United Nations rules. But the US says, well, we don’t like Cuba, so we’re going to find banks and tender billions of dollars so. So it’s been going on. A few years, but you’re right. I mean, obviously the Russian the confiscation of Russian assets really, really stepped it up. Chinese, we know they’ve been concerned about the economy, about the fragility of their own banking system. They’re not allowed to buy cryptos. So there are many, many places that they would want to put their money for security and wealthy individuals around the world, wealthy individuals, Middle East, Asia, particularly, but also Europe and increasingly, the US are just concerned, as you said earlier, about the imbalances in the world. And so all of these factors are not what I call the traditional economic factors that drive gold. You know, if you think what drives gold, you want a lower dollar. You want low low real interest rates. You want higher and increasing inflation. And you know, from 2022 to 2025 we didn’t really have that. So the environment was not the normal economic environment for gold. And so to me, it’s not really a surprise, but up until recently, North Americans haven’t really been participating in the gold market, because the stock market has been doing well. The dollar has been strong. The economy has apparently been strong. Inflation has been coming down and apparently under control. I keep saying, apparently. But you know, on the surface, things look good, and the S P was doing well. So why invest in gold would be what most people ask themselves.
Trey Reik 16:45
So putting you on the spot a bit Do you in terms of the US deficit, which you and I have been following for 20 years? And I would have said, you know, 20 years ago that deficits were a problem, when they were 400 billion. Now we’re in the $2 trillion range, and we seem to be normalizing these $2 trillion deficits, even though we’re not in an emergency environment anymore. Do you get the impression that people are finally concerned about sort of a doom loop on on interest costs and that type of thing. Yeah, I
Adrian Day 17:24
think so. I think So increasingly, I mean, a lot of it is political, as you know. I mean, it’s, it’s astonishing to me, but suddenly the Republicans in Congress, you know, seem to be fiscal Hawks. And you have to ask, Where were they, not just for the last four years of Obama, but where were they for the four previous years under under Trump, right, when to be a fiscal Hawk made you an extremist right. But I also think again politically, Elon Musk and the doge commission, although the two, the two things are connected, but they’re really separate issues. You can have a lot of waste even with a balanced budget, and you can have no waste with excess debt, but, but the two, really, you know, are connected, obviously. And I think what Elon Musk, all these different things that Elon Musk has drawn attention to, the waste, have made people focus a little more on, on the budget, and therefore on on debt, among what we’ll call, you know, investment, among the investment community, Yeah, I think there’s much more of a focus on really the impending, the impending crisis, because it really is a crisis. It’s been going on for, you know, 15 years now. I mean, who the number of people that are buying long term US debt are are going down meaningfully. You know, no longer. Obviously the Russians aren’t buying anymore, but the Chinese are selling. Even the Japanese, who are our friends, are no longer buying. That’s for purely economic reasons, not for political reasons. With China and with Russia, it’s, political reasons, but we’re not getting the sort of the big buyers of you know, if you go back 10 years and who were the big buyers of US bonds, well, it was Russians, Japanese and Chinese. They’re not buying anymore. It was regional banks in the US, well, they stopped buying very dramatically with Signature Bank and Silicon Valley and that lot, and of course it was the Federal Reserve. So who’s buying now? You know our insurance companies, people with long and pension funds, people with very long, long dated obligations. Funds, and his hedge funds, who are looking for a leverage way for, you know, benefiting from a reduction in interest rates. I don’t know very many, what I’ll call ordinary, everyday investors, whether it’s you know, institutions or retail, who are buying 30 year bonds with the intention of holding them 30 years, right? It’s just not a it’s just not an attractive investment opportunity, speaking. And anyway, my my point was that, you know, we’ve seen this reduction in interest in the 30 year and that’s gone along with, obviously, a reduction in the amount of 30 years and 20 years that are being offered to me. It was criminally and irresponsible. And I mean that I emphasize the word criminally. It was criminally irresponsible in the, well, it was Obama years in the Obama years when interest rates in the US was zero, lower bound zero, not to have issued more of the debt at long term. And I don’t just mean 30 year. I mean 50 year and 100 year. If Argentina, Italy, as well as Austria, if those countries could issue 100 year bonds at six and 7% interest rates. What would the US have had to pay on 100 year bond? Right? I don’t know. Three, three and a half, four. It was totally criminally irresponsible not to do that at that time, that opportunity has now passed. But as you know, under Yellen, I don’t think, I don’t think economic historians will will give Yellen a lot of credit for the way she managed a budget under her four years. It was, you know, because she really went all the way to, as you know, to short term, short term bills, and at this point, and she left the she left the Treasury empty. I mean, you remember that famous interview on the Friday before the swearing in of President Trump, of the new administration, she said, you know, basically, that the Treasury is going to run out of money on Tuesday. Good luck. Um, so, so, so currently, and I’m not making this a political thing, currently, we’re in a very, very serious situation, right? And it’s a matter of juggling bulls, frankly, to keep the keep the thing going. So
Trey Reik 22:38
along these lines over the weekend, because I’m not a bond guy, but I read over the weekend that the 10 year treasury price declined 3.8% last week, which is the worst week since the repo crisis. In 2019 the same time, the stock market was up 5.7% the s, p, which was the best month since, like november 2023 so my, my point is, you know, as gold guys, for a couple of decades, we’ve always talked about the possibility that, you know, the dollars, you know, day of reckoning may actually come, and gold may start to be perceived as a preserve, preferred reserve currency. And I’ll tell you for 48 hours last week, on Thursday and Friday, I thought we might be there. What do you think?
Adrian Day 23:34
Yeah, no, I agree with that completely. I mean, the one big factor that is missing or that has been missing from gold is, you know, a collapse in the dollar. And, I mean, we all know why the dollar has held up so strongly over the last 10 years or 20 years, it’s because of a lack of good alternatives. What one can’t help. I’m trying not to be political, but one can’t help scratching one’s head if the US has this funding problem, and part of a problem is that they’re not getting foreigners to buy long term US bonds. It’s a puzzle why the US seems to be doing everything possible to make foreigners not want to buy our long term bonds. And there was a proposal over the was it over weekend, or was it Friday, where Miran, who’s the chairman of the White House, Economic Council of Economic or the Council of Economic Advisers, came up with five proposals, one of which was to reintroduce 30% withholding tax on foreigners holding treasuries. Well, that does not make me want to say. Say, let me run out and buy some of these things. So anyway, that’s
Trey Reik 25:05
so skipping a little bit across the street in Washington to the Fed. You know, I’ve always avoided fed discussions in large rooms, because nothing turns us investors off quicker than criticizing the Fed or the dollar. It, it, you know, it’s not a popular line, but I’ve always said that fed cred, or fed credibility is is really starting to be challenged. And so generally, I’m interested in your thoughts on the Fed, but specifically, since you mentioned the political thing, I will point out that in the last 72 hours, we’ve had three regional presidents and governors, Collins, Goolsbee and Williams come out dramatically from the Fed’s lane of monetary analysis to openly criticize President Trump’s, you know, tariff efforts as inflationary, poor for employment and bad for the economy. So that was a long winded question. What do you think about fed credibility and gold at this point? Yeah,
Adrian Day 26:16
no, I think the Fed is definitely losing credibility. I There’s no question that the tariffs, the whole tariff issue, and, you know, the back and forth has put a focus on to something other than the Fed. So if the economy slows dramatically, or inflation picks up, people are going to point to tariffs, whereas in my view, before January the 20th, before the administration came in, the economy was significantly slowing anyway, and if you look at the inflation numbers, the price numbers, because that’s not inflation, that’s that’s a result of inflation, that’s right. But if you look at the price in inflation numbers, whether CPI or core PCE or whatever it is, they’ve all been trending upwards, slowly, but trending upwards from last June. So, you know, I although we look at a two year graph and we say, Wow, hasn’t inflation come down a lot? Well, yes, it came down from a very unusual spike because of COVID, but where we are now the last six months, or really more than the last 10 months, has been trending up. Number one. Number two, the numbers are still way above, or meaningfully above, where they were pre COVID. And number three, they are, of course, well above the Fed zone, arbitrary 2% target. And so I don’t think, I don’t think the Fed should be patting itself on the back for inflation. So even if we didn’t have tariffs, and I would dispute the fact that tariffs are inflationary. You know, tariffs are definitely bad for the economy. They definitely raise prices on certain goods for US consumers, and so I’ve always sort of perverse for a country to want to impose tariffs on imports when it’s only hurting their own consumers who want those products, but, but, but, but they’re not inflationary. I mean there’s as or I was going to say, as you know, there’s different views on this. I mean, I’m a monetarist. I’m
Trey Reik 28:47
very interested. Why do you think what you’re in us a minority there. Why do you believe that tariffs are improperly billed as inflationary?
Adrian Day 28:58
Well, because people look at price, right? So if you impose tariffs on Britain or United Kingdom, the cost of my scotch whiskey goes up and the price of my cheddar cheese, real cheddar cheese, not Wisconsin cheddar cheese, the cost of my cheddar cheese goes up, right? But if you have, if the Fed hasn’t increased the money supply, if we haven’t had an increase in money in the economy, then the price of something else has to go down very well. Said that, yeah, so we’re only focusing on on the individual prices that go up. We can only have you can’t have all crises in an economy moving up unless you’ve had an increase in the money supply. Interesting, that’s, that’s Milton Friedman showed us that 40 years ago, and I don’t think anything’s changed since then. Mm. So you can have individual prices going up, but you can’t have all prices going up. And that, of course, goes back to a base. It goes back to the Fed. Now there’s other factors. Of course, the Fed can increase the money supply, but if the bank simply borrow the money and put it back on reserve with the Fed, then you’re not increasing the money in the economy. I mean, the money has to get into the economy, but if the Fed doesn’t increase increase the money supply, it’s very difficult to have inflation without the Fed increasing the money supply. So they’re the ones that are ultimately responsible for inflation, and they don’t seem to, well, they certainly don’t, don’t. They certainly don’t acknowledge her own responsibility. But I think the Fed is beginning to lose credibility. It was losing it under Yellen, and then Powell came in and had a much more I think Powell restored some of the credibility, certainly for the first couple of years he it’s difficult to criticize what he did too harshly, certainly compared with the last 40 years of the Fed. I think he’s been, you know, a better Fed chairman, but I
Trey Reik 31:16
had to criticize them. I’d take 2021 when the Fed did 120 billion of QE a month with CP, you know, CPI already heading to 7% GDP at 6% and unemployment down from 14 to five. I mean, I do think that year will go down as certainly in the top five policy mistakes of Absolutely, it
Adrian Day 31:41
was a panic decision. It was a panic decision that was not necessary. But I mean, really, you go back to 2008 2009 when they, when they increase the money supply so dramatically, and people will say, Oh, you know, v we were in uncharted territory. We had no idea what was going to happen. You know, it could have been the worst disaster. You know, it could have the global monetary system could have blown up. I don’t think any of that was true. But even if it was true, or even if that was a fear, the big, the big, big mistake under the Nanci and then under yelling, was keeping that easy money for so long, right now, once, once we were over what was perceived as the danger zone, they should have dramatically pulled in, you know, pulled in the balance sheet, right? And they just kept it going for far too long, far too long. And
Trey Reik 32:38
my, my last chairman, Powell, criticism is on top of everything. Not only had they not admitted their contribution or addressed their contribution through that QE, but at Jackson Hole, he actually started making light of it. I’m sure you remember this when he said, we were not alone. We were on the good ship, transitory. And when I read that quote, I almost fell out of my chair. I was like, the Fed chair is now joking about the worst inflationary outbreak in the past 50 years. I mean, no,
Adrian Day 33:12
absolutely not something that not a joke that should have been said publicly. No, no, absolutely. I don’t mean to. I’m not a defender of the Fed. I mean, I think the Fed as an institution is flawed, right? I guess I’m just trying to, trying to save a Powell, perhaps, is not quite as bad as yelling and Bernanke and frankly, Greenspan. I think Greenspan was a disaster, and why I criticize Greenspan so much is because he actually knew better, right? And
Trey Reik 33:48
the variable mortgage thing, when he got the whole country to lever up on variable mortgages and then raised interest rates, you know, at 18 consecutive meetings or whatever it was, which no. And
Adrian Day 34:02
then, of course, what he did with long term capital, you know, the hedge fund run by the smartest people in the room, um, he introduced, it was really a green put for many years, right, right? That turned into the Fed put. But the critic says we’re getting a little but, but my criticism of Bernanke, of um Greenspan is he actually knew better, right? Whereas I don’t think Bernanke knew better, right? And I don’t think Yellen knew better. Yellen is, is a labor economist. I don’t think she has a very broad understanding of the economy, frankly.
Trey Reik 34:41
So before we move on to one of our favorite mutual topics, which are gold equities, my last question on the recent Gold Price Strength is we have this Basel three change coming in June, which we’ve read about for the better part of a. Decade, but has never sort of gotten over the finish line. And it has been suggested to me by some people I consider to be pretty sensitive to, you know, movements in the gold market that that June Basel three change may be one of the reasons gold has had this recent bout with strength? What do you think? Yeah,
Adrian Day 35:22
I mean, I think it’s like, as with a lot of markets, when you’re in a bull market, everything that is marginally bullish becomes bullish and has an impact. If this had happened 20 years ago, or certainly in the 1980s it wouldn’t have had any impact on the price of gold. That’s the way I’m looking at it. But when you’re in a bull market, then every bullish factor, right, just adds to that, just adds to the price and adds to the bullish environment. Like Chinese insurance companies now being able to hold gold in their in their reserves. Basil three is another example, yeah, all these things build on each other. You know, the thing I would say just before we get off that and onto equities, you know, I think the big message that I would have is that the people have been buying gold for the last three years, and the reasons they’ve been buying gold have not gone away, right? If anything, they’ve only got more more more serious, but they certainly haven’t gone away. And so that buying is just going to continue, and that buying also is relatively price elastic, price inelastic, you know? I don’t think central banks who are worried, I don’t think China is going to say, Let’s not buy gold at 3000 you know, and let’s just hope that nothing happens for the next few months, right? So I think that buying is going to continue. That is, that is the main message. So
Trey Reik 37:05
moving on to portfolio management, can you talk a little bit about the various roles complementary or otherwise that gold and gold equities can play in a portfolio?
Adrian Day 37:20
Yeah. Obviously, if one’s looking for insurance, you know, one really stays with with gold bullion or physical gold, gold ETF, such as the one put out by your former employer,
Trey Reik 37:42
right? Yes,
Adrian Day 37:43
P, h, y, s, so. So I think if you’re looking for it, for that defensive measure, for that insurance in an account, if you’re looking for something that will definitely go up, that the rest of the portfolio goes down, you know, then you’re sticking with gold bullion or or gold bullion ETFs. If you want to maximize your returns on on gold, then obviously you go, you go to gold equities. Typically, you know, if we’re looking back in the 70s, before I had the money management firm, but when I was doing it myself. And certainly, if you’re looking at the 2000s and then 2009 period, you know, once, once, once, gold has started to move. You typically move out of gold and into gold equities, because that’s where the leverage is. We are holding on to our gold. I have to say we have not started. We have not sold all our gold in order to move over to to equities. By any chance, by any means. I think both, both have a very strong role in a portfolio right now. You know where we have emphasized the seniors, because the seniors tend to be the ones that move first, as you know, and not only do they move first, but they’re more certain to move so if you own you know, Barrick and Newmont and a go and Kinross, some of them will do better than others, no question. But in the last, you know, six months, they’ve all, They’ve all moved up. If you buy Ajax consolidated, and, you know, Moose pasture Incorporated, they may or may not move up. So so they’re more certain to move, and they’re the first to move, but when we’re certainly got a large exposure to to juniors at the moment, which haven’t yet really moved, as you know, in a broad sense, I mean individual stocks have. But as. Hectare as a group, they really haven’t moved yet, and that’s the next thing I had. So
Trey Reik 40:06
gold last year was up 27% in through late October, GDX, the Arca gold mining, ETF, was up 42% I think at the peak in like October 22 and GD XJ was, you know, up a similar amount, 46% but by the end of the year, GDX and GD XJ only closed up 10 and 15% which was obviously a very disappointing three months. Why do you think the gold shares lag so much in the fourth quarter last year?
Adrian Day 40:45
Well, again, I think the fundamental is that the drivers of gold were not the typical drivers that attract North American investors and Western investors generally. The economic environment was not conducive to gold investments. You started to see things change in the summer, and then you got the Trump election, and with the Trump election, people thought, we’re going to have a strong economy, we’re going to have a strong stock market. You know, we don’t need gold anymore. So, I mean, I think that was the main reason. And as you know, Trey, it’s it’s been astonishing to me, but even with gold at record levels, and we’ll talk about the stocks in a minute, but even with gold at record levels, the interest among generalists, general investors, both generalists, funds and individuals, has been very, very, very modest. You look at a GDX, which, as you say, is the largest gold mining ETF, and there’s only been three days this year of inflows, net, net inflows. Three days this year of net inflows means just unbelievably astonishing. They’ve lost $2.2 billion in outflows this year.
Trey Reik 42:11
So speaking of this year through I looked before we got on so intra day to this morning, the S P was down 7.3% year to date, and the GDX is up 47 by the way. Did you know that that it was up 47% it’s a pretty big number. I It surprised me, and the GDX j is up 44.5 of course, nobody’s talking about it, nobody’s writing about it. No one knows about it. But, I mean, that’s a pretty encouraging thing in terms of changing the gold stock lag. Don’t you think,
Adrian Day 42:49
oh absolutely no. I mean, if, and I think we’re just beginning to see that that turn in, in in interest. I mean, no one can complain of what the senior gold stocks have done this year, six months, even a year, right? I mean, it’s difficult to complain, but they haven’t exhibited the normal kind of leverage, but we expect from from gold stocks, we’re just beginning to see that, I think this year, you know, if you look at, if you look at, in fact, I’ll do it while we’re here. If you look at one year, the X AU is up 40% gold is up 34% so no leverage at all. If you look at six months, they’re essentially the same, no, the X, A, u is actually under performed gold for six months. Wow. Now you look at, as you say, Now you look at year to date, and you’re seeing that leverage begin to begin to exit, begin to demonstrate itself, still not seeing it, and inflows into a GDX. That’s a good point, but a bit of a turn. I mean, we had, I said there were three days of inflow, net inflows this year that were reported by them act, because they don’t report every day, as you know, but, but only three days of net influence this year. Two of those were in the last week. So, okay, two swallows don’t make a spring, or is it a summer, summer, but, but nonetheless, you know, I think we’re beginning to see that turn. But you look at the gold stocks you have, obviously they’ve done well, but you look at very strong margins, as you know, and growing margins each quarter since the first quarter of last year. So four quarters, and then this year, this quarter is going to be the same thing. I think we haven’t had the results yet, but so you’ve had five quarters of growing margin expansion, which means increased cash flow. It is the sector of. S, p, the sector of the New York Stock Exchange, rather, with the fastest growing growth in cash flow over the last 12 months. Wow. And I mean that people, people don’t always sort of really focus on it enough. I mean, just look at those margins we and it’s a bit frustrating to me, trade, to be honest, that every single you know, quarterly reports quarterly financial call that I’ve been on for the last year. So there’s four quarters with maybe 15 companies. Every single one they spend all half a conference call talking about how costs are going up and the cost pressures and all of the measures that we’re doing, and our focus is on keeping costs down. Okay, important, very important. But when the price of gold is 3100 and you’re all in sustain. All in sustaining costs are 13 or 1400 that’s a pretty darn good margin. And I think we should spend a little more time talking about how the gold price is going up so much faster than the costs are going up, right?
Trey Reik 46:21
You bring up an interesting point for about you know, in the drawdown from 2012 to 2015 gold, the gold mining industry earned a unfavorable reputation for capital discipline and execution. Do you think, because you’re bringing up a good point, why haven’t earnings done better? And I there’s a lot of you know, high grading, low grading, when the gold price goes up. I understand all that. But do you think that the negative reputation for gold industry management is still deserved, or do you think the industry has made some improvements? The industry has
Adrian Day 46:59
definitely made some improvements, I think arguably, yeah, no. I mean, what happened in the 2011 12 period was, was was disastrous, just overpaying for marginal assets. And it wasn’t just overpaying for good assets, it was overpaying for marginal assets. And I read a report, it was John tomasos who did it, I’m pretty sure. But in the three years after 2012 he said over 75% of the investments were written off, right? Not written down, but written off, right? That is a that is a disaster. And if you’re a generalist investor who who finally decided to get into gold in 2010 2011 and you lost 86% because you were in a big stocks, and you lost 86% of your investment over the next four years. And then you say, why did this happen? And you look at the disastrous investments that were made over that time, yeah, it takes a long time to get over that. And I think there’s no question that’s one of a reason, one of the reasons of people, generalists, have been so slow to get back into the space. And, you know, the sad thing is, they finally decided to get back in. Let’s buy Franco Nevada, the safest, the safest possible gold stock out there. And then, of course, they had Cobra Panama, and they say, oh, no, you know, you can’t win in this space, right? So I think it did take time. But to answer your question, no, there’s no question in my mind. I think we have, on balance, we have better management now than we did 15 years ago. People definitely learned their lessons. You know, as you know, there are a lot of CEOs that were fired
Trey Reik 49:00
in that period, I think I can only count on one hand the amount of CEOs that are still around, like we know them. That’s John Boyd. It’s Mark Briscoe. There’s, you know, about five, but that’s it,
Adrian Day 49:14
yeah, and we should all since you mentioned those two, whatever mistakes, Mark Bristow may have made one mistake he didn’t make was and neither did Sean Boyd. Those two did not join the party of overpaying for marginal assets back right? We should emphasize that, but so, yeah, I mean, I think, I think people have become much more disciplined. There’s much more of a focus on paying down debt. I mean, the xeu is, is debt free on us or net debt free, net net cash positive, maybe is a better way of putting it, which is astonishing for a capital intensive industry, of course, that includes for. Cohen Wheaton, and, you know, the big, the big royalties, which have a lot of cash, but still, you look at the big, you look at the large mining companies, and the balance sheets are remarkably strong with some of them, again, some of them net cash positive in a capital intensive industry that is, you know, that’s, that’s, that’s very unusual. So you look at the you look at the x, au, and you compare with the s, p, the valuations are better, the price to cash flow is better. The dividend yield is higher, the balance sheet is better. It’s really, you don’t often get that situation, and that’s despite the stock prices having, having done what you know, gone up 50% in the last whatever period it
Trey Reik 50:51
is. So at your firm, when you look at gold mining companies, we all know they’re cheap. And there’s lots of different ways to look at ratios to gold, et cetera, over the long term. But of course, there are some reasons why those ratios should have moved out of favor. There are more shares. The mines are more difficult. Grade is lower, et cetera. But when you look at a gold mining company, what are your one or two favorite financial metrics to prove to your wife or someone else how cheap gold stocks are. Well
Adrian Day 51:26
before you get to financial metric, the first metric I look at is management. Management, to me, is absolutely critical, even with the large companies. And you know, we think, we all think the management’s important when you’re dealing with a $30 million exploration company, but it’s also important you you mentioned Sean Boyd. I mean, just think what he what kind of company that man built, agnigo Eagle. So I think, I think management is absolutely essential, in the first thing I always look at, at any company, frankly, is less important with Nestle and, you know, Hong Kong bank, than it is but, but, but it’s still important. And we can see that in the gold mining space, Franken of our Wheaton would be other examples where management was really excelled. So that’s the first thing. I think the prime financial metric that I look at is price to cash flow and price to free cash flow, because there’s no point in having a lot of cash flow if it’s not free cash flow. So those are the two most important metrics to me. Mean, you you can look at the the price or the cost of gold in the ground, you know, the valuation of reserves, and you know that’s an interesting metric. But as you say, it’s very difficult to look at most. It’s very difficult to look at a lot of a metrics and just say, Oh well, this one’s much less than that. So therefore it’s a better buy that that doesn’t follow, because you know, as you as you know, an ounce of, you know, an ounce of gold in Nevada is going to be mined in two or three years is much more valuable than an ounce of gold in in it’s not going to be mined for 50 years, right? Or might never be mined.
Trey Reik 53:32
It’s interesting, I think that the the gold mining industry goes through cycles and back. I remember in 2001 2002 you know, the big variable was reserves and resources. And yeah, nobody was in fact, everybody was losing money. So there was no reason to look at cash flow, because it was negative everywhere. And it does go in cycles. But I, I do think we’re going to have a time if gold keeps rolling. Goldman Sachs put out an update on their recent report this morning, and their new tail risk target for gold at the end of 2025 is, I’m sure you saw this, $4,500 which, when you think about how many people benefit from a high gold price at Goldman Sachs, the answer is, very few. I’m shocked to read you know those types of numbers in print. But my point is, if that, let’s just say that were to happen, I do think the pendulum would swing back to reserves and and resources and less on free cash flow. Don’t you think? Um,
Adrian Day 54:38
probably, but, but to me, I’ve, I’ve never been a big fan of the ounces in the ground, sort of argument. Okay, you know, all ounces are different. Obviously, you want a company with reserves. Don’t get me wrong. If you’re a big mining company and you’re mining 5 million ounces a year, you know, we as investors want to know that they’re going. To be able to continue to minus 5 million for the foreseeable future. And where are those my where are those houses going to come from? You know, that’s important. But if you look at the big companies, new month and Barrick and goldfields, I mean, they’ve got decades of reserves ahead of them. So that’s that’s never been my most important metric. I mean, it’s important to have reserves, but the valuation of reserves in the ground has never been my most important metric to be
Trey Reik 55:35
so last question for folks that are looking at establishing their own representation in the space. I feel obligated to bring up the issue with you of diversification, because I do think there are very few industries where owning fewer than five or even 10 stocks makes less sense than gold mining. So can you give us your view on, you know, which parts of the gold industry cycle you need to be involved with, I would say all of them. And, you know the number of stocks that make sense?
Adrian Day 56:09
Yeah. Um, well, first of all, I I don’t always agree with everything that Buffett, Warren Buffett says, particularly when it involves taxes. Um, I have actually written him a letter in the past saying, if you want, if you think taxes should be higher, please pay more, but don’t argue for mine to go up, right? But one of the things he did say, actually, was Charlie Munger, I think who who said that diversification is often an excuse for ignorance. And I do think there is a lot to be said for that. And, you know, I just want to put a something on the other side of a scale and diversification, because obviously, having all your eggs in one basket is a gross mistake. But the more the more one buys, the more one is going from high conviction companies, which one knows very well, to second or third and fourth conviction companies, which by its nature, the ordinary investor knows less well. So one thing I would say is whatever number you buy, make sure you really know those companies. It is astonished. And with you know, you and I deal with a lot of different kind of people. I mean, I deal with a lot of people who know more about all the gold stocks than I do, and I don’t know you know how they spend their lives. But you also have people who, frankly, don’t know anything about the stocks they buy. Right? I’ve had people who can’t even tell me, when I see a name on a list, they show me I said, interesting choice. Is that in production yet? Oh, I don’t know. It’s gold, isn’t it? Or is it silver? Oh, I don’t know. Well, if you don’t even know if it’s gold or silver, and don’t even know if it’s in production, you have no business owning it. I’ve
Trey Reik 58:10
told people for decades that just because there’s a company that has gold mining in its name, it doesn’t mean you have any connection to go the gold price, absolutely 95% of them will never mind an ounce of anything.
Adrian Day 58:27
Correct, correct, yeah, so you know, to sort of answer the question a little bit. I mean, I guess a lot of it depends on, obviously, how big your portfolio is, but also a lot depends on how much time and effort you want to put into this, or are you following one particular person. There’s nothing wrong with that. There’s nothing wrong with saying, you know, I’m going to follow Trey, and I’m going to do what he tells me, and I don’t know anything about anything that I’m buying. I’m just doing what he says. Nothing wrong with that at all, so long as you actually do what he says. So when he says sell, you actually sell, right? Because that’s another issue I’ve had for people. Oh yeah, I know, you know whatever Doug Casey did say sell, but I didn’t really feel like selling. So I still owe we’re going to
Trey Reik 59:19
save selling for our next discussion, because we both know that’s that’s the art of gold equities. And I think, since we both have facial ticks from the 2012 2015 period, I would bet that you tell your wife one of my favorite analogies that we’re not going to miss. You know, this high in gold, yeah, like many of us missed in 2012
Adrian Day 59:46
Oh, give me one more bull market. I promise not to waste it so. So the first thing I would say is diversify. Don’t diversify to the point where you don’t know the stocks that you are. And that’s the first thing. Mean, I think very much. But the large the large royalty companies, should be a foundation of a portfolio, things like Franco and Wheaton and royal they’ve done very well recently, of course. But you know, one might say, over a lot, over the full course of a bull market, you might not expect them to be your best performing stocks, right? But I always say to people, I guarantee you they will not be your worst performing stocks either. So to me, they are a foundation of a portfolio. Do
Trey Reik 1:00:35
you have anything in the exploration and development space, or do you, yeah,
Adrian Day 1:00:41
no, definitely. I mean, we have large, large royalties as a foundation. We have few, but a handful of the bet, what I consider the best of the large mining companies. And then we have no, we have a lot of second tier, second tier producers. And then we have a lot. Probably 30% of what we own across the board is in, is in exploration and small, small royalties and exploration companies and development companies.
Trey Reik 1:01:18
It’s interesting, do you file your holdings because I tried to sort of look you up on Bloomberg, and I couldn’t find a 13 F anywhere. Or do you not? Are you not subject to those filings? We’re
Adrian Day 1:01:30
not subject to the 13 F at the moment. We have been in the past. We will be again, but we definitely filed the 13 G’s, right? Which, for people out there, is the 5% us. And then we file on Cedar, which is 10% in Canada, right? So we do file that. I mean, generally speaking, I will like to stay at 9.9 for Canada, and I’ll like to stay a 4.9 in the US for a lot of reasons.
Unknown Speaker 1:02:06
All of them, good, yeah,
Adrian Day 1:02:09
but I’m not going to, I’m not going to let that determine whether or not I buy anything. So, yeah, we filed on quite, quite a few stocks. Okay,
Trey Reik 1:02:18
I was just trying to get a couple names out of you in the E and P space, but I don’t want to put you in the corner either. Oh, no,
Adrian Day 1:02:24
I’m happy to do that. So I’m not a geologist, all right? So I feel, I feel it’s always very important for individuals in all all aspects of life, right, to know thyself, know what your strengths are, but more importantly, know what your weaknesses are, I’m not a geologist. I could spend the next six months of my life doing nothing but studying geology, and I still will not have an edge over real geologists, excellent,
Adrian Day 1:02:54
right? And so I tend to focus with the junior stocks. I will focus much more on things that I think I’m good at, which is judging people. I never invest in a junior company unless I spend time with the person. And spend time might mean going on a mining visit with the person. It might just mean going out to dinner with them half a dozen times, but spending time and getting to know the person, and getting to know how that person acts in certain situations, that, to me, is absolutely critical. Just quickly, I’ll give an example. We all know that the social license in, you know, remote areas is very important. You know, I’ve been on a mining trip with someone who bought down half a dozen people from the New York head office. And I kid you not, we were in some outpost in the jungle in Peru, and the guy was wearing, it must have been a $5,000 Brioni suit Gucci loafers. And I thought, how often does this guy actually visit the camp? And there were six of them, and as they came into the camp, it was actually noticeable that people the workers, would sort of turn away and pretend to be doing things. I’ve been on another site visit, where the guy, the CEO, as soon as he came into the camp, the cook, dropped her pants and came out and hugged him, you know, nice. You know, which one’s going to get their permits quicker, which one’s going to have a happy workforce? I mean, the question answers itself. So anyway, where were we juniors? Yeah, so in the junior space, because I’m not a geologist, I will tend to focus on people, and I’ll tend to focus on balance sheets. So. I want companies that either have a good balance sheet, or they have cash flow coming in, or I can see where they’re going to be able to raise money in the Fauci, you know, in the future. And I want a history of companies that have raised money at opportune times, both opportunity in the market and opportune stock prices, and haven’t had the success of dilution, which is the huge problem in the junior space. And so because of that, I’m not, you know, I like companies like, say, origin, you know, origin royalties, um, origin as a company, it’s got about $22 million in cash on the balance sheet for a for a prospect generator is generating prospects for royalties. They could be in business the next 50 years and not go through $22 million they’ve got cash coming in from the metano royalty that they have as Majestics mine down in Mexico. So they have that’s coming in, and that’ll probably last for seven years. That’s if they don’t find new stuff. And then they have the very large they have a 1% royalty on on Anglo gold, silicon Merlin discovery down in Nevada, which is the most astonishing discovery I think, of the last five years. I mean, it’s gone from three it’s gone from nothing five years ago to 3 million ounces. Two years ago to 13 million ounces. These are Anglos numbers, all in all, in all, in third, indicated in third, but still very, very dramatic growth. So I like a company like that, where I’m protected with the balance sheet and the cash flow. I’m protected on the downside, but we also have significant upside, most of which is already but we’re still buying it, I should say so I like companies like that, because that’s something I understand, or I think I understand, and it’s something you know, but I know when the stock goes down. I know why it’s gone down. I know whether that means I should be buying more when you’re dealing with, if you’re dealing if you’re looking at the geology, and it’s a drill hole play, and the price goes down. Is it because of something in the drill core that I I don’t understand what it means, but there’s people who do understand what it means, and they’ve sold the stock, right? And I don’t know, right? So, yeah, I mean, I’m happy to give names. That’s not an issue. Generally, I prefer to discuss larger companies, because in the torrex
Trey Reik 1:07:57
Alamos realm, sorry, the torrex Alamos realm, yeah.
Adrian Day 1:08:06
I mean, if someone listens to what I’m saying today, let’s say and they decide to buy something that I say I like, a year from now, if it’s a junior company, 100 million market cap, 50 million market cap, anything can happen between now and then, and the person doesn’t have the benefit or otherwise of my advice. In the meantime, if I recommend someone buy eggnego, which is far and away, in my mind, the best of the mining companies. Yeah, the stock price might go down, the gold price might go down, but you and I both know we’re not going to be embarrassed, right? We’re not going to be embarrassed by Franco, right? And so those are the ones that I find it better to discuss. You know, to an audience that’s not going to be following me, excellent.
Trey Reik 1:08:56
Great advice. So I’ve taken too much of your time, Adrian, but I think we covered some interesting views on gold in the space. And I look forward to catching up with you, and, you know, a few months in the summer or fall, and we’re see, we’ll see how you’re progressing. Yeah,
Adrian Day 1:09:15
no, thank you. I’d love to do it, and you’re going down to Boca, are you?
Trey Reik 1:09:18
I am not. Oh, you’re not this year, okay, no,
Adrian Day 1:09:22
nope, nope. Well, we’ll catch up on an interview. Then
Trey Reik 1:09:25
Terrific. Well, thank you, Adrian. Have a great day and enjoy the weather. Well,
Unknown Speaker 1:09:30
thank you. I will thank you very much. You
