The Bet That Could Change Everything (Uncut) 02-07-2025

Massive Gold Play Unfolding – The Bet That Could Change Everything | Adrian Day

Hey everyone, welcome back to Kitco News. I’m Jeremy Safran. Well, gold just hit another new all-time high with April futures now above $2,900 an ounce and traders are scrambling to get ahead of what could be the biggest financial realignment in decades.

Now, according to the World Gold Council, global gold demand rose to a record high of nearly 5,000 metric tons back in 2024 and we’re seeing a rush into gold as the US-China trade war is continuing to escalate here. Inflation risks are obviously mounting and global capital is shifting very fast. Now, here’s some of the major headlines including gold lease rates in London that are surged to 10% to 12% obviously reflecting extreme short-term tightness and central banks are of course hoarding gold at record levels for the third straight year in a row.

Also COMEX inventory soaring 88% since November’s election as the US stockpiles gold ahead of potential tariffs. And then we got to talk about stagflation. There’s warning signs flashing with bond markets pricing in both inflation risks and an economic slowdown.

And now with President Trump’s tariffs delayed for Mexico and Canada but still hitting China, markets are questioning whether we’re seeing a tactical maneuver or the start of something much bigger. So what happens next? Is there a short-term gold rush or is this the start of a multi-year bull cycle? Well, to break it all down, I’m joined by Adrian Day, of course, CEO of Adrian Day Asset Management. Nice to see you, my friend.

Thanks for joining us today. Well, thanks for having me, Jeremy. Good to be here.

Yeah, you know, we got so much to get into, Adrian. I saw you back in Vancouver over at the VRIC conference. We were talking about record gold prices then and here we are again.

Let’s start with that spot. Gold rose 27% last year, the most since 2010. And now we’re learning that, of course, central banks piled into gold in the last quarter of last year, demand jumping 54% year over year, according to this new report by the World Gold Council.

Now, you know, today we’re trading to another record high, but this isn’t really a typical gold rally. I mean, we have strong dollar, the Fed still holding rates high, and yet gold keeps climbing. So what’s driving this? Let’s break it down here.

Yeah, well, I mean, I think we all know that the main driver of gold for the last two years has been central banks in an effort to diversify away from, you know, dollars in their reserves in the face of dollar weaponization. So we all know that’s been the driver. And of course, the central banks that have been buying gold, and as you mentioned, last year was another record high, December was very, very strong.

So it seems to be accelerating, not, you know, there’s no pause. People were thinking there’d be a pause. But that has nothing to do with the strength of the dollar or the strength of the US economy or whether interest rates are positive or negative on a real basis in the US, or the jobs market or anything else.

It has nothing to do with what’s happening in the US. The sort of traditional drivers of gold, if you like, the macroeconomic drivers of gold is not what’s been driving gold this time. And it’s not just central banks.

Of course, last year, beginning of last year, we saw a big spike in Chinese consumer buying of gold in the face of a declining economy or fears of a declining economy in China. One depreciation, and of course, concerns about the fragility of the banking system. So Chinese consumers moved into gold.

But again, that has nothing to do with what are called the traditional macroeconomic drivers of gold. Right. Yeah.

Well, with this rise, I mean, you know, talk to me about the untraditional movements and why it’s taking place, but also how sustainable is it? You know, we all seem to be waiting for this $3,000 level. Well, you know, to be honest with you, I’ve been thinking that we’d get a pause in this. Gold has been remarkably resilient.

We did see that bit of a decline when it looked like, well, when Trump was elected, President Trump was elected, it started, you know, the end of October, right before the election. So we saw a little bit of a decline. I honestly thought it was going to be a bit of a longer and deeper decline.

But to me, it just shows that there is an awful lot of pent up demand among central banks. I mentioned the Chinese and also, of course, very wealthy individuals and families in the Middle East and in Asia in particular, but also in Europe have been buying gold as protection against, let’s say, the fragility of the financial system. You know, with record debt everywhere you look, both at the government level and in many countries at the household level, you know, the debt levels among governments are frankly unsustainable.

And so I think people are buying gold as a protection against that. You alluded to it at the beginning, and I think, you know, we’ll get to it, I’m sure. But the one source, the one source of demand that isn’t there right now is what I’ll call ordinary retail investing in North America.

That’s just not in the market right now. Yeah, yeah. It’s been fascinating to watch.

We’re all wondering when those investors will get in. We’ll break that open for a second. But let’s go back there for a second, because we brought up, you know, this demand from the central bank, and we also are seeing this new story about gold leasing rates in London.

They’ve surged 10% to 12% due to the tightness in market. And the U.S. is, of course, hoarding the bullion. And we’re also seeing gold pouring in from the U.S. from major Asian market hubs like Dubai and Hong Kong as global bullion banks rush to capitalize, obviously, on these unusually high premiums of U.S. gold futures.

Now, Ken, for the audience, traditionally gold flows eastward to meet demand from China and India, the world’s two largest consumers, accounting for nearly half of the global demand. But that seems to be changing here. I mean, there’s concerns over U.S. import tariffs proposed by Trump.

They’ve pushed COMEX futures high enough that, you know, well above the spot price. Break down this arbitrage opportunity. What are we seeing here? How can we capitalize on it? I’m not sure that we as individuals can capitalize on it.

But, you know, my own feeling is that this is an interesting, certainly a very interesting story. But, you know, I think people are maybe making too much out of it. I don’t think, you know, it’s the beginning of the end of anything or the end of the beginning of anything, frankly.

You know, you had people, logically, you had U.S. people move gold from holdings in London via Switzerland because bars have to be refined to move to the U.S. You have people moving gold to the U.S. ahead of tariffs because, of course, if tariffs were imposed on Europe and the U.K., even 10 percent, nobody’s going to want to buy gold or import their gold when it’s 10 percent. So people were moving ahead of that. And, of course, as you mentioned, that’s led to this divergence in prices.

We’ve got a premium in U.S. prices as much as $30 at one point and a dollar an ounce on silver at one point. And we’re now getting a discount in London, right? So there is an arbitrage opportunity. But you know what happens with arbitrages normally? They work themselves out, you know, as more and more people take advantage of that arbitrage.

And just as we saw this move from London to the U.S. during COVID, when people were afraid they simply wouldn’t be able to ship gold, and now it’s for other reasons, but they wouldn’t be able, you know, that unwound once the COVID panic was over. And I think this is going to unwind at some point once the tariff panic, if you like, is over. Yeah, that makes sense.

I mean, we still have a month of it, you know, is that we got this month of uncertainty here when it comes to tariffs. Any idea as to, I mean, we don’t have a… You and I talk, Tedri, and the news is going so quick that we’re not sure if we can even cover it all. But, you know, what does this next month of uncertainty mean for the gold market? I think it’s going to mean the gold price is going to stay high.

I mean, there’s a lot of drivers and tariffs are just one of them. Excuse me, tariffs are just one of them. So I think the gold price is going to stay high.

The demand is remarkable. And as we mentioned, the North American, the regular North American investor, and by regular I mean retail, I mean small institutions, I mean generalist funds, they’re not simply in the gold market right now. They’re not in the market at all.

If you look at the GLD, which is the largest, you know, the largest gold, physical gold ETF in the U.S., one day in January had net inflows. Just one day had net inflows. We’re going to talk about stocks later, but maybe I’ll give you the, you know, don’t bury the lead.

I’ll give you the lead right now. GDX and the GDXJ had zero days of net inflows in January. I mean, this is astonishing.

When the gold stocks are up 47% in the last year and the major gold equity ETFs are not seeing inflows, same goes for gold mutual funds, I can tell you. You know, the ordinary investor is not moving into, not only are they not moving into gold, they’re continuing to sell gold and gold stocks. Yeah, it’s fascinating.

Okay, well, what about the mining stocks? I mean, you know, there’s some potential opportunity here. I saw you in Vancouver, but to your point, I mean, gold’s at a record highs, yet mining stocks have underperformed. Historically, they lead in global markets.

So what are we seeing? What aren’t we seeing and why? Well, what we’re not seeing, we’re not seeing the move of generalist investors into gold because, or into gold equities, because the macroeconomic environment has not, until very recently, has not seemed conducive to gold investments. When the broad stock market is continuing to move up, albeit with very bad breaths, you know, but the S&P is continuing to move up, the economy is continuing to do well, the dollar is still reasonably strong, and inflation is down, is low and apparently under control. I don’t think it is, but apparently under control.

In that kind of environment, people aren’t looking at gold investments. And that makes perfectly logical sense. But I think we’re going to see, one by one, we’re going to see those supports fall away, if you like.

The U.S. stock market is already sort of, let’s say, turning over. I won’t say turning. I won’t say that it’s going to have a crash anytime soon.

But you look at the erstwhile leaders, look at Apple and Microsoft and NVIDIA, you know, we’ve seen big declines in those stocks in the last few weeks. And the S&P is, let’s say the S&P is no longer the one-way bullet train that we thought it was. You look at inflation, you now look at the last five months, whether it’s CPI or whether it’s PCE or PCE core, whatever you want to look at, the last five months, the trend is definitely moving back upwards.

So at the minimum, we can say inflation is stubborn and a long way above this arbitrary, artificial 2% target that the Fed has. So one by one, these things are going to fall away. And I think people, and the last sort of hurdle, if you like, or the last thing to fall will be, will probably be the dollar.

But as these things fall away, people will start to look more at gold and they’ll start to look at gold stocks. And one thing to remember, we mentioned the gold’s at record highs, and we mentioned that the gold stocks are under, or haven’t had the leverage that they normally have. But let’s not forget, not only is gold price at record highs, but the margins of the gold miners are actually expanding.

The gold price is moving up over the last 12 months far, far faster, far more rapidly than the cost of mining. And yet every mining executive you talk to, every mining analyst you talk to, you know, on every quarterly conference call for the last 12 months that I attended of dozens of companies, everyone’s asking about costs and inflation and everything else. Why doesn’t someone just stand up and say, the gold price is moving up faster than our costs are moving up? And so the margins are expanding.

This is, in my view, this is a fantastic opportunity for the gold stocks. Yeah, no kidding. Okay, so then let’s get back to it.

Like, is it just a matter of the retail investors? Is it just shiny things looking at things like Bitcoin? And, you know, you mentioned some of these AI plays and tech plays because, you know, there’s this investor hesitation. But you’re talking about these margins. We talked to some of these companies, there’s millions of dollars of free cash flow.

So, I mean, what miners are undervalued at this point? Well, I think all of the miners, you said which miners are undervalued. I got to ask for a couple of tips. I think pretty much they’re all undervalued.

I mean, you know, I think we’re only at the beginning of the bull market. I think what we’ve seen so far, if you like, is the overture, if we use an opera analogy, and the curtain’s about to go up on the opera and the singing’s about to start. And that’s because of the type of person that’s been buying gold.

So once the traditional buyer, once the generalist starts buying gold, the gold stocks are going to move up dramatically. Now, when the generalist starts buying gold, he’s not going to look at HX Exploration. He’s going to look at Newmont and Agnego and maybe even Barrick.

He’s going to look at Franco-Nevada and Wheaton. You know, these big plays are the ones that are going to get the attention first. So I would start looking among the big miners and big royalty companies first.

I mentioned Franco and, I mean, they’re both up to date. Well, everything is up to date. But, you know, Agnego is, I was going to say obviously, I shouldn’t say obviously, in my view and the view of many, Agnego is clearly the best major mining company in the world.

By best, I mean, you know, best run, great balance sheet, good political, geopolitical profile of where their mines are, good pipeline, diversified assets, you know, really solid company. You can look at Newmont and you can look at Barrick and you can always come up with, you can come up with some negatives on those companies as companies. But Agnego is, in my view, the best.

So if you don’t own Agnego, I would close your eyes and buy it, you know, for the next bull market regardless of price. I also like the big royalty companies. I mean, Franco and Wheaton should be the foundation, in my view, of any gold portfolio.

Franco has had a big bounce today. But, you know, when, remember that they lost 20% of their cash flow, 90% of their cash flow two years ago or a year and a half ago when Cobra Panama was shut down. They have a big stream on Cobra Panama.

Remember, they’ve written that off. They wrote it off to zero, not just wrote it down, but wrote it off. That means that when that mine comes back, which it will, it’s all upside from here.

And it’ll come back whether First Quantum has it or First Quantum sells it to someone else. And unless the mine is confiscated by Panama, which I don’t expect to happen, then Franco’s stream will transfer to the new owner. And so just think about that.

Basically, 20% of your cash flow went away. And if that comes back, that’s going to be meaningful for Franco. So certainly, I would start there.

I mean, I could go down the list of juniors if you want, but certainly I would start there. Well, I talked to Sean Boyd. I mean, you know, Ignico, they’re doing crazy work.

And then on top of it, you put onto this play about critical minerals, you know, and their plays up north. And we’re seeing the world, and it’s specifically China, starting to hoard critical minerals. I mean, is this opportunity bigger than just gold and silver on the mining side? I think it is.

I think it is. I mean, to me, gold is the one with the best risk reward potential, because I can imagine a scenario in the next few years where I don’t want to own copper and nickel, frankly, and that is if the Chinese economy goes downhill and the US and China get into some tariff war, and God forbid if they were to invade Taiwan. But I can imagine a scenario where other metals will not do well, base metals will not do well, but gold will continue to do well.

So I would say gold has the best risk reward at the moment. But certainly other commodities, whether it’s the rare earths, because as we know, it’s not that the rare earths themselves come from China. As we know, it’s all the refining is done in China.

And so we need to move away from that. Copper is just very, very attractive to me. Uranium is attractive.

So yeah, I mean, I think companies like Agnigo with the rare earths, like Barrick with the copper, and Newmont now has copper, more copper than they did. Yeah, no, definitely. But those just add spice, if you like, or icing to the cake.

Yeah, or a little bit of diversification, to your point. Adrian, I got to ask you about China. You just brought it up.

We’ve seen this aggressive accumulation of gold buying 44 tons in 2024. At the end of the last year, the bank reported holding 2,280 tons of gold, still accounting for about 5% of its total international reserves. What does this tell you here? If you’re an investor and you’re seeing this, what are you doing now? Is this potentially a move away from the dollar? Yeah, absolutely.

I mean, let’s first of all say, if I were, or you, if you or I were Chinese in the Politburo, would we be wanting to sit with the majority of our reserves in the US dollar at this point in time? I don’t think so. We would be wanting to move away from that as rapidly as we could. And that’s what’s happening.

And I think that’s just going to continue to happen, frankly. And I don’t want to get political here, but when President Trump threatens the BRICS with 100% of tariffs, what’s the reaction of countries? What’s the reaction of Brazil or South Africa or Indonesia, let alone China? Do they say, oh my gosh, Mr. President, we’re so sorry. We didn’t really mean it.

Forget it. We’ll sell all that gold and we’ll buy the dollar. Of course not.

It’s the opposite. In my view, it makes them, they might give concessions to the US to try to stave off the inevitable, but they’re going to want to move away from a dependence on the dollar just as rapidly as they can, in my view. And, you know, to your point, I mean, Trump just delayed tariffs on Mexico and Canada, but he’s still targeting China.

And now he has the EU in his sights. I mean, is this, I got to ask you, I mean, is this just posturing here, Adrian? Are we looking at a full-blown trade war that could really disrupt global markets and supply chains? Yeah, the answer to that question is yes and yes. You know, again, I don’t want to get too political and I’m not a political analyst, nor am I a psychologist, but I mean, this is sort of Trump’s playbook, right? You threaten the extreme and then you can come back.

And maybe that’s good in negotiations, I don’t know. But I do think that certainly when you threaten tariffs on your friends, it does cause some resentment and that resentment is not going to go away. And this is not new with this administration, of course, for the last 20, 30 years, the U.S., as much as people around the world admire the U.S., like its music, and I don’t know why, but like its music and its movie culture and everything else, there is some underlying resentment that the U.S., about the U.S. telling other countries how to behave.

And, you know, that’s been going on for a long time. So it’s a bit of a, and I guess that always happens when there’s one top dog in the world. I’m sure in the 19th century, not everybody loved Old British all the time, right? But you see the way, as an example, the way the U.S. treated the Swiss banks, you know, telling the Swiss banks that they have to run their banking system the way we want you to run our banking system, not the way that you traditionally have run your banking system.

And that causes some resentment and the resentment doesn’t go away. That’s the concern I have. So, in answer to your question, yes, I think there’s a lot of posturing here.

There’s a lot of, again, negotiation. Definitely. But these things can, they can fall out of control.

They can go out of control if a country, you know, decides to retaliate and then the U.S. retaliates more. And, you know, the last thing this world needs right now is a global trade war, because we saw what happened. Oh, and it seems to happen so darn quickly.

I mean, let’s talk about the stagflation risks here too. When we’re talking about the economy, because we’re seeing short-term yields, you know, rise on inflation fears, but long-term yields are falling. Textbook stagflation, warning signs here.

So, I mean, look at what’s happening in the EU. So do you see this as becoming more of a crisis this year while we have this change of power? Yeah, I think so. I think the U.S. economy was heading in a certain direction regardless of the change of government.

So I already mentioned that the CPI-PCE for the last five months has been in a steady uptrend. Small, but an uptrend. And so when you look at a graph, all you see as well is come down from where I was in 2022 is an inflation under control.

But look at what it’s doing in the last five months or six months. It’s steadily moving up. If you look at the economy, all the headlines are great.

You know, the consumer’s still spending. Let’s forget about credit card debt and credit card defaults. Um, job numbers are great.

Well, let’s forget about the fact that last month the Bureau of Labor Statistics said 242,000, no, 256,000, sorry, 256,000 new jobs created of which 222,000 were private sector jobs. And the APL the day before said there were 122,000 jobs created. So one of the two is wrong.

Let’s not forget that the Bureau of Labor Statistics continually revises and more often than not, they revise downwards rather than up. Remember last August, they suddenly said, well, 818,000 jobs that we said were created last year actually didn’t exist. So the jobs numbers look good on the surface, but are they that good underneath? Let’s not forget that last year, the majority of new jobs, and this is literal, sorry, 2023, the majority of new jobs were either part-time or government.

That is not a healthy jobs market in my view. So I think these things are all coming to a head. So yes, stagflation I think is, is, and we, for stagflation, we don’t have to have runaway inflation.

We don’t have to have a depression. Stagflation simply means that the economy is growing at a lower rate than the rate of inflation. That’s all.

And I think we’re heading that way. And in the stagflation environment, the best performing asset historically has been gold. Yeah.

Okay. Well, I mean, this gets to my next point. It’s so interesting.

And we’ve been reporting on these, you know, magic job numbers just going away before our eyes. It’ll be interesting to see whether this new administration will be very, you know, vulnerable and kind of forefront with some of these numbers. And I mean, Adrian, if the Fed is stuck between inflation and recession, obviously it makes gold the best hedge, not just for inflation, but for economic slowdown too.

What are your thoughts here? No, absolutely. You know, everybody thinks of gold as an inflation hedge. If you asked 100 people in the street, 99 would say gold’s an inflation hedge.

And that’s because of recency bias. You know, in the 1970s, gold was an inflation hedge. But throughout history, gold has acted, actually gold has acted better in deflations and in inflations.

But gold is really a hedge against monetary chaos. And that can be inflation, or it can be deflation, or it can be a recession. And in a recession, of course, people go to gold.

And the statistics show this up. I don’t have them off the top of my head. But in the last, what, nine recessions since the 1960s, gold has gone up in about seven out of nine.

So gold has a very good track record of going up during recessions. And the reason gold goes up in recessions is because in a recession, you start to look ahead and say that the central banks are going to have to cut interest rates and ease monetary policy. And that’s positive for gold.

It’s not the recession itself is good for gold, it’s the response to recession is good for gold. So, yeah, yeah, I think we’re definitely heading towards a stagflationary environment, in my view, and that will be positive for gold. I told our audience that you were coming on the show here, Adrian.

And they were asking me on X to get your gold outlook. So I have to ask you about prices. I mean, break down short-term targets, long-term targets.

I know we got that psychological level of $3,000 gold, but we’re damn near there. We’re almost there. It’s funny, just in Vancouver, you mentioned Vancouver two weeks ago, someone said, so give me a target for gold this year.

Do you think we’ll break through $3,000? I said, that’s not a very aggressive target right now. Yeah, oh gosh, to me, the price itself, and I’m not avoiding the question, the price itself is far less important than direction. And the direction to me over six months, 12 months, 24 months is definitely up.

So who was it? Was someone, I forget who, said, if you want to know what the gold price is going to do, tell me what the dollar is going to do. And gold is moving up in the face of a strong dollar. So when the dollar turns, if the dollar turns, then gold could move just dramatically higher in terms of US prices.

I don’t know, I wouldn’t be surprised at all to see, we might get some backwards and forwards at the $3,000 level, we often do. But the way gold is moving right now, I think we could easily just break right through it. And remember, if most of your buyers are non-US people, right, they’re looking at gold price in Australian dollars or Chinese Yuan or Japanese Yen, they’re looking at gold in their own currency terms.

And so $3,000 is not a magic number for them. So I wouldn’t be at all surprised to see $3,500 to $4,000, that kind of range within the next 12 months. Yeah, fascinating.

Well, we’ll watch for it. I got to ask you before we let you go here. Markets are focused on inflation, the Fed, we’re talking about some of these issues with tariffs, but what’s the biggest geopolitical or financial risk that investors aren’t pricing in here? I mean, there seems to be some underpriced risks right now.

Gosh, I wish you’d asked me before I thought about it. I think certainly the high debt levels are something that certain people are beginning to really look at because they’re unsustainable, frankly. They are not just in the US, but certainly in most of the major economies around the world, debt levels are simply unsustainable.

And so that means something’s going to break, something’s going to change. That certainly is a big risk. Yeah.

Debasement, I wonder what will take, when you talk about Trump with these 100% tariffs on BRICS countries and stuff, I wonder who’s going to front run this? Who’s going to win? The problem is with tariffs, nobody wins. You know, nobody wins. The consumer always loses because the truth is we produce things as individuals and as countries that we have special skills at and we exchange them for things that other people produce that they have special skills at.

And that’s what makes a global economy grow. So in a trade war, nobody wins. Yeah, nobody wins.

Okay, well, we’re going to watch the environment, maybe $3,400, $4,000 gold. Adrian Day is the CEO of Adrian Day Asset Management. Thanks for joining us today, my friend.

Appreciate your time. Well, thank you very much, Jeremy. It was interesting.

It was fun. Yeah, looking forward to the next one. Thanks, Adrian.

And as we still have the audience here, I mean, gold is breaking record levels. Capital is moving fast and global markets are shifting in ways we haven’t really seen in decades. Where could this see gold heading next? How quickly can we get to that $3,000 level? Let us know in the comments and don’t forget to hit the subscribe button so that you would get our next big interview here at Kitco News.

I’m Jeremy Safran. We’ll see you next time.