By Allen Alper Jr.
Adrian Day of Adrian Day Asset Management, Interviewed by Al Alper, Jr., President of Metals News at PDAC 2017.
Adrian Day, Adrian Day Asset Management
Allen Alper Jr.: This is Al Alper, Jr., President of Metals News. We're here at PDAC 2017, and I'm interviewing Adrian Day of Adrian Day Asset Management, who just gave a wonderful presentation. Why don't you tell our readers/investors a little bit about what you had to say?
Adrian Day: The theme of my talk was gold under President Trump. There are some positive things about the Trump program, such as cutting tax, simplifying taxes, cutting regulations. That's one of the reasons the stock market has done so well since he's been elected. People see these positives. If he can really get that through Congress, then I think the US economy could do very, very well.
Allen Alper Jr.: Now if the stock market goes up, is that generally good for gold?
Adrian Day: Typically of course, a strong economy, a positive stock market is negative for gold. I think that's one of the reasons that gold has not done as well as people thought it would when President Trump was elected. Prior to the election, the traditional thinking was if Trump were elected, gold would explode upwards. But I think you've got to look at a couple of things. One of the reasons that gold is not doing so well is because of the fear of higher interest rates. I think that concern is overblown, and I pointed out in my speech that a lot of exactly the same rhetoric we're getting from the Federal Reserve in the last few weeks about higher rates is exactly the same rhetoric we saw a year ago. The Fed is reluctant to raise rates. There's no question about that. They are reluctant to raise rates because they feel that the underlying fundamental economy in the US is not that strong. They're afraid raising rates will put the economy back into a recession. I suspect we could well see a rates increase in December, but I don't think we're going to see four rate hikes this year, which is what they were talking about.
The other really important thing is that the Fed is lagging inflation. Inflation is now above its own target of 2%. If they increase rates once or twice or even three times this year, short term rates will still be lower than inflation. That's what matters for gold. It's not whether rates are going up or down. It's whether rates are below inflation. That's the important thing.
Allen Alper Jr.: Because gold would be good to have if we're having inflation.
Adrian Day: Of course. I haven't been an inflation bug for many years now, but inflation's beginning to pick up. If Trump is successful in overturning the Dodd-Frank rules that limit and restrict bank lending, and the banks start lending aggressively again, then we run the risk of inflation picking up. Inflation, when it picks up, tends to move rapidly. It moves geometrically.
Allen Alper Jr.: I've been interviewing a lot of different companies, and they're all very optimistic on his stance as far as US mining and energy and the ability for them to be able to advance their exploration and development.
Adrian Day: There's no question that President Trump is pro-mining. He's approved a pipeline to carry oil from Canada to the US which will stimulate more drilling and more exploration and more jobs in Canada and more jobs in the US. The same advantages apply to mining in general. I think President Trump is, without any specifics, a positive factor for mining.
Allen Alper Jr.: Do you have any other thoughts on the current economic environment?
Adrian Day: It’s not economic, but if you look around the world not just in the Near East, but also in Europe, you have a lot scary headlines and the possibility of, at the very minimum, more scary headlines. Fear in Europe is leading to far-right candidates in elections in Holland and France. You have elections in Germany in September, Angela Merkel looks as though she might be defeated. Greek debt is coming up again. Greece runs out of money again in the summer. All of these things certainly have the potential for scary headlines. That's all positive for gold.
Allen Alper Jr.: That's one thing you mentioned. I think you had a slide that said that gold is a good hedge against a politician.
Adrian Day: It was a great headline. I saw in in an article, and I thought gold is the best hedge against politicians. If you really believe that, I can't think of a better time to want a hedge than right now.
Allen Alper Jr.: Very good. Adrian, why don't you tell me a little bit about you? You have Adrian Day Asset Management. Can you tell me a little bit about you and where people could get more information about you and your offerings?
Adrian Day: We essentially manage money for individuals, small businesses. We manage money in global markets as well as resource markets. We are not available to Canadians, by the way. I say that since we're in Canada, so that I'm not arrested by some overly zealous regulator. But the best place to get the information is on my website. If they go to adrianday.com, then there'll be a little icon to go to the money management.
Allen Alper Jr.: Thank you very much for your time. Pleasure as always.
Adrian Day Asset Management: http://www.adriandayassetmanagement.com
ADRIAN DAY ASSET MANAGEMENT
801 Compass Way, Suite 207
P.O. Box 6643
Annapolis, MD 21401