In this episode, we sit down with renowned investor and CEO of Adrian Day Asset Management, Adrian Day. From central bank behavior and gold’s role as a liquidity asset to the future of the U.S. dollar and emerging alternatives, Adrian shares insights shaped by decades of experience.
Together, we examine the intersection of gold markets, geopolitics, and the evolving global financial order. We also discuss how current geopolitical tensions—from Iran to Taiwan—are influencing capital flows, investor sentiment, and the longer-term outlook for global reserve currencies.
Watch the conversation now.
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Additional Resources
Transcript
Adrian Day:
It’s interesting that today or last night was really the first time that China had made any particular statement on Iran, and it was sort of surprising given how important the flows, not just of oil, but lots of flows through the Strait of Hormuz are to China. And you’ve got to consider, knowing that China’s long-term ambition is to retake Taiwan, Xi wants to be the one to achieve that.
Now he’s dictator for life now, but still, you’ve got to wonder whether they’re thinking, wow, is this our opportunity? The US is losing its international prestige militarily, and with that, politically. So I think even if the US achieves its purposes, that will make it regain some of its prestige, but will it regain friends? I don’t think so. I think quite the reverse.
Monetary Metals:
Welcome back to the Gold Exchange Podcast. I’m joined by our good friend Adrian Day. Adrian Day is the CEO of Adrian Day Asset Management and joins us to talk about all things gold. Adrian, welcome back to the show.
Adrian Day:
Well, thank you for having me, Ben. Good to see you.
China sees this war as an opportunity
Monetary Metals:
Adrian, I want to talk quickly about the gold world and specifically about the liquidity that we’ve seen in gold. Obviously, central banks have been selling gold in part because of gold’s phenomenal liquidity. Do you see this continuing to happen, or do you think this is a peak in terms of central banks needing to sell gold to either defend their currencies or defend their economies?
Adrian Day:
Yeah, it’s probably close to a peak, although an awful lot will depend on how long the war lasts and whether it gets any, uh, deeper and extended. But, um, the liquidity has been, as you mentioned, it’s been a response to that war. It hasn’t been other countries arbitrarily selling. And, you know, it makes sense when you have a need for liquidity.
You know, you look at your portfolio and, oh well, here’s something that I bought $10,000 of and it’s now worth $35,000. Hmm, why don’t I sell some of that? And so I’m not overly— a lot of people are concerned. I’m not overly concerned about the fact that some central banks have been selling gold. I mean, let’s face it, one of the reasons you buy gold is precisely so that you have it when you need liquidity.
Monetary Metals:
And in terms of a crisis asset, we’ve seen gold, of course, be kind of a safe haven asset. We’ve seen the dollar, US Treasuries be a safe haven asset. Do you think that that thesis, that not only are the Treasuries kind of the par excellence currency in terms of the US dollar for safe haven investors, but that gold and other commodities are also remaining that safe haven asset, do you think that that recent crisis has shown that to be true?
Adrian Day:
Yeah, I think so. But there is a misunderstanding. A lot of people think that with gold, when there is a geopolitical event, gold should spike. But it doesn’t do that. Typically, when you have a geopolitical event or military conflict, going back over 45 years or 50 years, all the way back to— always seems to come back to Iran, doesn’t it, to the hostage situation. If something is anticipated, so long as it’s not completely out of the blue, With gold, you tend to get buying in advance. And certainly the Iran bombing was not completely out of the blue. There was speculation and anticipation.
When Russia invaded Ukraine, obviously we had speculation for weeks as the troops were massing on the border. And I’m not saying that it was certain that either event was going to happen, but they weren’t completely out of the blue. And so you, so you had gold moving up in advance. And as I said, it served its purpose when people had a need for liquidity, and you actually got selling. With the dollar, it seems to be the converse. The dollar didn’t really move up much at all on the speculation, but once the bombing started, then that became the safe haven after the event.
The 1979 mirror: is history repeating?
Monetary Metals:
How important do you think there is this historical mirror that could potentially be happening? Obviously, there was the Iran-Contra hostage situation, then the Russians invaded in Afghanistan, which at the time was seen as a problem for the United States.
Could we have a similar event play out where there’s this crisis in Iran, maybe China decides, hey, let’s start having some fun in Taiwan, they might be get bogged down. Do you think that in a way there is a mirror here where at first it seems like the US is out of their depth, they don’t know what they’re doing, but at the end of the day, they actually reassert themselves as the country that is the safe haven?
Adrian Day:
Well, I’m not a geopolitical expert, but I would certainly think that there is a potential for a mirror on the geopolitical side. I mean, it’s interesting that today or last night was really the time that China had made any particular statement on Iran. And it was sort of surprising given how important the flows, not just of oil, but lots of flows through the Strait of Hormuz are to China, that this was the first time they’d made any kind of statement.
And you’ve got to consider knowing that China’s long-term ambition is to retake Taiwan, or retake as they see it, I should say, because every word carries, carries connotations, right? And given even though we know that Xi wants to be the one to achieve that, now he’s dictator for life now, but still you’ve got to wonder whether they’re thinking, wow, is this our opportunity?
But you know, let me just back up a second. And it’s interesting because in many ways this is a mirror image and the direct opposite of what we saw in 1979. In 1979, you had the US Embassy taken by a bunch of students and hostages taken. Then you had— before we had Afghanistan, I think it was before— we had that failed attempt to rescue them.
Now, I’m not blaming anyone for that, but after— but what a loss of prestige for the US to have an embassy taken and hostages taken followed by a failed rescue attempt, and then followed by the Russian invasion of Afghanistan, which initially went quite well. So suddenly the story or the image was the US is losing its international prestige militarily, and with that, politically, and Russia is actually gaining that prestige. Now, what happens here is a little uncertain, of course.
We don’t know what’s going to happen in the end. If the US achieves all of its goals without an enormous loss of life that, you know, we had enough and getting bogged down, such as we had in Afghanistan and Vietnam, is that going to make the US prestige grow bigger in the world?
I’m not sure that it is because of the way it’s been done, because of— and I don’t want to get into political, but it’s You know, the US went at this alone with Israel, but didn’t try to build a coalition. So I think even if the US achieves its purposes, that will make it regain some of its prestige.
But will it regain friends? I’m not really sure, given some of the tweets or whatever you call them these days, the posts that President Trump has put out even towards the allies. Is a country like Spain going to say, you know what, good on the US, they won this, and yeah, I want to buy more dollars, that’s what I want? I don’t think so. I think quite the reverse.
So it’s interesting how this is in many ways a mirror image, because at the moment the US, you know, is the dominant global force still, militarily, economically, politically. But as we know, that is drifting away, and it’ll drift away in ebbs and flows. I don’t think it’s going to go all at once.
Monetary Metals:
I do want to ask about this idea of there is no alternative, or TINA. Obviously a lot of people have said, well, you know, the cleanest dirty shirt in the laundry argument. There’s Brent Johnson with this dollar milkshake theory. Obviously, you know, over time the prestige of the US may ebb and flow. But regardless of whether people like the US or not, they might be dependent on the US dollar. So do you think that there are alternatives that are arising now?
Adrian Day:
Yeah, no, that’s a really interesting question. And I think not to go into that overused phrase, but we’re moving towards a bipolar world. In a bipolar world, you can have two reserve currencies, one for half the world and another one for the other half of the world. And the Trump people themselves using that in a very loose way. You think about the, what was called the Mar-a-Lago Accord that came from that famous paper written before the election.
And the idea that, you know, we want a sphere of influence where we will help defend these people, they will get preferential trade treatment, they can invest in our country, and they will invest in the dollar. And on the other side, you can have people who don’t want to invest in the dollar but don’t expect us to defend you, and you will not get preferential treatment to our markets, either investment markets or trade markets.
And so that was a sort of idea that they quite prepared for, or indeed actively espousing. There’s nothing on the horizon at the moment to suggest this is going to be a sudden event where it is clear to everybody, uh-oh, the pound is no longer the world’s reserve currency, now it’s the US.
The pound collapsed after Suez. The dollar is next.
Adrian Day:
But let me just come back to that because it’s really interesting. In 1945, at the end of the Second World War, it was pretty clear to everybody, including Colonel Blimp in in Brighton, England, that the US was now the world’s dominant military power. And with that military dominance came economic dominance and political dominance. All right.
But the acceptance of the US or the recognition of the US’s military dominance did not mean that they were uniquely politically dominant for a period of time. And it certainly— and this is really interesting, most people don’t know this— it certainly did not end the, the pound’s status as a reserve currency immediately.
1954, on the eve of the Suez invasion, or the would-be, the takeback of the Suez Canal, in 1954, the pound was still over 50% of aggregate central bank foreign reserves. Very few people don’t know that. It had gone down from 1945 to 1954, went down slowly but steadily, but it was still over 50— oh, just about over 50% of foreign reserves in 1954.
Now I have to admit, or I have to state, that an awful lot of those, or the dominance of those reserves, were in former British colonies. Australia, Canada, Singapore all had large reserves in the pound. But nonetheless, after Suez, that went away very, very quickly. And you could see the same sort of situation with the dollar.
Frankly, 2000, the beginning of this century, the dollar represented 78% of aggregate central bank foreign reserves. 78%. And 5 years ago, that was down to 65%. Very heavy decline in central bank reserves. And remember, central banks tend to move slowly. And in addition to that, they were generating more dollars from trade surpluses all the way along.
And yet the percentage went from 78% down to 65% over 20 years, which is significant. Now, over the last 5 years, it’s gone from 65% down to 50%. To quote Ernest Hemingway with that rather hackneyed— or not hackneyed, rather overused— saying, how do you go bankrupt? Slowly at first and then suddenly. I think you reach a tipping point.
We saw it with the pound when it went under 50% of reserves. I think we’re going to see with the dollar when it goes under 50%. And remember, a lot of this is to do with trust. But an awful lot of it is just to do with, you know, how widely used is something. And it’s not just central banks and official uses, but the dollar is really a currency that you can use anywhere around the world. If you want to buy drugs in Bogotá, the guy will take dollars from you, right?
If you want to buy something in a store in Singapore and you just got off the plane, they will take dollars, etc. And at the end of the day, that drug dealer, when he’s counting up his dollars and counting up his pesos, okay, the dollars get stuffed into the mattress and saved, and the pesos get spent. So there’s a lot of dollars around the world. Romanian taxi drivers, they’ll take dollars.
Now, on my first trip abroad, people took pound notes in the store. Could you use a pound note today anywhere, even in Singapore or Canada, a former British— hey, there’s a bank down the road, buddy. Nobody will take it. And we’re going to move into that situation with the dollar at some point. Is it next year? Is it 5 years? Is it 10 years? I don’t know. But things that are inevitable are not necessarily imminent, but things that are inevitable tend to reach a tipping point where they, you know, where you suddenly go exponential.
Monetary Metals:
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UAE needs dollars: weaponization in real time
Monetary Metals:
I do want to ask about some of these countries that are now facing issues with their actual lack of dollars. The UAE Central Bank Governor Khaled Mohammed Balama actually said he’s looking for a currency swap line potentially with Treasury Scott Bessant. So do you think that we’ll see this more often, that currencies say, hey, we’re going to lower our dollar reserves, but then get into a crisis and need dollars? And that’s where this political angle for the US or dollar weaponization comes into play.
Adrian Day:
Yeah, no, that’s a good point. I think that could well be. And I’m not actually sure why the UAE’s dollar reserves went down so low. Was it just they were selling dollars to buy gold? Maybe. I don’t know. So yes, you could well see that. But as you say, okay, UAE, we’ll give you a swap line, but in return we want XYZ. And what the US wants in return is not a monetary, you know, it’s not a 10% interest on that, on the dollars we’re lending you. No, it’s military bases and it’s political support.
Monetary Metals:
And what do you think about these reports that we’re hearing that, you know, the yuan is maybe getting a second breath of fresh air in the Strait of Hormuz instead of US dollars being used to pay tolls? Maybe it’s a yuan. Same with the UAE saying, listen, if need be, if we can’t get dollars, we’ll look for the yuan. Do you think that the yuan actually has a chance as a global currency or not?
Adrian Day:
Not imminently, because it’s not a freely trading currency and it has— it doesn’t have deep capital markets. And you have to have very deep capital markets and a freely trading currency to be a world reserve currency. But what a lot of countries have done, as you know, is they’ve accepted the yuan and immediately exchanged for gold.
And China knows this. It’s an open secret. But the exchange is, you know, the transaction is conducted in yuan, but then in the end you get gold. So it’s, it’s a win-win for everybody. Again, these things can take time and they have already taken time. This has been 25 years that the dollar— and longer really, ever since 1971. It’s been a long period that the dollar has been losing its sole dominance. And I think that’s important. It’s sole dominance.
But you can have a lot of alternatives. It could be a single currency like the yuan, or it could simply be a basket such as the BRICS are looking at doing, a basket of different currencies and commodities that form your alternate reserve. And of course, it’s not just a reserve currency, a currency, you know, to have a reserve currency means that you are the dominant force in reserves. But it also means, as you’ve just alluded to, the dominant trading currency.
So again, go back 25%, and again, something like 75% or even 80% of world trade, even if it did not involve the United States, was conducted in dollars. All oil trading was conducted in dollars. And so that percentage has also slowly come down. And so you can easily have a situation where more and more and more trade between countries outside of the US is conducted in other currencies. And again, that will help the US lose that sole reserve currency status.
Monetary Metals:
Why do you think we haven’t seen as much trade being conducted in either physical gold or tokenized gold where two countries say, well, you know, maybe we can’t trust each other’s currency because I don’t want rupee and you don’t want yuan. But we can always trust gold. Why don’t you think we’re seeing as much of this bilateral trade happening in either physical precious metals or even tokenized precious metals?
Adrian Day:
Well, tokenized precious metals, of course, is relatively new. We will definitely start to see more of that, particularly on non-official basis. You know, people trading with each other. There’s no question about that. And that is going to— again, that’s something that picks up. For that to happen, you need both parties to want to do it. You need the network. It’s no good if one person has a crypto wallet and the other guy doesn’t.
So I think you’re going to start to see that. And again, you know, it’ll be slower first. The adoption will be slower first, and then it’ll start to take off as it becomes self-reinforcing. I can’t really answer why more countries on the official basis have not undertaken trade in gold, but in effect, that’s what we’re seeing right now. When Saudi Arabia sells the oil to to China, again, they exchange it from yuan into gold immediately. So effectively, that’s what’s happening.
Monetary Metals:
And what do you think about these central banks? Central bank holdings are now, uh, owned— they own the most gold they have this century in terms of central banks. But obviously there’s also this risk, right? The more gold they own, the more maybe they can potentially sell. And being such big players in the gold market, that can really drive prices. How do you think about central banks and gold going forward?
Adrian Day:
Yeah, and of course we’ve seen this movie before, haven’t we? I mean, gold used to be the dominant holding in global central banks, and then in the ’80s we had so much selling from central banks. But, you know, the generation grew up and became central bankers that had been taught gold was a barbarous relic and they didn’t need it.
And so we had the massive selling of gold by central banks to where they actually had to introduce an international accord but they would only sell so much per year. Will we get back to that? I’m not going to say no, it’s not going to happen. I think you’re going to— the more immediate concern, I think, is that gold becomes such a dominant position in reserves and high relative to the money that was put in.
But when countries need liquidity, that is the obvious place to go. I mean, we all do it in our portfolios. If we suddenly have a bill that has to be paid today, most people don’t say, oh, look at that dog that hasn’t moved for 3 years. Let me dump that. No, they say, oh my gosh, I’ve got 300% profit in gold. Let’s sell that.
It’s a natural reaction to sell what’s going up. I think it makes us feel better about selling something. Well, you know, we got a profit on that one. So I think that is a bigger concern in the near term. But, you know, things move in cycles. But it may be a while before central banks decide they just don’t want gold anymore and start selling. I think that’ll be a long while.
Silver vs gold: does silver even matter?
Monetary Metals:
And what about silver? Obviously, central banks tend to not really ever own silver as a reserve asset. And yet silver and gold have been moving quite correlated with each other. Where do you see the silver play compared to gold going forward in terms of, you know, safe haven asset versus an industrial commodity? Where do you see silver going forward?
Adrian Day:
Yeah, no, that’s an interesting question because there’s so many, so many factors coming into play with silver. I, I think only Russia did buy a little silver. Only they bought a silver ETF, they didn’t even buy physical silver. And Saudi Arabia has accumulated a little silver. But the biggest problem obviously is the cost, the cost of, of storing and insuring silver.
Relative to the cost of storing and insuring gold. So I think silver might begin to play a role, but it’ll always be a much smaller role because of a relative— a difference in relative value. It’ll always be a smaller role, in my view, than gold. But again, you mentioned digital. You— we don’t have a digital silver yet, to the best of my knowledge, but that’s something that could come and then become very attractive.
Now the question has to be asked with digital gold, Do you really need digital silver? Because part of silver’s attraction is you can break it up and spend little bits. But if you can digitize gold, do you really need that? So I don’t think— I don’t expect silver to, to become a major part of central bank holdings anytime soon, frankly, just because of the costs of insurance.
But silver most recently has had a lot of interest from retail. You only have to look at the flows into the silver ETFs up until the war started in March. You only have to look at those flows to see that silver was— the retail was much more important to silver than it was to gold. And I think that’s going to continue. It’s one of the reasons why silver is perhaps more— one of the reasons why silver is perhaps a little more volatile, both on the upside and the downside, because of, of more retail interest.
And of course, the other factor is supply side, so very little, so relatively little silver, someone like 20-25% of world silver production is from primary silver mines. And what that means is, so when silver is a byproduct, a byproduct of a zinc mine or a byproduct of a tin mine, and it’s representing maybe 8 or 10% of a revenue, what that means is you do not get very strong price signals from changes in demand up and down.
Don’t really affect the production. You know, the zinc miner in Peru who gets 8% of his revenue from silver— oh, now it’s 12%, how wonderful— he doesn’t decide to build a new zinc mine because of a silver byproduct. And so you don’t get these response— production responses to changes in price. And that’s another reason why the silver price is much more volatile on the upside and the downside.
Gold miners are cheap despite gold’s rally
Monetary Metals:
I do want to ask you now about these gold and silver miners. First, they were facing headwinds with central banks around the world raising interest rates, increasing their financing costs. Then, of course, if they were hedging the price of gold when gold prices rallied, they could be in trouble on their hedging. And then, of course, now with oil prices spiking, it seems like there’s all these headwinds towards the miners. But do you agree, Adrian? And where can we think about the gold and silver miners going forward.
Adrian Day:
Yeah, don’t let me forget to mention about the oil price because that’s important. But if you look at the gold and silver miners, they really have not exhibited the kind of traditional leverage that we’re used to and we come to expect from rises in the, in the commodity prices. And the reasons for that are, are really quite clear in what we’ve already talked about, and that is that the main reasons that gold in particular moved up over the last 3 years had nothing to do with the normal economic factors, and the retail investor and the generalist investor was simply not in the market.
And in fact, if you look at, um, you know, the last month, the GDX is still getting net outflows. You look at the Silver Miner Index, it’s still getting— I mean, it had huge inflows most of the last 6 months, but in the last month it’s had net outflows. But gold never did really get those large inflows, and so that’s the reason we didn’t really have the traditional leverage. But the gold stocks, notwithstanding their prices, are still very, very good value.
And my favorite example to give will be Agnico Eagle, which is the second largest gold mining company now. No particular hairs on that dog, if you like. Nothing to say, oh, well, that’s why they’re cheap. You look at the price of the stock, and of course, it’s way up in the last month, year. You know, I remember Agnico was $35 not so long ago. It’s now $220.
Yet look at the valuation because of a huge increase in the gold price and a relatively stable cost input. I mean, they all go on about inflation, but they’re relatively stable compared with 2011 or, you know, 1980 and so on. When costs zoomed up, the cash flows have just been tremendous. So you look at Agnico on a price-to-free cash flow basis, and although it’s higher today than it was last year, it is actually trading at a lower valuation today than for each of the 5 previous years.
And that’s with the price of a stock where it is, right? And so the stocks are not expensive at all. The valuations are actually quite good. There are headwinds, and mining is famous obviously a business where Murphy works overtime and comes up with problems that, uh, he’d never really thought about before. But oil, I think we can overexaggerate the effect of a higher oil price for mining generally, just around the world in all commodities.
For mining generally, every $10 increase in the price of oil represents about 2% increase to their all-in sustaining costs, not just their operating costs, But they’re all in sustaining costs. So a $50 increase from $60 to $110, that means 10-11% increase in costs. Now, it’s more for copper mines and iron ore mines than it is for gold mines. It’s more for open-pit mining operations than it is for underground mining operations. It’s more in Asia and Europe than it is in Africa and North America.
So an underground gold mine in Canada will tend— it’ll tend to have a lower impact than an open-pit copper mine in Indonesia, for example. But even if we take 2%, when you look at, again, to look at Agnico, last year their all-in sustaining cost was $1,300 and I think it was $39. Can they take a 10% increase in their costs with gold at $4,800? I think the answer is yes.
And then you look at Agnigo a little deeper and you say, oh my gosh, they’ve hedged over 50% of their diesel costs for this year at $0.69 a liter. That’s looking pretty good right now. So, but the impact, the impact of the higher oil price is not 100% on a company like Agnigo that has hedged. So I think although it’s unquestionably a negative, it’s really not a disaster. It’s not as bad as, as we think. And go back to some previous periods.
I mean, think of 2011, the peak of 2011. Oil was $144. Even with the war in the Middle East, we’re not there yet. COVID, it was $148. We’re not there yet. You go back to the middle of the 2000s, look at the gold price of gold from 2006 to 2008. When the price of gold essentially doubled, right? But costs also actually more than doubled.
So the margins were actually compressed even though the price of gold doubled. We are right now, or I should say last 2 months ago before the war started, we were at an incredible, an incredible situation where the price of gold had moved up so dramatically, like from $1,040 a few years ago to $5,500. $1,500, but the costs had hardly budged at all. We were at an incredible space, so we can afford to see a little bit of that go away without it destroying the thesis.
Monetary Metals:
How do you think about allocating between just regular old physical bullion and the miners? Because obviously some people say, well, if you look at gold versus, you know, gold miners, they’re almost like gold with leverage in some way, or that could be a thesis. How do you think about the difference between allocating to physical gold versus saying, hey, I want to speculate here on the miners?
Adrian Day:
Yeah, for me, it’s— you mentioned the word speculation, great, because it’s essentially, to me, it’s a matter of what is your goal, what is your purpose in buying gold. If it’s defensive, if it’s insurance, if it’s a hedge, if it’s to have it for liquidity when I need liquidity, in the event my house burns down and oops, I forgot to pay the insurance bill last month.
Physical. It’s got to be physical. It can’t be leverage. It’s got to be physical. If your goal is to maximize your returns from a higher gold price, then obviously it could be options or futures, or you could use leverage yourself if you want. Well, I hate— I don’t like to use leverage. Personally for anything, but particularly with a volatile asset like gold and silver, then, then stocks are, are the better alternative.
There’s no question. So to me, it depends almost exclusively on your objective in buying. Now, there are obviously, there are times when you can say, gosh, the stocks are so undervalued relative to gold, and there are other times when you can say, gosh, gold is really undervalued relative to the stocks. But it still, for me, comes back to your objective for buying.
The biggest risk to gold right now
Monetary Metals:
I want to ask you, what is the biggest risk you see to first the gold market and then maybe from the gold market? What’s the biggest risk to the miners going forward?
Adrian Day:
Let me answer the second one first, if I may. I think the biggest risk to the miners right now would be an end to the gold bull market, because clearly you can have the best company and the most, you know, the most well-run company in the world. Or you can have a company that’s made the most astonishing discovery and so on and so on. But if the gold price is $3,600, not $4,800, they will all drop.
It will be an extraordinarily— an extraordinary gold company that would go up while the gold price drops meaningfully. Some will drop less than others. You know, the big royalty companies tend to be better investments to hold during a bear market. And we saw that from 2012 to 2016. But everything goes down. The biggest risk to the gold market— I think the biggest risk to the gold market is a confluence of events, which is not impossible to imagine at all.
So you can have a scenario where central banks— I mean, the momentum of central bank buying is going to slow just because, uh, the Bank of Japan was concerned about holding too many dollars, now has 50% in dollars, not 80% in dollars. So although you can still be concerned, you’re less concerned, perhaps. So the momentum will slow if the war continues for a longer period of time.
You could have liquidity needs getting deeper and expanding. And God forbid, but the desalination plants are blown up, for example. Fertilizer is something we haven’t talked about either. So again, you know, we pray to God that we don’t have a situation where not only are fertilizer prices very, very high, but fertilizer is actually in short supply and combine that with weather or something that causes bad crop yields 6 months from now.
So there are disaster situations that are not simply extreme tail risks. You know, hopefully they are less than 50%, so they’re possible, not probable, but they’re still reasonable possibilities. And that would cause that kind of scenario would cause liquidity crunches everywhere, which would mean people, both central banks and non-central banks, would simply be forced to sell— well, not be forced to sell, but they would sell their gold as, as people always do in a liquidity crisis. Think back to the great financial crisis. So I think that would be the biggest risk right now.
Monetary Metals:
Adrian, I want to finish up with a series of rapid-fire questions. I’ll ask you them as quick as I can, and you can answer either as short or as long as you want. So let’s start with this one. First rapid-fire question for you, which is, of the BRICS countries, which do you think is going to outperform this year and which do you think is going to underperform this year?
Adrian Day:
Uh, Brazil, depending on the results of the election, will be the outperformer. Oh gosh, poor old South Africa, but I’ll say South Africa will underperform. Russia, a lot depends on the end to the Ukraine war.
Monetary Metals:
Next rapid-fire question for you. Let’s talk about the, of course, war in Ukraine and Russia. This has been going on for, for obviously many years now. Do you see that an end to the war, do you think that’ll change the macro environment meaningfully, or do you think it’s just a geopolitical event that investors should be thinking about?
Adrian Day:
Well, it’s mostly geopolitical. I think an awful lot depends on how the war ends, and there’s no sign of it at the moment. But if Russia were to, you know, accept a reasonable and Ukraine, of course, both would have to accept a reasonable solution.
And Russia comes back into the fold, and we don’t— the West doesn’t make the same mistake it made with Russia when the Wall came down, which was saying, we’re victorious and you’re, you know, irrelevant at this point, and ignoring them, but instead tries to foster a relationship. We made a— the West made a mass— sorry, this is not rapid-fire, but in my view, the West made a massive mistake with how they treated Russia when she was defeated, essentially.
Never a good idea to be magnanimous to your defeated enemies. But anyway, but if we try to bring Russia back into the fold, then obviously there’s some economic ramifications because Russia still has enormous, enormous amounts of commodities. To be developed.
Monetary Metals:
Next question for you, I want to ask about the Fed versus other central banks. Do you think that other central banks are going to continue to lower rates while the Fed maybe keeps rates high or higher, or do you think that altogether globally central banks are going to look to lower interest rates?
Adrian Day:
Not imminently, but sooner rather than later, yes.
Monetary Metals:
Now I want to ask you about the commodities bull run. Do you think it’s just gold and silver that are in a bull market, or do you think that other commodities are also a part of this bull market?
Adrian Day:
Oh no, other commodities, absolutely. I mean, other than oil, which, you know, let’s say at the end of the year was still flat, you know, was still very, very depressed. But if you took out gold and silver, you still had most commodities up last year. You still had a bull market in commodities. Look at copper, almost, you know, it went to new all-time highs. So no, absolutely. It’s a broad-based bull market that is only just getting started. Gold and silver obviously led the way, but it’s only just getting started.
Monetary Metals:
Next rapid-fire question for you. Which country do you think is most under the radar that you think more investors should be focused on?
Adrian Day:
You know, I would say, I would say United Kingdom, actually Britain, from a point of view of a stock market. You know, we all know what’s wrong with Britain. When I recommend Britain, people say, oh, don’t tell me you like Starmer. Oh my gosh, they’ve got too much immigration. Oh my gosh, my friend was in London last week and his cell phone was stolen in the street. Well, it’s when things are bad and the perception is bad, that’s when you can find good investment opportunities. Buy when blood is in the streets. And so I think Britain will be the one that most individual investors are ignoring.
Monetary Metals:
And which country do you think is the most overhyped in terms of investment to do the flip side of our last question?
Adrian Day:
Well, I’m going to say the US, but I’m going to say even a sector of the US, and that is the big tech in the US is extremely overhyped in my view.
Monetary Metals:
Now I want to ask you about the global fragmentation we see happening. Do you think we’ve kind of hit a near-term peak in terms of globalization with cheap goods from China, with these trade deals, or do you think that maybe post-Trump this globalization world comes back?
Adrian Day:
I think global trade will come back because, you know, global trade, free trade will come back because that is clearly to the benefit of everyone. You know, it’s to the benefit of the seller as well as to the buyer.
Monetary Metals:
What do you think about this idea that tariffs were, you know, the big news story? Now this conflict in Iran is the big news story. Do you think that tariffs are basically old news and we shouldn’t be focused on tariffs or this trade war in general? Or do you think that maybe once this news dies down, tariffs will be back on the table?
Adrian Day:
Yeah, I think once— yeah. Yes, yes. I think it’ll be back on the table once the war dies down.
Biggest mistakes gold investors make
Monetary Metals:
Next question for you, Adrian. With all your years of experience in the gold market, what’s one of the biggest mistakes you see investors making?
Adrian Day:
The biggest mistakes in gold, but in other assets as well. Well, there’s two biggest mistakes. One, reacting rather than being proactive. When people call me and say, oh, why don’t we own any XYZ? We should be, we should be buying some XYZ. I heard about it on the news last night. Oh, it’s the front page of the Wall Street Journal.
Well, it’s too late at that point. Everybody knows. You don’t have a, you don’t, you don’t have any secret information at that point or any insight at that point. So being reactive rather than proactive is a big mistake when you’re bullish, when you’re bearish. It’s a big mistake in all areas.
The other big mistake, specifically with gold and silver— it seems more prevalent with gold and silver— is not right-sizing your investments. You should have a philosophy, an approach. I don’t mean you want to be stubborn and never change anything, but if your allocation for physical gold is 10%, for example, and it now is almost 30% because the price of gold’s gone up, but maybe the price of the other things you happen to own hasn’t.
I’m not saying you should sell two-thirds and go back to 10%, but you shouldn’t just continue to build on that. You should have some kind of plan. And this is less important with physical gold, which is insurance, which is savings, which is defensive. But certainly when you come to stocks, people tell me, oh my gosh, you know, this stock is now 20% of my portfolio. It’s done so well. Well, maybe that means it’s a time to cut it back.
Monetary Metals:
And Adrian, what’s the biggest investing mistake you’ve personally made and how could you learn from it?
Adrian Day:
Biggest mistake I made. And there’s no question about it, was in the early days when the gold and silver stocks all started to move. Instead of what I started to do was put new money into things that appeared cheap, but I really didn’t know so well.
So I was not just buying second and third tier quality assets, but I was buying fourth and fifth and sixth to quality assets because, well, Agnico looks expensive. Oh my gosh, Franco is expensive. Let me buy Ajax Exploration that no one had ever heard of but was brought to me by a broker.
That was my biggest mistake. The lesson is always do your research, and I believe very much in sticking with quality. Now you can have quality at the low end as well. You can have a $20 million market cap company that’s an exploration company, but it’s high quality. But always stick with quality, and I’d rather overpay for something of high quality than underpay for something of low quality.
Monetary Metals:
All right, Adrian, last question for you, which I ask all my guests: what’s a question I should be asking all future guests of the Gold Exchange Podcast?
Adrian Day:
I think you could ask, what are the influences outside of investing, what are the influences that come to bear and help you be a better investor?
Monetary Metals:
Adrian, I’ll turn it around to you. What are those influences for Adrian Day?
Adrian Day:
Well, one would certainly be history. This is not egotistical, but I find some of the better investors tend to be people who are not Harvard MBAs, but they tend to be people who are, who were psychiatrists or studied history. Or study literature. You know, literature is another way that tells you how people think and how people react.
Psychology or psychiatry, of course, tells you the same thing. History tells you, shows you very clearly the mistakes that we as a society have made over and over and over again. You know, you read Charles McKay’s book on Madness of Crowds, or Kindleberger, was it, on panics and crashes. And you just see that human nature doesn’t change.
And those are important lessons. And I think a lot of people who are Harvard MBAs can focus much too much on the dryness of the numbers, which are important, whereas so much of investment is due to psychology. What’s the psychology of the market right now? Why is the market reacting this way? How would it react this way? Which are not things that you see on, on the numbers. And history tells you how they’ve done it in the past over and over and over again.
Monetary Metals:
Adrian, as always, it’s been fascinating getting to interview you. If people want to find more Adrian Day, where can they go?
Adrian Day:
The website is adrianday.com, which tells you about our newsletter as well as about our money management. And, you know, if you Both of those websites, you can send questions in and we’re happy to answer them.
Monetary Metals:
Adrian, thanks so much. We’ll have to have you on again soon.
Adrian Day:
Thank you so much for having me. I appreciate it.
