Gold and Gold Stocks in “Perfect Environment”

The gold price has pulled back after briefly breaching the US$1,950 per ounce mark at the beginning of the month, but Adrian Day of Adrian Day Asset Management believes its prospects look positive in the long term.

“I think gold is vulnerable to any negative (news) — whether from the Fed or someone else — any negative,” he said on January 29, when gold was just below US$1,930. “But on a sort of three, six, 12 month basis, I think this move is very, very real.”

According to Day, more and more investors, from central banks to retail investors, are realizing they want to hold gold.

“Stocks didn’t do very well last year, we lost money on bonds … and we certainly lost money on bitcoin,” he said. “So people are looking for something that they think will be a little bit more stable, a little bit of a hedge.”

Gold’s path forward is tied to the US Federal Reserve‘s fight against inflation, and Day said he doesn’t think that’s over.

“I think at some point the Fed and other central banks will want to declare victory, but they’ll declare victory in my mind before they’ve killed inflation,” he said, describing inflation as “a very resilient animal.”

While that might sound alarming, this setup should be positive for the yellow metal.

“I would say I think we are at the dawn of a very, very strong market for gold and for gold stocks. The environment is perfect whether we have a stagflationary period, or even a recession. People tend to forget that during recessions gold and gold stocks do well. So I think the environment is very, very positive for gold and gold stocks,” Day explained.

However, that doesn’t mean gold is set to rise straight up. “Don’t think the market is just going to go upwards forever,” he said. “Even if we’re going to get to US$2,500, even if we’re going to get to US$5,000, there’s going to be cyclical phases within that, and there’s going to be periods when stocks fall 20, 30 percent. We should remember to take profits along the way.”

Watch the interview above for more from Day on gold and gold stocks. You can also click here for the Investing News Network’s full Vancouver Resource Investment Conference playlist on YouTube.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.