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Adrian Day: Long-Term Rallies Have Followed Last Five Major Gold Market Declines

(Kitco News) - While investing in gold and the overall mining sector is difficult, one precious metals investor says that the sector is on the verge of entering another bull market.

Sunday, to kick off the 2015 Denver Gold Forum, Adrian Day, president of Adrian Day Asset Management, said in his keynote address that in every major decline in the gold market, the following rally has seen prices double, with gains of 200% or 300%.

“We’re at that time now, it seems to me, where we’ve had this huge decline from 2011 and whether this is the bottom -- or whether it’s next month or we have to wait another year -- gold stocks, if history is any guide, are likely to go up 100% or more after they have bottomed,” he said in his presentation.

While Day is optimistic that it is only a matter of time before prices move higher in the long-term, he also cautioned investors not to expect a sharp rally in prices once the bull market begins.

He explained that what makes this particular correction different from previous price decline has been its duration; it has been more than four years since prices hit $1,900 an ounce, he noted.

“When you have a correction [that has grounded on and on] it is highly unlikely that you are going to see a sharp recovery,” he said. “The recovery is going to be in fits and starts. There are going to be sharp recoveries and pullbacks, and sharp recoveries and pullbacks.”

One of the key messages in Day’s presentation, titled: Where Precious Metals Investors Go Wrong… And Lessons Learned, was that investors should learn to accept volatility in the gold and resource sectors.

“Volatility in this sector is a fact of life and you either embrace the volatility, live with the volatility, try to take advantage of the volatility, or else you get destroyed by the volatility,” he said.

However, given the nature of the market and the nature of the recovery, Day said investors will be able to find good investment opportunities without having to chase the market.

When asked where he sees value in the sector, Day said that he likes royalty companies like Franco-Nevada and Royal Gold. He explained that royalty agreements that are going to come on stream provides growth opportunities for this segment of the market.

“[Royalty companies] also tend to be lower risk compared to the market,” he said.

By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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