The Fed is out of control and the gold price will be above $2,000 by year end - Adrian Day
(Kitco News) - Gold and silver prices are going to go higher and end the year above $2,000 an ounce and investors shouldn’t worry or quibble over some short-term profit taking and consolidation, according to one fund manager.
In an interview with Kitco News, on the side line of the Mines and Money Online Connect global mining conference, Adrian Day, CEO of Adrian Day Asset Management, said that he remains bullish on gold as the U.S. dollar enters a new long-term down trend because of extremely loose Federal Reserve monetary policy.
Day added that it will be impossible for the U.S. central bank to unwind the trillions of dollars it has pumped into financial markets to support the economy that has been devastated by the COVID-19 pandemic.
“Remember the end of 2018, seems so quaint right now, the Fed started to raise rates,” he said. “They started to increase rates and the stock market had a hissy fit and they immediately reversed. There's that expression when you're a hammer, everything looks like a nail. And that's the way it is with the Fed.”
Not only will the Fed be able to unwind its balance sheet, but Day noted that markets are now addicted to monetary policy stimulus and more will be needed to continue to support equity markets.
“The fed is out of control. [Federal Reserve Chair] Jerome Powell himself has said there are no limits. There are no red lines,” he said.
Along with precious metals prices Day said that he is also bullish on the mining sector. Although equities have seen big gains in the last few months, he added that they are still historically undervalued.
Day noted that while gold prices have hit all-time highs in early August, the value of mining companies are still well below where they were in the last bull run in 2011.
“It just takes a long time for these prices to catch up. So anyone, that thinks they miss the boat on the gold stocks couldn't be more wrong,” he said. “Now the prices are not as good today as they were six months ago or a year ago, but they are still very, very undervalued. That applies to the senior miners, which are obviously always the first to move.”
He added that this cheap valuation is finally attracting generalist investors.