(Kitco News) - A recession would be positive for gold and gold stocks, said Adrian Day, chairman and CEO, Adrian Day Asset Management.
In mid-January Day spoke to Kitco Mining at the Vancouver Resource Investment Conference 2024.
He referenced a graph showing all the recessions going back to the 1960s. In every recession except one gold went up. In the majority of recessions, gold stocks rose and in some cases gained up to 200 percent.
“The lesson to me is very clear,” said Day. “You definitely want to own gold in a recession, and you most likely want to own gold stocks. But you definitely want to own gold stocks rather than the broad market.”
Day pointed out the last couple of years have been unusual, in that gold has been the only strong performer among gold and silver assets, including coins and equities. The gold price has been underpinned by central bank buying.
Day said “there’s no doubt in my mind” the Fed will cut interest rates this year, and if gold gets to $2,100 an ounce, “people are going to start coming back very rapidly I think.”
Day said he’s most focused on metals with a supply shortage, such as copper. He named as factors the largest copper mines in the world that are undeveloped, the Cobre Panama shutdown, lower production at Codelco and Rio Tinto, “and the lack of any big new mines coming on stream to offset that. So I think the copper supply is going to be tight and that will be very positive for the copper price.”
Day said higher interest rates have hurt junior resource company financing, and noted that the equity markets are so weak that it’s difficult to raise money without excessive dilution. This presents an opening for royalty and streaming companies, but the royalty companies aren’t interested in small deals. “The juniors, the exploration stocks are really orphaned at the moment,” he said.
Coverage of the Vancouver Resource Investment Conference 2024 was sponsored by Snowline Gold.