Adrian Day: Uncertainty is Gold’s Best Friend

Adrian Day, president of Adrian Day Asset Management and portfolio manager at EuroPacific Gold Fund, discusses the disconnect between gold prices ($2,800-$2,900) and lackluster gold stock performance. He attributes this to central bank buying driving gold prices over the past two years, while retail and institutional investors remain disinterested—evidenced by no inflows into GDX and GDXJ ETFs this year—favouring a strong stock market, dollar, and economy. Despite a 56% rise in the XAU index outpacing the S&P, gold equities see little attention, with investors possibly conserving cash for an expected market correction or selling physical gold for profit.

Day sees political and economic uncertainty—amplified by Trump’s policies like tariffs and the “Mar-a-Lago Accord” ideas (e.g., forcing foreign treasury holders into 100-year zero-coupon bonds)—as inherently bullish for gold, though not yet translating to equities. He positions his gold fund heavily in seniors (e.g., Barrick, Agnico Eagle) for their initial appeal to new investors, while his global accounts hold 30% gold stocks and 15% resources, citing low risk-reward ratios, expanding margins, and historically cheap valuations (e.g., Agnico at 8.5x cash flow). Day emphasizes people over metrics like P/E, highlighting management’s role in navigating jurisdictional risks and sustaining cash flow.