Adrian Day: Gold and Gold Stocks Remain Under-owned and Under-appreciated.
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Adrian says gold was my very first investment and I’ve always had a real interest in it from an Austrian economics perspective and in the entrepreneurial model.
He is very bullish on gold. This year you’ve seen gold swing up and down several times, each time we have gone higher and had higher lows. This is a bullish pattern. It’s extremely encouraging that gold has held up well above 1300. Central banks are going to be very cautious from here.
When things are going well, people don’t feel the need to own gold. The last few months have seen increasing concern about the U.S. stock markets and their valuations. We’re not in a bubble because it lacks those characteristics, but we are high by many valuation metrics. Some people are beginning to get cautious with this market.
Gold and gold stocks remain very very under owned and largely ignored and this is key as gold has broken out above 1300. You will see more people, institutions, and hedge funds move back into gold. If gold is considered undervalued, then gold stocks are even more so.
If there is a rapid decline in equities, typically all equities will fall. In a slower decline, you will see a rotation from sector to sector. 2008 was a credit crisis, and people needed liquidity fast, that is why gold briefly sold off in 2008 but quickly rebounded. The most important factor determining if gold stocks will decline in a general market sell off is did they participate in the market gains. In the case of this market, they certainly are pretty cheap.