Adrian Day: Don't Forget Why Gold is in Your Portfolio

TL;DR

The president of Adrian Day Asset Management discusses the benefits and disadvantages of royalty and streaming companies in the gold space, as well as the potential of gold and copper as investment opportunities.

Transcript

I'm Charlotte McLeod with the investing news network and here today with me is Adrian day president of Adrian day asset management Adrian day asset management among other things manages the euro Pat gold fund which is the top performing gold fund this year thanks for joining me Adrian well thank you very much for having me of course now we're here ... Read More

Key Insights

• 💄 Royalty companies mitigate risks associated with mining, making them attractive to investors due to reduced exposure to problems like capital expenses and confiscation.
• 🦕 Prospect generators provide exposure to multiple exploration opportunities, reducing the long odds of achieving successful mining projects.
• 😘 Smaller mining companies are actively engaging in mergers and acquisitions, taking advantage of low gold prices and the need to replace declining production.
• 💄 Copper is a favored commodity due to its projected supply deficit in the next few years, making it an attractive investment opportunity.
• 🧑‍🏭 Investors should consider factors such as management, balance sheet, and history of dilution when choosing prospect generators.

Questions & Answers

Q: What advantages do royalty companies offer in the gold space?

Royalty companies mitigate risks associated with mining by allowing investors to be free from future mining problems, such as capital expenses, confiscation, or raised taxes.

Q: What benefits do prospect generators provide in the exploration sector?

Prospect generators reduce the long odds of finding a successful mine by offering exposure to multiple opportunities, allowing investors to hold multiple "lottery tickets" instead of just one.

Q: Are there any disadvantages to prospect generators?

Yes, prospect generators give up control over their own destiny, as the company funding the projects controls the pace, location of expenditure, and disclosure of news.

Q: How do royalty companies perform compared to mining companies in the stock market?

Royalty companies tend to outperform mining companies in both strong and weak markets over medium-term periods due to their better balance sheets and reduced risk exposure.

Q: How should investors choose streaming and royalty companies?

Investors have limited choices in the market, with the four big players being Franco-Nevada, Wheaton Precious Metals, Royal Gold, and Osisko Gold Royalties. All four have different attributes that make them appealing, depending on an investor's preferences and risk appetite.

Q: What factors have limited gold's upward momentum this year?

Factors such as the possibility of a successful summit between President Trump and Kim Jong-un and a recovery in the US dollar have limited gold's upward momentum this year.

Q: What can investors expect from the gold price for the rest of the year?

In the short term, the US dollar poses the biggest risk to gold's performance. However, in the medium to long term, the overvaluation of the dollar relative to Asian currencies may lead to a decline in the dollar and support for gold.

Q: How significant is the declining gold supply and could it lead to a supply crunch?

While a 5-10% decline in gold production may not seem significant on paper, it could have psychological implications for investors and impact supply-demand dynamics.

Summary & Key Takeaways

• Royalty companies mitigate risks associated with mining, as investors are not responsible for future mining problems, such as capital expenses, confiscation, or raised taxes.

• Prospect generators offer exposure to multiple opportunities in the exploration sector, reducing the long odds of finding a successful mine.

• However, prospect generators might give up control of their own destiny and face potential disadvantages, such as having limited control over the pace of projects and disclosure of news.