Video summary

“Don’t Get Shaken Out Now” – Gold Miners Are Catching Up | Adrian Day

Main summary

Key takeaways

Finance

Finance-focused Summary (Gold/Silver + Gold Miners)

Market/Positioning Outlook (Adrian Day)

  • Overall stance: Cautiously optimistic for precious metals with a long-term horizon (3–5–10 years).
  • Short-term risk: Possible retest of the last gold low. If gold breaks down, gold could reach ~3,600, and gold stocks could fall further.
    • Presented as a non-zero scenario (~10–20% probability) (“not a zero probability”).
  • Tactical behavior: Investors may take advantage of “these prices and values”, but should keep some cash for potentially better opportunities.

Portfolio/Cash Allocation (risk management approach)

  • Adrian indicates (for his managed accounts) ~12% cash in gold accounts (~88% invested).
  • Implicit framework: Keep dry powder so you aren’t forced to sell during drawdowns, while staying invested enough to benefit if the long-term thesis plays out.

Sentiment/Contrarian Indicators Used

  • Gold mining stocks down ~40% since January.
  • Valuations near/at long-term lows (no specific multiples provided; emphasized qualitatively).
  • Extremely bearish sentiment: gold mining bull/bear sentiment index ~7% bullish, described as extreme versus a normal range of roughly 40–60, with prior days showing near-zero bullishness.
  • Contrarian capital flows:
    • Money pouring out of GLD and GDX (“in droves”).
    • Suggests retail/sentiment capitulation may be approaching.

Historical Precedent Mentioned

  • 2008: even after a huge drop in gold stocks, once October 2008 bottomed, gold stocks doubled within ~5 months.
  • Key takeaway: “Don’t panic at the low.” Panic tends to show up after price peaks.

Macro Drivers: What’s Moving Gold/Silver Now

Main driver: higher interest-rate expectations

  • Adrian argues gold is driven mainly by concerns about higher interest rates globally (not solely the Fed).
  • He points to rate talk from:
    • ECB (Europe)
    • Britain/Japan/Canada (discussing/raising rates)
  • He also links it to oil-price spikes → inflation (CPI) → rate-hike concerns.

Why inflation-linked correlation looks “broken” short-term

  • He suggests the correlation is not broken—markets are looking ahead:
    • Near-term inflation from oil spikes can lead markets to anticipate Fed tightening.
    • Longer-term, if inflation persists for ~10 years, he predicts higher gold prices (example: the 1970s).

Deflation vs inflation relative performance (portfolio framing)

  • In his framing:
    • Gold tends to do better in deflations (relative to the choice between bonds vs gold).
    • In inflations, there are many alternatives (e.g., real estate, equities, other real assets).
  • He also notes oil and other assets did well in the 1970s alongside gold.

Gold Miners Fundamentals / Cash Flow Strength

Cash flow strength (a key “noticed later” factor)

  • Adrian cites nine consecutive quarters (including Q1 of this year) of increasing cash flows for gold mining stocks.
  • He highlights this as unusual compared with other sectors.

Margin compression: what could squeeze and why it may be manageable

  • He argues current gold miner margins are “phenomenal.”
  • Example scenario:
    • Agnico Eagle: AISC ~under $1,340
    • If gold fell to ~4,000 and costs rose to ~1,800, margins would compress but remain “pretty attractive.”
  • What could compress margins:
    • In commodity cycles, other costs catch up in addition to gold price moves.
    • Oil is ~30% of operating costs (as stated context), plus cost inputs like aluminum, steel, copper, and rising mine/build/operating expenses.
  • Cost structure and currency backdrop:
    • Australian and Canadian dollars were at ~30% discounts to USD, potentially benefiting U.S. miners with AU/Canada-cost bases.
  • Hedging:
    • Agnico hedged over 50% of energy for the year to reduce near-term oil shock.

Quantified oil sensitivity (risk math)

  • For an “average mine,” a $10 increase in oil ≈ ~2% increase in AISC.
  • Variability:
    • Less sensitivity in gold mines than the average (more in copper mines).
    • Underground vs open-pit differences.
    • Regional differences: lower in North America/Africa, higher in Europe/Asia (as stated).
  • He notes that multiple $10 oil rises might translate to ~12% cost increase, which he argues is not necessarily devastating given current margin levels.

Silver-Specific Thesis

Silver’s dual demand drivers

  1. Industrial demand (two-edged sword)

    • Industrial demand supports silver, but it’s not fixed.
    • As prices rise, end users increase efficiency and pursue substitution.
    • Example: in Chinese solar manufacturing, once silver rose to roughly $60–$100+, silver use in panels fell materially due to efficiency improvements.
    • Core idea: “the solution for high prices is high prices”—industry adapts when silver becomes expensive.

  2. Retail positioning is more important for silver than gold

    • ETF flow behavior is emphasized:
      • SIL and PHYS: inflows in January
      • GLD and PHYS (in referenced context): gold/silver ETF outflows
    • He frames retail investors as more skittish:
      • January: retail bought silver aggressively
      • After the drop: retail is panicking and selling

Technical levels (explicit price points)

  • He is “not a technician,” but suggests:
    • Support around ~56–57
    • If silver breaks below, possible ~47 (high 40s / “just under 50”)
    • He “doesn’t see it going much under” the high 40s

Explicit caution/“when to buy”

  • He suggests it is very close to a really good time to buy silver, tied to fear/capitulation and likely support.

Investing Guidance / Behavioral Risk

Core admonition: avoid panic + avoid oversizing

  • Don’t panic.
  • Panic typically occurs when you’re oversized in gold/silver.
  • Recommendation: right size
    • If you’re nervous about volatility, keep the sector allocation to a minimum.
    • If you can tolerate volatility mentally and financially, allocate more.

Dollar-cost averaging

  • He references dollar-cost averaging (“perhaps into the stocks too”), implying staged entry rather than a single buy.

Instruments / Tickers / Assets Mentioned

  • Gold ETFs: GLD
  • Gold miners ETF: GDX
  • Silver ETFs / products: SIL, PHYS (also referenced in inflow/outflow context)
  • Individual company: Agnico Eagle
  • Macro-equity references: Nvidia, Microsoft, Amazon, S&P 500 (S&P)

Key Numbers & Timelines Mentioned

  • Gold downside scenario: possible retest of the last low, then ~3,600 if it breaks
  • Probability of downside scenario: ~10–20%
  • Gold mining stocks drawdown: ~40% down since January
  • Cash allocation (accounts): ~12% cash (~88% invested)
  • Sentiment metric: gold mining bullish ~7% vs normal 40–60
  • Historical precedent: after the October 2008 bottom, gold stocks doubled in ~5 months
  • Cash flow streak: 9 consecutive quarters of increasing cash flows (including Q1 this year)
  • Oil/margin sensitivity: $10 oil ≈ ~2% AISC increase
    • Margin example: AISC ~1,340 rising toward ~1,800
    • Energy hedging: Agnico hedged >50% for the year
  • Silver levels: ~56–57 support; possible ~47 if breaks (limited further downside per his view)
  • Inflation horizon claim: gold does well over ~10 years of rising inflation
  • Silver manufacturing adaptation example: efficiency improves when silver reaches roughly $60–$100+

Disclosures / Disclaimers

  • Adrian notes he is not discussing a specific fund during parts of the discussion and references “last quarter’s public disclosure,” stating he can only speak broadly due to compliance.
  • The provided text does not include an explicit “not financial advice” phrase.

Presenters / Sources Mentioned

  • Adrian Day (Adrian Day Asset Management)
  • Kai Hoffmann (host; founder of “Soar Financially” channel)
  • Rick Rule (referenced)
  • Lobo Tigre (referenced)
  • Rob McEwen (referenced)
  • First Majestic Silver (mentioned as a video sponsor)

Original video