(Kitco News / Clayton County Register) - In a recent interview with Kitco News, Adrian Day, president of Adrian Day Asset Management, expressed his belief that the U.S. economy is still on track to weaken by the end of the year. While some economists are shifting their forecasts and ruling out a potential recession, Day argues that the current strength of the economy and the resilience of consumers are being overestimated.
Consumption has largely supported economic activity in the first half of 2023. However, Day points out that consumers have depleted their COVID savings as credit card debt soared in the second quarter. According to the New York Federal Reserve, consumer debt rose to $1 trillion between April and June. Day notes that consumers not only rely on debt to cover expenses but also face higher interest rates due to the Federal Reserve’s tightening measures. These indicators are not typically seen in a healthy economy.
Day warns that consumers, unable to service their debt, may soon start to default on the $1 trillion debt, posing a significant risk to the economy. He believes that it is only a matter of time before investors turn to gold as a means of protecting their wealth as the economy heads towards a recession. However, Day also acknowledges that short-term Treasury Bills with a yield of around 5% present significant competition for gold, which offers no yield and incurs holding costs.
Despite these challenges, Day remains bullish on gold for the remainder of the year. He advises investors to consider increasing their allocation to gold as a recession looms on the horizon. He emphasizes that gold serves as an important insurance policy to safeguard portfolios, and as risks heighten, the need for more insurance increases.
In conclusion, Day asserts that the Federal Reserve’s monetary policy will continue to play a crucial role in triggering a rise in the price of gold. He believes that when the Fed ceases its tightening measures before inflation is controlled, gold will experience an upswing in value.
By Lira Mercer
August 23, 2023
