WEBVTT - Sprott's Smirnova on Gold: Still Seeing Lots of Upside (Audio)

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<v Speaker 1>You're listening to Taking Stock with pim Box and Kathleen

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<v Speaker 1>Hayes on Bloomberg Radio. Gold the mirror image of the

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<v Speaker 1>stock market for the last two trading sessions, rising for

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<v Speaker 1>a second day today, adding to the biggest search in

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<v Speaker 1>seven years on Friday. Uh The fallout from UK's decision

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<v Speaker 1>to leave the EU is boosting the demand for gold

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<v Speaker 1>as a safe haven after many factors have been boosting

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<v Speaker 1>it so far this year. Will it continue? What does

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<v Speaker 1>it mean for some of the gold companies like Barrick

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<v Speaker 1>and Newmont Mining. Well, let's put that question now to

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<v Speaker 1>Maria Smirnova. She's portfolio manager at Sprout Asset Management. Welcome back, Maria, Hi, Kathleen,

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<v Speaker 1>great to be here. Well Gold, how long will this

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<v Speaker 1>Brexit impact last? Is this you know, everyone's kind of

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<v Speaker 1>trading fast and furious. Maybe you had a position you

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<v Speaker 1>had to cover one way or the other, so you're

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<v Speaker 1>buying or selling gold or whatever it is. Or is

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<v Speaker 1>this this is really going to cement this trend higher

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<v Speaker 1>in gold for a while. Well, certainly the Brexit decision

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<v Speaker 1>on Friday or on Thursday was a surprise to the

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<v Speaker 1>market in general, but we've believed in gold you know,

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<v Speaker 1>for a long time now, we've become increasingly bullish from

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<v Speaker 1>the end of last year at the beginning of this year,

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<v Speaker 1>and we actually believe that the fundamentals that have been

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<v Speaker 1>driving gold and silver higher this year UM have been

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<v Speaker 1>there and are there and will continue. So we don't

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<v Speaker 1>think that the Brexit vote is you know, at one

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<v Speaker 1>time event. We do think there's lots of upside left

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<v Speaker 1>and gold going forward. Why uh, The fundamental reasons that

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<v Speaker 1>we think, you know, are driving the drivers are slowing

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<v Speaker 1>global economies and central banks around the world trying to

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<v Speaker 1>stimulate their economies and as a result of that, UM

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<v Speaker 1>yield dropping all around the world. You know, we talk

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<v Speaker 1>about US yield the tenure being at one right now,

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<v Speaker 1>that's down from previous years. We are looking at the

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<v Speaker 1>Fed not raising rates as much as we thought. Even

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<v Speaker 1>last year, we thought we'd have four rate hikes this

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<v Speaker 1>year and you know, we're not having that. In fact,

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<v Speaker 1>I believe the probability of right hike now being factored

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<v Speaker 1>into the market is zero close to December, so a

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<v Speaker 1>lot has changed from last year, and the outlook for

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<v Speaker 1>the global economy is quite different today than it was,

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<v Speaker 1>you know, even six months ago, and those things are

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<v Speaker 1>the fundamental drivers for gold right now. So how do

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<v Speaker 1>you characterize the fundamental view of the global economy now

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<v Speaker 1>compared with six months ago? What is your view? And

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<v Speaker 1>I think what you're referring to broadly isn't just your view,

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<v Speaker 1>but how you perceive the view of all the investors

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<v Speaker 1>around the world who are helping to fuel this gold

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<v Speaker 1>rally right exactly. Um, we think that the the perception is,

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<v Speaker 1>you know, has deteriorated in terms of the growth prospects

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<v Speaker 1>of the world. We talked about China, we talked about

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<v Speaker 1>the US is the bright pot in the world. Right.

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<v Speaker 1>The economy is growing at two to three percent, let's say,

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<v Speaker 1>but it's it's I would say, it's considered tepid growth, right,

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<v Speaker 1>it's not robust growth. And like I said, the FED

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<v Speaker 1>has been signaling um fewer rate hikes this year UM

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<v Speaker 1>and and that's had a tremendous impact on the markets

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<v Speaker 1>and how the markets view gold. So when you look

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<v Speaker 1>at Barrack, when you look at Newmont, I mean Goldman

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<v Speaker 1>Sachs says that Barrick Gold is now a conviction by

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<v Speaker 1>they see gold averaging even higher than they thought before.

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<v Speaker 1>Does this make sense to you. Do you agree, Well,

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<v Speaker 1>I think we think that gold stocks in general are

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<v Speaker 1>a buy, and of course gold stocks offer leverage to

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<v Speaker 1>the gold price. So we're you know where, we have

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<v Speaker 1>a whole um gold portfolio management team, and we're fully

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<v Speaker 1>invested in a whole variety of names, from the seniors

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<v Speaker 1>such as Barrack to the juniors. Were continuously adding in

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<v Speaker 1>changing our portfolios. We've actually been adding more junior names

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<v Speaker 1>for that leverage in the portfolio. Junior names like who

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<v Speaker 1>well uh um. When we talk about junior names, these

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<v Speaker 1>are generally exploration and development stories. So I'm probably not

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<v Speaker 1>at liberty to discuss individual names, but um all, I

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<v Speaker 1>will say these are smaller companies, you know, there may

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<v Speaker 1>be just entering production versus Barrick of course, as a

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<v Speaker 1>mature company with multiple minds all all around the world,

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<v Speaker 1>and we have, you know, a whole basket of these

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<v Speaker 1>names that we are very positive right now on most

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<v Speaker 1>gold names. I would say, so right now, spot gold

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<v Speaker 1>uh today trading around one thousand, three hundred twenty six

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<v Speaker 1>dollars and change the futures price just a little bit

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<v Speaker 1>higher than that. You say that thirteen sixty is the

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<v Speaker 1>resistance level after that four hundred. Duke's back that thirteen

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<v Speaker 1>sixty level to be challenged anytime soon. If the market

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<v Speaker 1>breaks that level and rises higher. Is this another bi

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<v Speaker 1>signal for gold? Absolutely, It's pretty difficult to call timing,

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<v Speaker 1>I would say, but definitely if we go through thirteen

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<v Speaker 1>thirteen sixty and then after four hundred, there's very little

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<v Speaker 1>resistance because don't forget, we've come a long way down

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<v Speaker 1>in the bear markets, so now we're pretty much retracing

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<v Speaker 1>um that bear market, but on the way up. So

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<v Speaker 1>we don't see a lot of resistance at the hundred level,

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<v Speaker 1>and we'll get pretty bullish if we go through that level.

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<v Speaker 1>And uh, what is the next? Just really quickly about

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<v Speaker 1>thirty seconds, what is the next? Like sort of is it?

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<v Speaker 1>Is it breaks? It? Is it? What happens within the EU?

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<v Speaker 1>As an Italian banking crisis bank in Japan? What's the

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<v Speaker 1>key event you're watching next for gold? Um? I don't

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<v Speaker 1>know if I have a key event. We're certainly watching

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<v Speaker 1>what the Fed is saying and doing very closely. We

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<v Speaker 1>think that Brexit and that the outcome of the vote

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<v Speaker 1>will take a while to be digested by the markets

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<v Speaker 1>all around the world. We're watching volatilities around the world.

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<v Speaker 1>We're watching currencies, We're watching a lot of factors um

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<v Speaker 1>correlations between various factors UM. We're watching out for contagion. Basically,

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<v Speaker 1>if there is contagious and it's spreads and we have

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<v Speaker 1>a financial crisis, that could have affect our outlook. Okay,

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<v Speaker 1>Maurice Mirnova, thank you so very much. Portfolio managers brought

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<v Speaker 1>asset management joining us from Toronto. I'm Kathleen Hayes. This

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<v Speaker 1>is taking stock on Bloomberg Radio.