Sergio Lujan talks Sprott’s expertise and the gold markets with RIA Channel

January 8, 2024 | (3 mins 9 secs)

At the 2023 Schwab Impact conference, Sergio Lujan joined Keith Black of RIA Channel to discuss Sprott’s specialization in precious metals, the current state of the gold market, along with our outlook.

Video Transcript

Keith Black: Hello, I'm Keith Black with RIA Channel, joined today by Sergio Lujan, Senior Investment Consultant for Sprott. Welcome, Sergio.

Sergio Lujan: Thank you.

Keith Black: For those who are new to Sprott, what should they know?

Sergio Lujan: Sprott is a publicly traded company with a track record of over four decades. Predominantly, we’ve provided investment solutions within precious metals. Most recently, we've added energy transition. We manage over 25 billion in assets and have clients globally.

Keith Black: Tell us a bit about the gold market. You said Sprott is a precious metal specialist. What's going on in the current market, and what's Sprott's outlook?

Sergio Lujan: Gold is currently hovering around the key psychological level of $2,000 an ounce. It's up over 8% year to date. This year, we've seen that gold reached new record highs in various global currencies. We do think that it could happen in US dollar terms as well.

What's been really interesting is that even in this rising rate and strong US dollar environment, gold has done exceptionally well on a relative basis. So, since the market peaked in '21 and rates bottomed, gold has outperformed both gold stocks and bonds by over double digits each. This is coming when the correlation between stocks and bonds has been stronger than usual. Gold has been a true diversifier in a traditional 60/40 portfolio, and we don't expect that to change anytime soon.

Keith Black: Is that gold's key attraction as a diversifier to stocks and bonds and maybe a hedge against inflation?

Sergio Lujan: Certainly. When we talk to advisors about how to use gold in a portfolio, we tend to talk about it in two different ways. One, as a risk-off trade via physical gold. Gold historically has been a store of value, a hedge against inflation, and a non-correlated asset. An 5% to 10% allocation has historically improved risk-adjusted returns over a full market cycle.

On the other side, we talk about gold as an opportunistic trade in a risk-on environment. This is typically done through the miners themselves. Miners have a leverage trade on the price of gold, typically 2x to 3x, whatever the price of gold does. In this current environment where the short-term to medium-term outlook is bullish for the price of gold, miners can provide that extra leverage.

When we look at them from a valuation perspective, they are at historic lows compared to gold itself and the stock markets in general. I believe they're an opportunistic trade and a leverage trade to the price of gold.

Keith Black: Thanks for sharing with us, Sergio.

Sergio Lujan: Thank you.

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