In Gold We Trust report released!
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Posted 29/05/2019
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Easily the most anticipated report on all things gold each year is Incrementum AG’s “In Gold We Trust” report and the 13th version has just been released. The full report runs at over 300 pages and there is a 96 page ‘compact’ version (links below). Regular Ainslie readers will know we also gave a 6 part preview summary back in April. If you missed them they are a good summary of the whole document in 6 relatively short easy reads. They are here: Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6.
The following is an interview with Kitco and the principal author Ronald-Peter Stoeferle on its release.
“Investors need to look past gold’s current summer doldrums and focus on the yellow metal’s safe-haven potential as trust in society and financial markets continues to erode, according to one fund manager.
In an interview with Kitco News, Ronald-Peter Stoeferle, fund manager of Incrementum AG and one of the authors of the 13th annual In Gold We Trust report – which clocks in at over 300 pages this year - said that gold remains the last bastion of security in an ever fragile world.
“We have seen an erosion of trust in many parts of our lives; we’ve lost trust in the media, in democracy, in geopolitical alliances and monetary policy,” said Stoeferle. “There is still some trust in the U.S. economy and the U.S. dollar, which is hurting gold, but we don’t think this will last.”
Stoeferle said that the trust in the U.S. financial system is already being tested following the performance in the fourth quarter, which saw large-cap U.S. equities fall 13.5%, small-cap stocks fall more than 20%, gold prices rise more than 8% and gold equities rise nearly 14%.
“For the first time in many years, the seemingly untouchable competitive advantage of stock markets has been seriously questioned. Gold has outperformed all major domestic equity markets,” the firm said in its report.
![Everything bubble Everything bubble](/root/NewsArchive/Images/2019/5/IGWT-chart-1.webp)
Although the perception is that the U.S. economy is “the least dirty shirt in the laundry,” Stoeferle said that the economy is built on debt, which is not sustainable in the long run. The report noted that next year, “U.S. government debt will exceed the combined debt of Japan and the eurozone, despite the fact that absolute U.S. and Japanese debt were at similar levels until 2011, rising almost in step.”
Stoeferle added that it’s not just government debt that is growing out of control; he said that corporate debt with about $600 billion in bonds at risk of being rated as junk.
“I think we are seeing a little bit too much confidence in the U.S. economy and the U.S. dollar and that will come back to bite investors,” he said.
![USA debt USA debt](/root/NewsArchive/Images/2019/5/IGWT-chart-3.webp)
Stoeferle added that confidence in the U.S. dollar is already starting to weigh as it struggles to push higher from its already lofty valuation. Incrementum AG noted that last year the U.S. dollar rose only 4.3%.
“Given the numerous economic, political, and social trouble spots in the EU – Brexit, Italy’s open rebellion against the Stability and Growth Pact (SGP), the yellow vest protests in France, the economic slowdown in Germany – it is remarkable how little the U.S.D has appreciated,” the firm said. “A further indication that the U.S. dollar could slowly but surely lose its status as a classic safe-haven currency is the fact that in the course of the sharp correction of the stock markets in Q4/2018 the greenback strengthened only marginally. We regard this as a prime indication of a U.S. dollar bear market, whose starting signal has not yet been apprehended by the majority of investors.”
While the U.S. dollar gold price dominates investor perceptions of the yellow metal, Stoeferle said that it is also important to pay attention to the health of the global market. Gold prices are up in other currencies like the Australia dollar, the euro, the Swiss franc and the Japanese yen, the firm said in its report.
“We think it’s only a matter of time before we start to see higher gold prices in the U.S. dollar.
![World gold price World gold price](/root/NewsArchive/Images/2019/5/IGWT-chart-2.webp)
But Stoeferle added that the real test will come when the inevitable recession hits.
According to the report, most economists are not expecting to see a recession in the next three years, but the investment firm also noted the terrible track record economists have at predicting a recession.
“According to a study by Fathom Consulting, the IMF has correctly predicted only 4 of 469 downturns since 1988,” the report said.
According to the Federal Reserve’s own indicators last month there is a nearly 28% chance of a recession by 2020. “In the past 30 years, this figure has never been so high if there was no recession in the following two months,” the report said.
Although the gold market is suffering from a lack of investor interest, Stoeferle said that this sentiment could quickly shift if financial markets start to deteriorate. He added that investors need to watch last year’s highs at $1,360 an ounce. He said that if this price level breaks, then investors will flood back into the market.
“We are sticking to our statement from last year that gold is in the early stages of a new bull market – a bull market that could soon pick up momentum on a U.S. dollar basis as well,” the firms said.”
To read the 96p compact version click here. Or the full version, here.