Trusting in gold - $1480 in 12 months, $2230 longer term
“Never before have such enormous monetary policy experiments taken place on a global basis. If there ever was a need for monetary insurance, it is today.” says Ronald Stoeferle.
Posted: Friday , 28 Jun 2013
FUNCHAL, MADEIRA (Mineweb) -
Every year Ronni Stoeferle, formerly of Austria’s Erste Bank and now with specialist advisors, Incrementum AG in Leichtenstein (although remaining a consultant to Erste Bank), produces one of the most comprehensive analyses of the global gold market available under the ongoing title – ‘In Gold We Trust’. Stoeferle is very much a believer in gold as a monetary metal rather than as a commodity and notes that gold analysis should be the preserve of those who study monetary matters rather than those who specialise in commodities which is the normal pattern amongst the major financial institutions.
As the report title suggests he tends to be mildly positive on the role of gold and produces some extremely comprehensive analyses of various aspects of the gold market with regard to global economics, Thus his latest 54 page analysis is packed with data and relevant charts which support his thinking and give an overall, and not over-hyped, positive view of the global gold market.
In his introductory comments, and also in the conclusions at the end of the report, Stoeferle notes as follows:
“Even though the consensus is convinced that the gold bull market has ended, we remain firmly of the opinion that the fundamental argument in favor of gold remains intact. There exists no back-test for the current financial era. Never before have such enormous monetary policy experiments taken place on a global basis. If there ever was a need for monetary insurance, it is today. “In the course of the recent gold crash, the market has once again demonstrated its tendency to maximize pain. Massive technical damage has been inflicted. We are convinced that repairing the technical picture will take some time. Accordingly $1,480 is our 12-month target.”
Supporting this premise, Incrementum itself warns on its website: “As central banks are engaged in the greatest monetary experiment in the history of finance, the current bubble dwarfs all previous financial bubbles by a large amount. We believe that there are unmistakable signs of an enormous debt bubble – respectively bond bubble. However, government bonds are still considered to be ‘risk-free’ assets in private and institutional portfolios as well as foreign reserves. This dominant paradigm is absurd, especially in times of structural overindebtedness and negative real interest rates.” This too suggests that some form of insurance against stock and bond market collapse is perhaps essential and gold would very much seem to have the potential to fill this role despite its recent weakness. Indeed the fall in the price will to many believers in gold make it a better investment than ever for those who may have missed out on the bulk of its 12 year bull run.
Going back to Stoeferle’s 12-month price target, this is not his long term estimate. This on an unspecified timescale, is for gold to reach what would appear to some to be a relatively conservative $2,230, although this is nearly a doubling of this morning’s price level. Indeed Stoeferle does not expect any start to a recovery in the price until, perhaps August this year as the northern hemisphere early summer months tend, on past performance, to be a quiet time with regard to the gold price.
The report is split into six main sections - Assessment of the current correction and the most recent events; Essential features of gold; Gold in the context of the current macroeconomic backdrop; Structural over-indebtedness argues for continued upward revaluation of gold; Approaches to gold price valuation; Gold stocks close to a trend change? Followed by the report’s Conclusions. Most of these sections are split into a number of subsections with detailed analysis of various aspects of the gold market and the monetary system being examined.
As we have in past years, Mineweb will examine some of these specific sections in rather more detail in a future series of articles as Stoeferle makes some very pertinent points on aspects of gold which bear further coverage. However the reader may download the full report by clicking on the following link - http://www.incrementum.li/latest-news/in-gold-we-trust-2013-extended-version/ to download it directly from the Incrementum AG website.
iPad Version: Picture - Gold bars are pictured at the Ginza Tanaka store during a photo opportunity in Tokyo: REUTERS/Yuriko Nakao