The newest edition of the In Gold We Trust report is out. It is the tenth anniversary of this highly respected report. The 2016 edition is full of fundamental insights, economic and monetary data, sharp observations, from a rational Austrian viewpoint.
Summary of the report
Ronald Stoeferle and Mark J. Valek write in their summary:
“We went far out on a limb last year by projecting a price target of USD 2,300/ oz. for June 2018 amidst a pronounced bear market. The first step in this direction appears to have been taken. The commodity sector, as well as gold, seems to have formed a bottom. Early this year gold celebrated an impressive comeback, exhibiting strong vital signs.
We are nevertheless still a long way from our USD 2,300 price target. In order to reach it, currently prevailing perceptions of the global economic situation will have to change. Moreover, the feasibility of interventionist monetary and fiscal policy will have to be fundamentally questioned.
There are more and more signs that scepticism is rising. Something quite telling happened at Ms. Yellen’s press conference after the March FOMC meeting. The first question that CBNC journalist Steve Liesman asked her was: “Does the Fed have a credibility problem […]?” (see video)
With respect to future rate hikes, the verbal dance on eggshells commonly known as the Fed’s communication policy doesn’t exactly inspire confidence, as no clear monetary policy strategy is discernible. A significant downturn in economic growth, followed by a renewed stimulus program including even more extreme measures would increase uncertainty further. In this case it would have to be expected that the gold price, commodity prices and also price inflation, would rise.
In our opinion, this or similar scenarios have a high probability of eventuating within the coming 24 months, and we are therefore sticking with our price target of USD 2,300 by June 2018. The current combination of obvious over-indebtedness, expansive fiscal and monetary policy and the unrelenting determination of central banks to generate price inflation, continue to represent a stable foundation for further advances in the gold price.”
Executive summary of In Gold We Trust 2016
- Gold is back, a new bull market is emerging
- Increasing uncertainty about economic and political developments boosts the gold price
- Monetary stimulus ongoing: the BoJ and the ECB are creating the equivalent amount of the world’s entire annual gold production via their QE programs each month
- BREXIT: Uncertainty will negatively affect growth. Further monetary and fiscal stimulus to be expected to counter further disintegration of the Union
- Dollar strength upon US-recovery and normalization was major contributor to gold/commodity weakness of the last years
- The narrative of economic recovery is crumbling; US recession cannot be ruled out; faith in monetary policy measures declines
- Continued depreciation of the US dollar and strength in commodities may lead to higher inflation, or maybe stagflation
- The persisting low interest rate environment is leading to a revival in interest in gold investments on the part of institutional investors
- In addition to gold, this generally means a positive environment for inflationsensitive assets like silver and mining stocks
- Incrementum confirms its long-term price target of USD 2,300 for June 2018