50 Slides For The Gold Bulls – ChartBook by Incrementum

Some of the key takeaways from the chartbook are:

  • Is consumer price inflation in the offing? The new bull market in gold is accompanied by an increase in price inflation
  • How does gold perform in times of stress?
  • The narrative of economic recovery and a normalization of monetary policy is crumbling
  • The breakout in mining stocks has marked the end of the cyclical bear market – the party has just begun!
  • Is gold “antifragile”?
  • Gold price target for June 2018: USD 2,300

50 Slides For The Gold Bulls

Our Conviction

Due to structural over-indebtedness and the resulting addiction to low/negative real interest rates, we believe that the traditional approach to financial markets and asset management is no longer beneficial for investors.

Therefore, at Incrementum we evaluate all our investments not only from the perspective of the global economy but also in the context of the current state of the global monetary regime. This analysis produces what we consider a truly holistic view of the state of financial markets.

We believe that the Austrian School of Economics provides us with an appropriate intellectual foundation for our investment assessment and decisions, especially in this demanding financial and economic environment.

Ronald-Peter Stoferle, Mark J. Valek

Gold Price Target for June 2018: USD 2,300

Gold Bulls

  • In 2008 (when gold traded at USD 800) we first called for a long-term price target of USD 2,300
  • The gold price reached a (nominal) all-time high of USD 1,920 in September 2011
  • Contrary to our expectations, then a correction started which evolved into a full-blown bear market in 2013
  • While most other gold analysts became bearish on gold, we continued to stand by our thesis that gold is still in a secular bull market
  • In June 2015 we set our price target of USD 2,300 for June 2018

Extensive indebtedness Has Made the System Crave for Growth (and/or Price Inflation)

Gold Bulls

  • Structural over-indebtedness all around the globe: Debt levels have increased by about 40% since the financial crisis, a trend that has spilled into emerging markets as well (especially China)
  • True reform and spending cuts appear illusory and massive tax increases as counterproductive – to service this debt more growth (and/or price inflation) has to be generated at any cost

To Stimulate Growth Central Banks Have Gone All-In

Gold Bulls

  • With monetary experiments, central banks have been engaging into an all-or-nothing gamble, hoping it will eventually bring about the long promised self-supporting and sustainable recovery
  • The central banks‘ leverage ratios and the sizes of the balance sheets relative to GDP have enormously risen in the aftermath of the 2008 financial crisis
  • The Bank of Japan (BoJ) has taken this insanity several steps further than their peers have managed; the ECB has been comparably conservative, but is currently doing its best to catch up

However, Can Central Banks Heal the Economy? 3 Worldviews in the Post-Lehman Economy

1. Believers in the system

  • The Keynesian economic policy in the post-Lehman world is in principle correct and necessary
  • The economy is in a recovery process, financial markets are gradually sounding the “all clear”
  • New regulations have lowered systematic risk
  • Low/zero gold allocation in the portfolios
    • The current mainstream economic worldview

2. The Skeptics

  • Doubts about the sustainability of the extreme economic policy measures that have been taken since 2008
  • Pragmatic gold holdings: much accumulation after the crisis, reduction of the position in recent years
  • Skeptics could play an important role as marginal buyers in driving the future gold trend
    • Gradually growing group

3. The Critics

  • Conviction that the monetary architecture is systematically flawed
    • Theoretical foundation is provided i.e. by the Austrian School
  • The current economic recovery is neither sustainable nor self-supporting
  • Portfolios include system hedge and inflation hedge modules, e.g. gold

See the full slides below.

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