Friday, 26 June 2015

"In Gold We Trust 2015"

Ronald-Peter Stoeferle and his team have just published the 2015 edition of the "In Gold We Trust" report. The report, featuring some 140 pages of commentary, analysis and charts, is a yearly must-read for investors, portfolio managers, analysts and students of economics and the financial markets alike. The full version in pdf format can be downloaded here.  Below is the introduction to the 2015 edition.
The 2015 edition of the In Gold We Trust report contains a wealth of insights for all types of investors. In Gold We Trust 2015 takes a look at the big picture in the financial system, from the point of view of the unusual monetary policies. This is the ninth edition of the report. Below is the executive summary from the report, as well as the report itself to be downloaded or read online:
After the barely averted implosion of the financial system in autumn of 2008, we are now in the seventh year of world-wide central bank experimentation. We have all become guinea pigs of an unprecedented attempt at re-inflation, the outcome of which remains uncertain. Questionable monetary policy ventures like quantitative easing and negative interest rates are a direct consequence of a systemic addiction to inflation.
The global financial architecture remains in a fragile state. Disinflationary forces have dominated since 2011. The systemic instability between inflation and deflation – monetary tectonics – culminated in a “disinflationary earthquake” in the second half of 2014, as all industrial commodities and every paper currency lost enormous ground against the US dollar.
Widespread, chronic over-indebtedness is ratcheting up the pressure on monetary authorities to break the deflationary trend and finally generate rising price inflation rates. Gold has always been the best hedge against excessive inflationary efforts.
We are convinced that we are now close to a decisive fork in the road: the disinflationary trend will (have to) be broken. Rising price inflation rates are possible both in conjunction with a revival in economic activity and in a stagflationary environment. In both cases, inflation-sensitive investments including gold and gold mining stocks will benefit.
The majority of market participants have gradually abandoned all concerns over inflation in recent years. This is reflected in exceptionally low inflation expectations and the composition of investment portfolios. The exit from the current “low-flation” phase could prove to be the “pain-trade” for most investors.
From a technical perspective, the picture is not unequivocal. The downtrend hasn’t been broken yet. However, pronounced negative sentiment indicates resignation among gold bulls. We believe a final selloff is possible. During such a sell-off, the support at USD 1,140 could be tested. A reversal following such a test would be a reliable indication of a primary trend change in the gold market.
Based on the “big picture” analysis that is packed into this report, we see no reason for a change of course: In gold we (still) trust. We are firmly convinced that gold remains in a secular bull market that is close to making a comeback.
We expect to see a final trend acceleration at the end of the cycle. We thus decided to set a time horizon of three years – June 2018 – for our long-term price target of USD 2,300 to be reached.