Gold to emerge as a reliable asset and source of relief amid growing chaos.
In a recent interview with Kitco, Incrementum AG’s fund manager Ronald-Peter Stoeferle spoke about what he views as a steady erosion of trust from all corners. Stoeferle, who was previously named Incrementum’s most accurate quarterly forecaster, thinks the stars are aligning for a prolonged bull market in gold, despite tepid summer price action.
The author of the annual In Gold We Trust report noted that a general lack of trust is becoming a common theme among both investors and the average citizen. Stoeferle said that people are beginning to doubt the veracity of the media, the prudence of geopolitical alliances and current monetary policies, and even democracy itself.
According to Kitco, in such an era, gold is bound to emerge as the one reliable asset and source of relief amid growing chaos. Stoeferle thinks that movement in the stock market perfectly illustrates the aforementioned point, as the fourth quarter of 2018 saw both small- and large-cap stocks drop by double-digit percentages. Meanwhile, gold gained more than 8% and rounded up the year as a top performer.
The Q4 performance of U.S. stocks marked the first instance that the S&P 500 Index has looked truly vulnerable in a long time. Regarding the dollar, Stoeferle noted that investors are both overly confident in it and skittish to make an extended commitment.
The first point has to do with the well-known debt issue, which has risen dramatically in the U.S. and the rest of the world. Yet Stoeferle finds the domestic debt situation especially troubling, stating that U.S. debt right now exceeds that of Japan and the entire eurozone combined. It’s a massive jump from 2011 levels when the U.S. had similar debt levels to Japan, and Stoeferle is critical of investors who misinterpret the underlying themes in the U.S. economy.
Conversely, Stoeferle pointed out that there has been a relatively tempered amount of interest in the U.S. dollar given geopolitical developments. Although the greenback still holds strong, logic dictates that various issues surrounding the eurozone should bring far more positive attention to the U.S. dollar than they have so far.
Stoeferle also touched upon the subject of an upcoming recession, which most analysts agree is a virtual certainty. However, Stoeferle doesn’t share the view of some economists that the next recession is three or more years away. He notes that the Federal Reserve’s own indicators point to a 28% chance of a recession happening in 2020. Over the last 30 years, such a high figure invariably resulted in a crisis within two months of being made official.
According to Kitco, the case for gold becomes even stronger when Stoeferle reminds investors that the metal has been gaining in nearly every other major currency. The analyst thinks it’s a simple matter of a sentiment shift in the U.S. market that will usher in a lengthy bull market for gold. Stoeferle added that $1,360 is the level that investors should keep an eye on, as the gold market will likely see heavy buying after this resistance is breached.