Incrementum AG Fund Manager states why gold could soon jump to new heights
Despite the dollar’s moderate recovery over the last few days, an article on Kitco reports one fund manager maintains gold will be the standout asset in 2018.
Ronald-Peter Stoeferle, fund manager at Incrementum AG, told Kitco News that gold could jump to new heights before the end of the year. He says the main driver of this rally would be stagflation – an environment where rising inflation and slow economic growth combine.
To Stoeferle, there is little question that gold is currently at the start of a bull market. The publisher of the annual In Gold We Trust report said that the metal remains attractive to investors and could see an explosion in price as volatility rises.
The U.S. economy has been touted as strong across the board, but Stoeferle warns that the praise is overblown. Like many other analysts, he believes that the dormant inflation has lulled officials into a false sense of security, and that a major spike in inflation is around the corner.
This will be made worse, said Stoeferle, by inflationary pressures from increased infrastructure spending and the passage of unprecedented tax cuts in the U.S. The analyst believes the same warning holds true for global economies, stating that countries around the world could find themselves caught unprepared by inflation and a subsequent slowdown in economic growth.
When this happens, he believes gold will once again emerge as the most sought-after asset, as it’s widely considered the ultimate hedge against inflation.
Stoeferle was also critical of the dollar and dismissed its recent short-term recovery. The article reports that, although the greenback’s bounce gave some traders confidence, it nevertheless continues to simmer in the territory of multi-year lows. Before its recent pushback, the dollar found itself in a downwards spiral that started in December and poured over into the new year, where it hit a three-year low.
The money manager sees U.S. debt as yet another strong tailwind for gold prices. While the U.S. economy still hasn’t felt the consequences of this ever-expanding deficit, Stoeferle believes the time is coming.
Finding a plunge into a recession unavoidable, Stoeferle said that an even weaker dollar will be one of the hallmarks of this descent. Regardless of where it comes from, dollar weakness is going to help gold eclipse bond yields, which Stoeferle believes are close to running their course.
With all of this in mind, Stoeferle thinks that gold could easily see $1,500 an ounce by year’s end, amounting to an increase of around 13% over current prices.