The following post is presented courtesy of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and may have been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Edited excerpts from the summary by Williams are as follows:
For the past several years, Ronald-Peter Stoeferle has produced one of the most comprehensive analyses available anywhere of what is happening in the gold sector – firstly under the auspices of Austria’s Erste Bank, and now from the Liechtenstein-based advisory company, Incrementum AG, of which he was one of the founders. Incrementum is an advisor to Erste Bank so this report, the eighth in the series, is based on an original analysis prepared for Erste Group Research entitled Goldreport 2014, but also contains additional information.
This time Ronni Stoeferle has been joined in the preparation of this 94-page long report by his colleague Mark Valek and between them the two analysts have put together a remarkably detailed assessment of what has been going on in the sector, and how gold is likely to perform in the near future.
Firstly one should point out that the report – again entitled In Gold we Trust – while positive in its outlook, is not one of those documents put out by the gold mega bulls predicting a $10,000 gold price, but an extremely considered and balanced analysis of gold’s fundamentals and the global factors which contribute to its demand as a monetary metal and tends to disregard most aspects of gold as a commodity. In other words Stoeferle and Valek are very much of the opinion that gold is indeed a monetary metal and the ebbs and flows in the gold price are almost wholly dependent on this aspect.
Stoeferle and Valek open the report’s executive summary thus. “We are currently on a journey to the outer reaches of the monetary universe. We believe that the monetary experiments currently underway will have numerous unintended consequences, the extent of which is difficult to gauge today. Gold, as the antagonist of unbacked paper currencies, remains an excellent hedge against rising price inflation and worst case scenarios.”
First of all, to avoid keeping readers of this article on tenterhooks…the authors predict:
- a fairly conservative 12-month price target of around the US$1,500 level and
- a long-term target of $2,300 to be reached at the end of a parabolic trend acceleration phase that still lies ahead…
Indeed, the new analysis considers that the gold price is near the end of a long consolidation period. Some clearly positive data and the recent revival of gold mining shares all are seen as suggesting as much with the reports suggesting that the technical picture has been repaired and that a stable bottom has been formed.
Overall though, Stoeferle and Valek reckon that in the course of last year’s price collapse, a lot of technical damage was inflicted and the past months have seen a significant decline in speculative activity in the sector. They feel that the majority of bulls appear to have thrown in the towel and like the fact that the consensus considers the gold bull market over. Gold is now a contrarian investment they reckon – which they see as a definite positive.
So far big injections of capital into the global monetary system have not, contrary to many viewpoints, resulted in significant inflation. Indeed Stoeferle and Valek:
- are not necessarily convinced…that inflationary forces will win the race…
- comment that socio-economic incentives and high indebtedness clearly suggest that…higher inflation rates would be tolerated,
- [feel that] should the inflation trend reverse…[that] there would be excellent opportunities in inflation sensitive assets like gold, silver and mining equities…[and]
- point out that the migration of gold demand from West to East is continuing and that the growing importance of Asia’s middle class for gold demand is widely underestimated. Assuming that incomes in China and India will continue to rise, they foresee that gold will inevitably be one of the major beneficiaries…
- reckon that the gold stocks…[given] their more than dismal performance over the past couple of years…now clearly exhibit a highly asymmetric risk-reward profile. In the wake of the correction, mining companies have reset their priorities; profitability, capital spending discipline and shareholder value have replaced the maximization of production. Moreover, there is no other sector that investors view with similarly pronounced skepticism which suggests great opportunities should the overall gold price scenario prove accurate.
The ongoing consolidation that began in the late summer of 2011, with the all-time high, is important for the bull market’s health.
- The nominal gold price may appear to be still high, but relative to the monetary base it is actually at an all- time low. In our opinion, this is a temporary anomaly, which we regard as an excellent entry opportunity.
- We have demonstrated that gold remains attractively priced relative to stocks and bonds, but also relative to a number of hard assets.
- Hence, the gold bubble argument often promoted by pessimists is refuted as well.
Anyone interested in the precious metals sector should view the latest In Gold we Trust report for the wealth of detailed analysis on virtually all aspects of the gold market. It is downloadable from the www.incrementum.li website – direct link, click on: In Gold we Trust 2014 – Incrementum Extended Version – English.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
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