“Sell Economic Ignorance, Buy Gold”
“We live in an age of advanced monetary surrealism….” is how Incrementum’s Ronald-Peter Stoeferle and Mark J. Valek begin their latest writing on the precious metals market, In Gold We Trust.
They consider a bullish stock market the most significant opportunity cost for gold. Therefore, a clear breakout of the gold price should only be occurring amid a stagnating or weaker equity market. If we compare the gold price performance with the development of equity prices, we can see that the relative weakness of gold seems to be ending. Last year the intensity of the upward trend declined significantly. After almost 5 years of underperformance relative to the broad equity market, the tables might slowly be turning now in favour of gold.
In a historical context, the relative valuation of commodities to equities seems extremely low. In relation to the S&P 500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1. Following the notion of mean reversion, we should be seeing attractive investment opportunities.
Key topics and the full report include:
High expectations of Trump’s growth policy dampened the gold price increase in 2016, but it’s still up 8.5% in 2016 and 10.2% since January 2017; the further development of the normalization of monetary policy in the US will be the litmus test for the US economy; is Bitcoin digital gold or fool’s gold; white, gray and black swans and their consequences for the gold price; an exclusive interview with Dr. Judy Shelton (economic advisor to Donald Trump) about a possible remonetization of gold; and 5 reasons why the gold bull market will continue.