Gold & Silver “Monetary Climate Change”: New Report

Gold’s inflation-adjusted all-time high has not yet been reached…

by Ronnie Stoeferle via In Gold We Trust

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Review of the last 12 months
Over the last 12 months we have seen ups and downs when it comes to gold. Shortly after the publication of the last In Gold We Trust report, we saw a new all-time high in gold in any currency. This was followed by a breather, which was due to a firm US dollar and rising government bond and bitcoin yields. But in general, the performance was very good, with a price increase of 24% on a US dollar basis and 14% on a euro basis. Moreover, gold acted as the defender of the portfolio, fending off all attacks from falling prices in the turbulent weeks of spring 2020. Currently, performance is looking much better again. The breather is over and gold can now resume its ascent.

The great comeback of inflation
Yes, it is back, the once declared dead monster of inflation is back. Monetary climate change is in full swing and the pendulum has finally swung to the side of inflation. In 2020, a reversal of the trend has taken place. The sceptre of money creation has been passed on to politicians. It is also hardly surprising that they feel very comfortable in this new role. Instead of QE, fiscal packages are now the means of choice. Second, the US has an average inflation target. The inflation rate is allowed to overshoot and will not be prevented from doing so. Moreover, geopolitical tensions as well as a decline in globalization continue to drive inflation. Higher inflation will have a negative impact on equities and bonds and the classic 60/40 portfolio will have big problems.

Debt, Debt and More debt…
All taboos have been broken in 2020 and the corona pandemic has inflated debt mountains to unprecedented heights. The average debt-to-GDP ratio is currently 365%. Leading the way is the US and, in many countries, the national debt is now as high as it was at the end of World War II. Never before has the world been so indebted in peacetime. These massive mountains of debt make a sustainable turnaround in interest rates virtually impossible. Negative real interest rates are the new normal and at the same time form the basis of the gold bull market. This is therefore a good foundation for a further rise in the gold price.

A New Commodity Supercycle?
The commodities sector had a brilliant year in 2020 and practically rose like the phoenix from the ashes. A quick response to the pandemic and a general improvement of companies during the bear market led to a quick recovery and many are already talking about a commodity super cycle. Several things speak for this. First, the brutal bear market has finally ended. There has been chronically little investment in exploration and mining, which is now already leading to shortages in some commodities. The green wave should be very good for commodities like copper or lithium. Inflation and a weak dollar would also be positive for commodities.

Silver´s Decade?
When the last IGWT report was published, the gold silver ratio was at a record high. Now we see that silver has clearly outperformed gold so far. Silver is back in the focus of many investors and here to the green wave is boosting demand. Silver is also doing very well in an inflationary environment, which is why we also believe that silver will continue to do very well.

Mining stocks
There has also been a lot of activity in the mining sector. Companies had the most profitable year in the history of the gold mining sector. Companies became true cash flow monsters and 2021 should be even better. The sector is generally very healthy, and we see very great potential for the companies themselves as well as for investors in the sector.

Is Gold Already “too expensive”?
We have to answer this frequently asked question with an unequivocal “no”. For one thing, the inflation-adjusted all-time high has not yet been reached. In addition, in this issue we also present a new gold price model, which suggests that we will see new all-time highs this year.

You will find these articles and many more in this year’s In Gold We Trust Report. As always, our motto is, all roads lead to gold!

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