The True Importance of Gold Lies in Its Possession, Not Its Price

Sunday, July 7, 2013
By Paul Martin

By Lars Schall
July 6, 2013

On occasion of the publication of his seventh annual “In Gold We Trust“ report, renowned gold market analyst Ronald Stoeferle discussed for Matterhorn Asset Management / GoldSwitzerland some aspects of his latest report and the larger picture, inter alia: the current bad market sentiment in gold; the rather strange fact that gold is traded like a currency but analyzed like a commodity; the question if it’s a problem that gold is traded now below average cash costs for mining companies; and the most contrarian call at the moment: gold mining equities.

Ronald Stoeferle, managing director of Incrementum AG in Liechtenstein is a Chartered Market Technician and a Certified Financial Technician. He was born October 27, 1980 in Vienna, Austria. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign in the U.S., he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income / Credit Investments. After graduating, Stoeferle joined Vienna based Erste Group Bank, covering International Equities, especially Asia. In 2006 he began writing reports on gold. His benchmark reports drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also writes reports on crude oil. Recently, Stoeferle and his partners incorporated Incrementum AG in Liechtenstein. He will soon launch a global macro fund, based on the thoughts of the Austrian School of Economics. Furthermore, he is now senior advisor to Erste Group Bank and a lecturer at the “Institut für Wertewirtschaft” (“Institute for Value-based Economics“) focusing on the Austrian School of Economics.

Lars Schall: Mr. Stoeferle, your new report is called once again “In Gold We Trust”. However, the sentiment in the market is currently extremely bad. Why so?

Ronald Stoeferle: Well, we’ve seen a massive price drop and in the course of the recent gold crash the market has definitely demonstrated once again its tendency to maximize pain. The fact that sentiment is by now at the most negative level since the beginning of the bull market, gives us cause to be clearly positive about the long term. Sentiment indicators like e.g. Market Vane, the Hulbert survey and Rydex precious metals fund cash flows show that the gold price is miles away from excessive euphoria. According to the Hulbert Financial Digest, the allocation recommended by gold newsletter writers was recently at minus 44%, an all-time low.

Therefore, I think we’re at the point of maximum pain at the moment, the sentiment is as bad as it can get. From a technical point of view, massive technical damage has been inflicted and I am convinced, that repairing this damage will take some time.

However, from my point of view, gold, and especially gold mining shares, at the moment are the ultimate contrarian investment.

L.S.: So you’re still confident in the prospects of gold?

R.S.: From my point of view, we’re witnessing monetary policy experiments more or less on a global basis – have a look at the “monetary Harakiri” happening n Japan for example, have a look at the UK… There exists no back-test for the current financial era. If there ever was a need for monetary insurance, it is today.

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