Ronald Stoeferle: Gold Bubble or Bargain?

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In this one hour presentation for ABC Bullion, Ronald Stoeferle from Incrementum Liechtenstein explains in much detail why he believes gold is a bargain and debt a bubble. This article provides the highlights of the presentation and the rationale for Stoeferle’s key premise.

The difference between the Keynesian economist and Austrian economist (explained by a comparison with a doctor):

The Keynesian economist doctor will suggest to take pills and other medicins. The Austrian doctor will try to understand the root cause of the problems (not the symptoms). Likewise, in the economy, the problems with Lehman Brothers or Greece are symptoms but the underlying problems are far more important. The real issue is the fundamental monetary problem. That’s the focus of the Austrian economist.

A comparison between today’s corrective phase and the one in the 70′s:

Based on the damage on the chart and the length of the correction, Stoeferle expects gold to revisit $1,900 in two years, i.e. 2015. It will probably be at around $1,500 that the investment community will start buying again.

The quote from Richard Russell is quite accurate: “Gold always does what it should do … it just never does it when we think it should.”

Some of the most important reasons for the current correction:

  • disinflation
  • the outlook of QE taper or QE exit
  • rising real interest rates
  • partly declining money supply (especially ECB)
  • record high short positions
  • rising opportunity cost of owning gold due to the rally in stocks

Why the gold bull market is not over:

The rationale of Stoeferle for why the gold bull market is in a temporary correction and will resume its uptrend:

  • Not any event or major policy change has occurred associate with the peak (eg Paul Volcker in 1980).
  • Gold producers have not made significant new highs yet despite a near doubling of the gold price.
  • Monetary climate has not changed. QE has not been discontinued by any central bank yet.
  • Nodoby has a real idea how global central bank balance sheets will be normalized. The potential for future paper currency debasement clearly exists.
  • Short term interest rates will remain extremely low until 2016 at least.
  • Gold’s behaviour leading it up to its $1900 peak and its subsequent decline bore none of the hallmarks of a classic secular top.
  • Confidence in gold among developed world financial/macro investors has been shaken. Confidence in gold, particularly physical gold, among emerging market investors and central banks remains unshaken.
  • The fall in gold in 2013 has taken gold from weak hands and put it into stronger ones.


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