They discussed this year’s prospects for gold, silver and mining shares; the still increasing gold demand in China; and a book that Stoeferle co-authored, “Austrian School for Investors – Austrian Investing Between Inflation and Deflation”. The full audio interview can be found at the bottom of the page, but we have also summarised the content below:
On the Federal Reserve and US Markets
How he totally rules out the chance of 4 fed rate hikes this year, as does the market.
How a recession in the USA is his most likely scenario this year.
How the Fed will instead likely lower interest rates. He doesn’t rule out negative interest rates in the US. And noted how one popular economist has been calling for the US Fed to consider this as an option.
So he believes it will be an interesting year for gold investors and macro investors.
Gold sentiment is very bad and how stock markets are the “opportunity cost” for gold. So gold will perform well when equity markets are struggling. How he thinks that as soon as the market prices in negative interest rates or QE4 gold will then really pick up momentum.
They discuss how we are far away from free markets in just about everything including gold. So of course central banks do not want a rapidly rising gold price.
How gold did very well in the past 2 years in many currencies (e.g. emerging markets, Canadian and Australian Dollars) other than the US dollar.
How everyone expects the Fed to continue raising rates and everyone thinks the economic numbers in the US are doing better than the rest of the world.
He thinks the markets will start to realise sooner or later that this is not the case and this will be quite positive for gold.
On the Gold/Silver ratio:
(The number of ounces of silver it takes to buy one ounce of gold.) Why the gold/silver ratio is a very crucial indicator for everyone interested in gold. And in particular as an inflation measure.
Why do they put so much emphasis on the Gold:Silver ratio?
Because they crunched the numbers and in times of disinflation or deflation the ratio is rising, because silver struggles due to its high industrial demand in comparison to gold.
When the ratio is falling this means inflationary forces are getting stronger again. We are still a way away from this currently.
However sooner or later central bankers will step in again with further money printing or “peoples QE” in the form of infrastructure spending.
Whereas a falling gold silver ratio means we are having a strong bull market for gold. Because this means silver is outperforming gold.
To see how the Gold Silver Ratio is calculated, how it can be used, and where it might head to next see: What is the Gold/Silver Ratio?
On the Gold/Oil Ratio:
The ratio has risen dramatically so your purchasing power in gold has risen dramatically in relation to oil. Historically you can see every time this ratio has risen this high it was a time of massive crisis in 2008, in 1998 with the Asian financial crisis.
So it shows you there is enormous stress in the system. He is in fact surprised there is not more nervousness.
Not an issue of whether they have a soft or hard landing but rather there is a massive credit bubble collapsing. This is the major cause of many problems being seen.
Why this will lead to even more demand for gold.
Loss of trust in the Chinese stock market and how there will be more capital controls and devaluation of the Chinese currency.
Why we should take Chinese gold holding numbers with a grain of salt.
Why the Chinese will not back their currency with gold.
It’s really a long term story and the Chinese want to have the leading currency in 2049!
On Mining Shares:
How there has been an enormous wealth destruction in the sector, but how it is the most undervalued sector in the world.
How there have been lots of positives such as focusing on cashflow.
It is a great contrarian move but there is still the risk that some of the bigger miners may still go bust. They will invest in them as soon a their inflation measures head up.
He wrote this book as he believes we are in a systemic crisis not a cyclical crisis. So there is a major opportunity if you understand the business cycle and Austrian Economics. And there are hardly any books on Austrian investing.
For the book “Austrian School for Investors“ click on the link below:
What is Austrian Investing:
Focusing on our monetary system and its consequences.
Inflation of the money supply vs increases in consumer prices.
“We cannot foresee the future so we have to prepare for every situation so diversification is necessary”.
Austrian school doesn’t care about forecasting GDP or other common economic numbers as it deals with human action and helps you understand “the big picture”.
People understanding the Austrian view understand that gold does have an important role, but that said it doesn’t necessarily mean you should put all your eggs in one basket.
But the portion of gold in your portfolio should be roughly equivalent to your expectation of the probability of extreme scenarios such as hyperinflation or monetary reform.
Another theory is to split your wealth into thirds. one third based upon good times, one based upon average times and one based upon it being terrible times.
In Gold We Trust:Why Gold Insurance is More Important Now Than Ever.
Ronald-Peter Stoeferle, who is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe), 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 USA, 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 on gold drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also wrote reports on crude oil. In 2013, Stoeferle and his partners incorporated Incrementum AG in Liechtenstein, where he manages a fund that is managed based on the view of the Austrian School of Economics.