Insights
In Gold We Trust Report 2021: Monetary Climate Change
Sprott is proud to be a sponsor of Incrementum's 15th edition of its annual In Gold We Trust report.
Key Takeaways
A monetary climate change is emerging.
- The term describes the multi-layered paradigm shift triggered by the pandemic and the policy responses to it. Profound changes in fiscal and monetary policy will have tangible consequences for the monetary system and ultimately for the population.
Increased inflation rates will not pass anytime soon.
- At the center of Western central bank narratives on inflation dynamics is one term: that it is temporary. In our view, the current pickup in inflation rates heralds a fundamental trend reversal and we will see the introduction of "yield curve control" by
central banks.
Real interest rates will remain negative for years to come.
- The market environment favors real assets. In particular, equities from selected sectors, commodities, and precious metals should have a correspondingly high weighting in a portfolio.
Silver: main winner of both monetary and meteorological climate change?
- The fundamental supply and demand situation presents itself as very solid. Many of the currently massively promoted "green” technologies require silver. A longer-term inflationary period – that we expect as a consequence of monetary climate change – could additionally provide a massive boost to the price of silver.
Gold and silver mining stocks remain highly exciting portfolio additions.
- In 2020, the gold mining industry posted its most profitable year ever. While the gold price marked new all-time highs last year, the valuation of gold mining companies does not yet reflect their sharp increase in profitability. We expect gold mining companies to generate record high cash flows in 2021 and beyond.
Cryptocurrencies will not replace physical gold as an investment.
- Due to its unique properties, physical gold will continue to play an elementary role in asset investment in the future. Nevertheless, the importance of cryptocurrencies and digital assets will increase, not least due to the monetary climate change. Portfolios with precious metals and crypto exposure can improve risk/return potential for investors.
Technical analysis
- The Coppock indicator generated a long-term buy signal for gold at the end of 2015. The long-term cup-handle formation, which could now resolve soon, appears particularly interesting. The price target of this formation is USD 2,700.
Gold price 2030: USD 4,800; 2021 new all-time high
- We are sticking to last year's forecast for the USD price of gold at the end of the decade. For our conservative base scenario, we have issued a price target of USD 4,800; in an inflationary scenario, even USD 8,900 is within the realm of possibility. Based on implied expectations in the gold options market, we see a 45% probability of gold reaching a new USD all-time high as early as December 2021.
Ronald-Peter Stoeferle and Mark Valek, investment managers of the asset management company Incrementum AG in Liechtenstein, are the authors of the report. In Gold We Trust report is widely considered the “gold standard” in gold-related research.
Additional Resources
Incrementum Press Conference: In Gold We Trust 2021
Sign-Up Now:
Insights from Sprott
More Insights from Sprott
-
3/21/2023
Has the Next Commodities Supercycle Begun? -
3/20/2023
Masterclass: ESG -
3/10/2023
Uranium‘s Mixed February -
3/6/2023
First Gold Dip Since Central Bank Buying Spree -
3/6/2023
BNN Bloomberg with Sprott CEO Whitney George
Important Disclosure
Past performance is no guarantee of future results. You cannot invest directly in an index. Investments, commentary and statements are that of the author and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this commentary are those of the author and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.
This content may not be reproduced in any form, or referred to in any other publication, without acknowledgment that it was produced by Sprott Asset Management LP and a reference to sprott.com. The opinions, estimates and projections (“information”) contained within this content are solely those of Sprott Asset Management LP (“SAM LP”) and are subject to change without notice. SAM LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, SAM LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. SAM LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. SAM LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. SAM LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, SAM LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
The information contained herein does not constitute an offer or solicitation to anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada or the United States should contact their financial advisor to determine whether securities of the Funds may be lawfully sold in their jurisdiction.
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on their specific circumstances before taking any action.
© 2023 Sprott Inc. All rights reserved.