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Special Report

In Gold We Trust Report 2021: Monetary Climate Change

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 

2021 Report Compact Version

2021 Report Extended Version

Incrementum Press Conference: In Gold We Trust 2021

In Gold We Trust Report 2021 Monetary Climate Change

In Gold We Trust Website

Chart Book 2020

Monetary Climate Change
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