In Gold We Trust Report 2023 - Showdown
Sprott is proud to be a sponsor of Incrementum's 2023 edition of its annual In Gold We Trust report.
Key Takeaways from Incrementum
The effects of monetary tightening are yet to hit home
The time factor is significantly underestimated in terms of the impact of interest rate hikes. In view of the precarious debt situation in many industrialized countries and the rapid tightening of monetary policy, especially in the US, the authors expect a recession and a monetary policy showdown in the next 12 months.
The monetary policy showdown approaches
Due to the increasing fragility of banks, the real economy and financial markets, a monetary policy showdown will ensue in view of the weakening economy and the fact that core inflation rates remain significantly too high. A departure from restrictive monetary policy would have far-reaching consequences for inflation, central bank confidence, which is already under attack, and the gold price.
Inflation rates falling in the short term, rising again in the medium term
Even though inflation rates in the US and the eurozone have fallen recently, the authors assume that another wave of inflation will follow and that the environment of “Stagflation 2.0” — the title and leitmotif of the In Gold We Trust report 2022 — will accompany us. Arguments such as demographics, the increased focus on fiscal policy, greenflation, de-globalization and global rearmament speak for a structurally, and not merely temporarily, inflationary environment with high volatility of inflation rates and possibly several waves of inflation.
De-Dollarization: Monetary manifestation of the geopolitical showdown
As early as last year’s In Gold We Trust report, it was strongly suggested that the freezing of Russia’s foreign reserves in February 2022 would go down as a historic moment in international monetary history. Record central bank demand for gold in 2022 was one of the responses. Structurally higher central bank gold demand will act as a key driver of the gold bull market.
Shifts in gold demand:
Together, India and China have officially imported between 34,000 and 36,000 tons of gold over the past 20 years. China and India are also becoming increasingly important in terms of consumer demand. The two countries now account for 48% of consumer gold demand.
ESG: The social component of ESG
For the fourth time, the report specifically examines ESG issues in the mining equities sector. This year, the focus is on the social aspect of ESG.
The gold price “flirted” with a new all-time USD high again in the first half of the year, but failed to do so in the short term. While long-term indicators such as the Coppock indicator are still clearly bullish, shorter-term models such as the Midas Touch Gold Model™ and the seasonal patterns currently suggest a temporarily more cautious outlook, which could result in attractive buying opportunities.
Long-term price target (2030) for the gold price of USD 4,800 confirmed
Based on the assumption that a recession will occur, the authors consider new all-time highs of the gold price in U.S. dollars and prices of USD 2,300-2,400 within 12 months to be probable. They continue to adhere to the decade price target of USD 4,800 against the backdrop of the monetary, geopolitical and fiscal situation.
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