Gold Bulls

In Gold We Trust Chartbook 2018: The Gold Bulls

We are proud that our 12th annual “In Gold we Trust” report was very well received and disseminated to more than 1.7 million people.

Q3 hedge fund letters, conference, scoops etc

Obviously, not all our readers had time to read the entire 220+ pages. We therefore decided to put together a compendium of some of the most compelling charts and important conclusions of the report. Of course, we also had a look at the current technical setup of the gold price.

Some of the key takeaways of our new chartbook are:

  • A turn of the tide in monetary policy: 10 year liquidty party is ending due to QT and rising interest rates.
  • A turn of the tide in the global monetary architecture: De-Dollarization is real. Trade and currency wars might be the consequence
  • A turn of tide in technological process: cryptocurrencies and gold are friends, not foes
  • Gold’s status quo: Heavily skewed risk/reward-profile after capitulation selling. CoT report offers best setup in 17 years. USD 1,180 is a crucial support level.

Chartbook of the “In Gold we Trust” Report 2018

Executive Summary Of The IGWT Chartbook

  1. A Turn of Tide in Monetary Policy
    • 10 year long liquidity glut is ending due to QT and rising interest rates
    • The end of the liquidity party is the first crash test for financial markets in 10 years, as investors have become used to the “monetary surrealism” created by central banks
  2. A Turn of Tide in the Global Monetary Architecture
    • Renunciation of the US-centric monetary order (“De-Dollarization”)
    • Geopolitical tensions are increasing: Trade Wars -> Currency Wars
    • Debt issue unsolved, US with exploding budget deficits
  3. A Turn of Tide in Technological Progress
    • Blockchain technology as a central component for our future economy?
    • Cryptocurrencies and gold are friends, not foes
  4. Gold‘s Status Quo
    • Due to the most recent capitulation selling in gold and mining stocks, we see a heavily skewed risk/reward-profile over the next couple of months
    • CoT report offers the best setup in 17 years
  5. Gold Stocks
    • The HUI/SPX ratio currently stands at the same level like in 2001 and 12/2015 when the last bull markets in gold stocks started
    • Gold & silver mining stocks are probably the most hated asset class these days. We are convinced that the recent capitulation selling offers a very skewed risk/reward- profile of the next couple of months

1. The Turning of the Monetary Tide

“People vastly underestimated the power of QE.

And they are in danger of doing the same with QT.”

Franz Lischka

Gold Bulls

Monetary Policy Tides Turn: From QE to QT

  • The Liquidity Party is officially over: 2018 will be the year when central banks withdraw liquidity from financial markets for the first time since the GFC.
  • Slowly but surely, ECB, BoJ, and BoE are thinking about measures similar to the ones taken by the Fed.

“We’ve never had QE like this before, we’ve never had unwinding like this before… When the unwind happens of size and substance, it could be a little more disruptive than people think. We act like we know exactly how it’s going to happen, and we don’t.’’ – Jamie Dimon

Gold Bulls

  • The Quantitative Tightening (QT) plan for the Fed is to shrink its balance sheet by USD 420bn in 2018 and by USD 600bn in 2019.
  • So far, everything seems to be going according to plan: The balance sheet of the Federal Reserve has so far fallen by 7% or USD 308 bn to its lowest level since March 2014.
  • The Fed’s balance sheet has drastically deteriorated over the past years, not only in quantitative but also in qualitative terms.
  • The quality of its balance sheet will sooner or later haunt the FED, especially in an environment of rising interest rates and inflation.

Gold Bulls

  • Loose monetary policy was a major ingredient of the unsustainable boom that resulted in the GFC. The bust was met with even more radical interventions, such as various forms of quantitative easing programs, zero and negative interest rate policies as well as massive fiscal stimulus.
  • Those drastic measures have clearly hampered the economy’s self- healing powers and have made the system dependent on continual injections of credit.
  • But now, the first dark clouds are gathering on the (interest) Not only the Fed but also the ECB is slowly but surely leaning into the monetary turn (although with a substantial time lag).

See the full PDF below.

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