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Macro Voices

MacroVoices #378 Ronnie Stoeferle: In Gold We Trust - Showdown

Thu Jun 01 2023

Macro Voices Podcast Summary


  • Macro Voices is a financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors.

Interview with Ronnie Sturfala

  • Ronnie Sturfala, principal author of the InGold We Trust Report and Fund Manager at Incrementum, discusses the 2023 In Gold We Trust Report and the outlook for precious metals.
  • The report covers various topics related to gold, including opportunity costs, equity markets, inflation, debt, interest rates, geopolitical issues, mining stocks, technical analysis, crack-up boom, narratives in the sound money community (gold vs. Bitcoin), and exclusive interviews with Russell Napier and Sultan Posar.
  • The Light Motiv of this year's report is "showdown," which refers to three different showdowns: central banks vs. real economy; geopolitics and de-dollarization; and gold price itself.
  • Emerging markets are becoming increasingly important for the gold space as they have a significant impact on gold demand and infrastructure.
  • Gold has made new all-time highs in almost every currency except US dollars. Despite this fact, general investors seem uninterested in gold while many gold bugs have given up on it.
  • The report also includes chapters about CapEx and a recession indicator built by Incrementum.

Outlook for Precious Metals

  • Something changed dramatically in the precious metals market on November 6th of last year when interest rates peaked.
  • Market participants have realized that the end of the rate hike cycle is coming closer and closer.
  • A recession is definitely the base case according to leading economic indicators such as yield curve, labor market, and ISM.
  • Analyst consensus predicts a slowdown in growth but not a hard landing or severe recession.
  • Despite massive monetary tightening, a hard landing is still clearly a minority view.
  • An incremental recession model was created to analyze which asset classes work best in every stage of a recession.
  • Gold is a decent recession hedge, while equities only work when reflation starts happening.
  • In the earlier stages of a recession, it's best to be overweight gold and underweight mining stocks and commodities.
  • It's too early to build a massive position in the mining space as risk appetite is still pretty low.
  • Large royalty and streaming companies are doing well as they are regarded as the most conservative stocks in the mining space.
  • The market doesn't appear to leverage that producers have, and there isn't much risk appetite for developers or juniors yet.
  • Many market participants are still on the sidelines when it comes to gold, indicating that we're not there yet for big mania in junior mining space.
  • For those who think that a new secular inflation trend is already upon us, it spells a certain showdown coming in monetary policy.
  • The Fed may have to hike interest rates to fight inflation, but also cut rates to save the stock market, which puts them in a difficult position.
  • There are potential consequences for whichever decision they make.
  • Inflation is becoming more important for asset allocation and portfolio management.
  • There are few deflationary drivers left, with M2 growth falling and global supply chains normalizing.
  • Technology and innovation, such as artificial intelligence, are disinflationary forces.
  • Medium to longer-term inflationary dynamics are becoming stronger due to factors such as wars and greenflation.
  • The current environment is a fourth turning with greenflation and significant costs.
  • Energy prices are important for industrial nations to remain competitive, which is another inflationary driver.
  • Demographics show a decline in labor supply and an increase in demand, driving up wages and costs.
  • De-globalization and reshoring are also inflationary drivers.
  • Higher inflation volatility should be expected going forward, with another inflation wave after the current one ends.
  • Hedging against inflation is still cheap and asset managers need to prepare for an inflationary environment instead of assuming a return to the great moderation.
  • Russia and China's gold accumulation may be part of a diversification strategy away from the US dollar and treasuries due to sanctions against Russia. Gold plays a vital role in this strategy.

De-Dollarization and Central Bank Gold Demand

  • Russia continues to buy gold and 17 nations want to join the BRICS.
  • Gold has been the core of the global financial system for millennia.
  • The BRICS, emerging markets, and STO are significant in central bank gold demand and consumer demand.
  • India imported 31,000 tons of gold over the last 20 years, more than the top 27 central bank gold holders in the world.
  • Western focus should be on developments in Shanghai, Mumbai, and Dubai where gold flows are heading to.
  • The de-dollarization topic is complex and political but forecasted developments are happening.
  • Three out of five top oil exporters are big buyers of physical gold at present.
  • It's naive to believe that Raimimbi will be the world's reserve currency soon due to Chinese problems.
  • Remember is being accepted as a trade currency but not yet as a reserve currency due to capital accounts and floating currency issues.
  • There is much infrastructure development and bilateral agreements going on towards de-dollarization.
  • The narrative that "bad guys" will use gold to kill the currency system could impact gold prices.
  • Gold demand has shifted from West to East, with Eastern central banks purchasing gold and diversifying out of the US dollar.
  • China is responsible for 25% of consumer demand for gold, while Germany is almost 6%.
  • Gold demand in Western nations has stagnated except for Germany due to hyperinflation in their monetary DNA.
  • There are significant movements in the gold trading infrastructure with the Shanghai Gold Exchange, India International Boleon Exchange, and Russian gold market infrastructure.
  • Geo-strategic central bank gold buying is happening from nations in the Shanghai Corporation organization, BRICS, and Belt and Road initiative.
  • Indian contrarian gold buyers tend to accumulate when the price falls and sell when it rises.
  • Gold mining stocks have an ESG section in the report due to environmental concerns.
  • The social component of ESG is often overlooked in discussions about gold mining stocks.
  • Gold mining projects can have positive impacts on communities, such as providing infrastructure and access to resources.
  • Co-ownership models, where the community receives a portion of the mining project or revenues, can have positive effects.
  • Critics of mining may not have visited mines or talked to people in the community and may not understand the positive aspects of mining.
  • Companies care about their impact on communities because it can affect their share prices.
  • The fundamentals for gold are strong, but a crowded trade could lead to market volatility.

Market Analysis

  • The market has bounced off the 100-day moving average, but it's uncertain how long this will last.
  • If the market breaks the 100-day moving average, there may not be much support from a technical perspective.
  • A potential recession could cause panic selling and shake out weak hands in the market.
  • Fund managers have reduced their positions in the mining space and put in stop loss orders.
  • Sentiment indicators show a neutral position for gold, but people in the gold industry are pessimistic despite being slightly below all-time highs.
  • The next couple of weeks may be tough seasonally for gold, but a better seasonal setup starts mid-July to beginning of August.
  • US two-year yields falling from significant highs could signal an impulsive bull market phase for gold.

Outlook for Crude Oil

  • Analysts predicted that crude oil price recovery would happen in the second half of the year, with June being a turning point.
  • The prevailing downtrend is still the path of least resistance for crude oil prices, with short-term risks including a retest of previous lows and temporary shoot down below $60.
  • There may be a big buying opportunity eventually, but there is no evidence that it will happen now.
  • OPEC+ could become a catalyst for the market
  • Optimistic that a done deal on the debt ceiling will bring an excitement rally up to 4309, but may be the last hurrah for this bear market rally
  • Spot price is currently at 4180 on SPX with a call wall above at 4300 and put wall below at 4000 which is also heavy support
  • Implied move for June 16th op-ex is 110 points in either direction with upper expected move at 40-90 just below Q level of 4300 and lower expected move at 4070 just above key level of 4000
  • Key resistance above is at 4200 then 4300 and key support below is at 4150, 4100, and 4050
  • Probability of a hike stands at about one in three chance for FOMC meeting in two weeks time, expecting volatility to pick up into that op-ex
  • Short-term bullish but don't expect much more gas beyond tapping the double of 4,300
  • Momentum lost in S&P and evident mostly in NASDAQ alone with S&P equal weight dragging lower than

Market Analysis Continued

  • The AI hype train has left the station and may leave many investors with losses, similar to the crypto boom.
  • While there may be a blow off and deep mean reversion in the market, it's difficult to predict when it will happen.
  • Volatility is currently benign, but there may be a big move in either direction once there is more clarity on the debt-slinging crisis and FOMC.
  • The US dollar index is consolidating near key resistance at 105 and a half, and its bullish upside break will likely come on the back of a risk-off impulse.
  • Gold futures have held critical support at the 100-day moving average and are looking great on the continuous contract futures chart.

Technical Analysis

  • The continuous contract futures chart for gold is looking positive and has navigated back above short-term moving averages.
  • Charting programs have rolled from the June delivery contract to the August delivery contract, resulting in a contango phenomenon where the new contract is trading at a premium of almost $20 over the expiring contract due to interest rates.
  • The August contract chart shows that gold is still holding the line on key support, but another $100 downside is still possible from here.
  • Gold's pullback mirrors a similar pullback in February, and it will be interesting to see if bulls can clear 2000 with momentum or struggle to hold onto gains above this level.
  • Watching how gold traders play out in the upcoming week will give insights into what's next on a short-term basis.
  • The Bloomberg Commodity Index has been in a decisive bear downtrend for an entire year with clear lower highs, lower lows, and perpetual downward channel.
  • The commodity index is showing distinct weakness and may not see a major turn until the fourth quarter of the year.
  • A prolonged bottoming formation along the downside may occur before an ultimate low is put in.
  • Patience is needed at this level, but when a major turn does happen, it will be an extraordinary buying opportunity.


  • Incrementum runs several investment strategies including precious metal strategies and usage funds available for retail investors.
  • Contact information for Incrementum can be found on their website or via Twitter.
  • Last year's performance showed that Incrementum reaches peak performance when it's tough out there.
  • The podcast discusses the performance of Macro Voices in the previous year.
  • The hosts invite listeners to visit their webpage and email them for a chat.
  • Listeners can get Patrick's chart decks every day with a free trial of Big Picture Trading.
  • The episode was made possible by Respect Energy, a leading European trader of renewable energy.
  • The research roundup includes a transcript for the interview, links to the In Gold We Trust report and articles of interest.
  • MacroVoices appreciates feedback and suggestions on how to improve the program.
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