Seeking Alpha

Ronald Stoeferle: Gold Is Dirt Cheap Right Now

Chris Martenson
Newsletter provider, energy, macro

Fresh from releasing his exhaustive 230-page annual report titled In Gold We Trust, Ronald Stoerferle joins us to summarize his forecast for the yellow metal.

Stoerferle, an author of several books on Austrian economics and head of strategy and portfolio management at Incrementum AG, concludes that gold is extremely cheap right now in dollar terms. And he sees a new bull market beginning for the precious metal - one likely to quickly build momentum as the next (and long overdue) financial market correction arrives.

We're at the beginning of a new stage of a bull market.

We've seen a massive correction with a big drawdown, but we're now seeing the Commitment of Traders report suggesting that there's been a washout. We're seeing that sentiment is really negative. We're seeing that nobody really cares about gold and mining stocks, and especially about silver. Silver is probably the biggest contrarian investment, though silver mining stocks are probably even more contrarian at the moment.

We all know that the herd behavior in the sector is getting more extreme. I think it has got to do with career risk in the financial industry, so nobody really wants to make a contrarian call. But once we go above this $1,360-$1,380 resistance, which is also the neckline of a large inverse head & shoulder formation, I think gold will hit $1,500, $1,600 pretty quickly.

The most important thing is: in comparison to all the monetary printing that we've seen in the last couple of years, gold got significantly cheaper. Gold, in monetary terms, is dirt cheap at the moment. We're basically at the same levels like in 1971 when it comes to the gold backing of the US dollar. So gold is a bargain at this level.

Of course, we need some sort of catalyst. I think one of the main catalysts will probably be recession fears coming up and the greater volatility in equity markets that's going to go hand in hand. And we'll see it sooner or later.

We should not forget that stocks have been trading at or close to the all-time highs, that real estate has been doing really well, that bond markets have been doing well, that cryptocurrencies have been kind of stealing the show, that people regained trust in the financial system, in banks, and even in politicians. Inflation is not a big concern at the moment. We're seeing rising rates and so on. Let's face it: those things are not an extremely positive environment for gold. But still, it's been doing pretty well.

If those headwinds become tailwinds, meaning that there will be some volatility kicking in in equity markets, that the bond markets start cracking, that people start losing trust in the system again -- early indications of which it looks like we may be seeing here in 2018 -- that's going to be the point in time when gold will pick up momentum big time.

And the other big thing is that the whole world is increasingly trying to diversify out of the US dollar. We're coming to a multipolar currency system sooner or later. That's a long process. This year we've seen the introduction of the oil futures in Shanghai -- that's a really big development -- volumes are enormous in Shanghai. Nobody would have expected that. And that's just another nail in the coffin of the US dollar. And, of course, all those countries that are trying to avoid the US dollar in their trade, they are big holders of gold. So I think within the course of the next crisis, I think there's might chance of a revaluation of gold.

Click the play button below to listen to Chris' interview with Ronald Stoeferle (49m:22s).


Chris: Welcome, everyone, to this Peak Prosperity podcast. It is June 6, 2018, and I am your host, Chris Martenson. Our view at Peak Prosperity is that the attempt by the world Central Banks to replace the business cycle with a credit cycle is both foolish and ultimately self-destructive, at least for the majority. Of course, one of the key features that keeps insiders promoting and supporting the credit cycle approach is that the well-connected become fantastically wealthy as part of that process.

However, the credit cycle also promoted boom/bust cycles that have been getting larger and larger the longer they persist. We're now very far along in the third credit boom cycle sine just the year 2000, and the bust is going to be absolutely spectacular. That's our view which means, for us, that investing safely or even preserving the purchasing power of your money is going to be a very tricky proposition; how to invest, where to keep your money.

Well, keep listening because today, we're going to be discussing the always amazing report titled "In Gold We Trust" with one of its lead authors, Ronald Stoerferle. This report is published annually by the Lichtenstein-based investment and asset management company, Incrementum AG, and this year's addition is a real keeper just like they all are. But this one is amazing. Hey, I first met Ronnie in person last year at the Munich metals conference, and I really liked him right away; smart, well-read, and he's desiring to help people both grow and protect their wealth.

Ronnie's a partner of Incrementum AG and is responsible for research and portfolio management. Also, he's the author of several books, one on Austrian economics and a second on the zero-interest rate trap. He's got a lot of experience in investing and trading. Hey, and he's a very well-rounded individual. Hey, welcome, Ronnie.

Ronald Stoeferle: Thanks, Chris. That's a very nice introduction. Thank you very much.

Chris: Oh, you're welcome. You're welcome. Listen, I just loved your report, "In Gold We Trust" this year because I love data, I love things being sourced, it's packed with information. It's very well written. First, talk to us about how long you've been writing this report, it's annual, and what's maybe changed along the way?

Ronald Stoeferle: Well, I'm writing it for twelve years now, and, actually, we reached an all-time high, not in the price of gold but in the length of the report. So this year we wrote 230 pages. It's quite a brick, so you probably have to spend like a weekend to study the report. As you said, there's quite a lot of different sources, many angles where we're analyzing gold, many charts where they're very much data-driven.

And, actually, I started writing about gold when I was a young analyst sitting in an Austrian bank, ASSA [PH] Group in Vienna, and I had, for my private account, I had a mining stock that did really well, and I had no clue about gold and the mining sector itself. I was really lucky. So I went to my boss and said, you know, can I perhaps spend some time on researching gold? And he said, yeah, go ahead. So this was the first report in 2007 called "In Gold We Trust," and yeah, from then on, I have to say, that the first edition was very basis, just analyzing supply/demand.

But then I found out about the so-called Austrian school of economics, and it might sound a bit odd because I am from Austria, but nobody really knows the Austrians, Ludwig von Mises is, of course, Freidrich August Von Hayek, Carl Menger and so on. It's not taught at all on university or in schools. So for me it's been kind of this red pill moment when I read the first quotes by Ludwig von Mises. And then I googled it, and saw the Austrian School of Economics, so I ordered all the books that I could find on Amazon and yeah, then started digging into his topic, and it completely changed my world view.

Of course, 2008 happened, and I saw the crisis coming from a different angle, from this Austrian perspective, analyzing credit cycles. And then, at some point, somebody told me, you know, if you're an Austrian in kind of a gold box sitting in a bank you're like the vegetarian in the big butchery. And I said, yeah, that's kind of right. So I set up my own company together with some partners from Austria and from Switzerland, and we set up the company in Lichtenstein. It's no coincidence because the Liechtenstein family, they actually run the country like it was a business. They know the Austrian School of Economics. It a fabulous, small country in the center of Europe.

And yeah, so it's really my passion and one of my biggest interests, of course, starting monetary history, financial history, combining that with analysis on the current market situation, and I really enjoy writing. And I kind of hoped that I can also help people understanding the monetary system and, you know, last year we had more than 1.7 million downloads for the report. It was quoted in more than sixty countries all over the globe. So I really hope that I can make some sort of impact there, and that's really why I enjoy this work so much.

Chris: Well, really, it's a very educational piece, and it is just packed with just charts and sources, as I mentioned, and you've summarized this into just three key pivotal takeaways. Let's start with that first there. You say that the tide is turning in monetary policy. Discuss that with us, please.

Ronald Stoeferle: Yeah. Taking a step back, since the year 2008, the biggest Central Banks all over the globe, they created 14 trillion, which is 14 thousand billion, out of thin air, basically. And, of course, that had an impact on the markets. This created this everything bubble. And I think that people, they vastly underestimated the consequences of quantitative easing, and my conclusion in the report is that they also vastly underestimated the consequences of quantitative tightening because the Federal Reserve, they're on a clear path, they've communicated that they will just reduce Central Banks liquidity this year by $420 billion, next year $600 billion. They increase it every quarter, so starting in October it will be $50 billion per month, and that's quite a lot of money, actually.

And it's not only the Federal Reserve that will become more hawkish, it's also, to some extent, the ECB, the Bank of Japan, the Bank of Canada, the Bank of England and so on, so we're seeing that this ten-year long liquidity party is coming to an end, and this will have consequences. We have seen a credit-induced boom, and sooner or later, this monetary U-turn will lead to a recession. And, Chris, nobody is actually seeing a recession on the horizon at the moment.

We always come up with this chart - I think 78 economists, most highly regarded economists probably with an IQ of 270 and eight PhDs from Ivy League Schools, they are always questioned by Bloomberg on their forecasts and what do you think? Out of those 78 analysts how many do see a recession in the next three years?

Chris: Zero?

Ronald Stoeferle: Zero. Exactly. Exactly. How many saw a recession coming in 2007?

Chris: Zero?

Ronald Stoeferle: Zero. Exactly. So what I want to say is I don't want to say that 2019 or 2020 there will 100 percent be a recession, but the market is completely underestimating the recessionary fears that we are already seeing. And if the positioning in the market is that extreme, that's also going to mean that if there's only a small shift and recessionary fears come up, this is going to have huge consequences for _____ [00:09:39] locations.

So if a recession is coming, and I think there's some clear signs - we're see rising rates, we see QT. we're seeing a _____ [00:09:49] boom, we're seeing record high consumer confidence and junk market is booming, we're seeing inflation, price inflation is rising. We're already seeing rising default rates, rising write-offs of credit card debt and so on, so perhaps I'm just a bit too bearish, but from my point of view, there's clear signs that a recession is on the horizon. And that's probably going to be one of the biggest drivers for the price of gold going forward.

Chris: Now, I want to get to how that drives the price of gold, but I would like to - lots to chew on there - fantastic summary. And I would like to interject that there are a couple of economist types I've run into who are looking at this; one, I'm sure you're familiar with Stein Jacobson _____ [00:10:32]. He sees a recession coming because of the credit impulse that now we have this whole market which is just credit based, and you either have more credit or less credit. Less credit, even if it's - you said we had 10 percent credit growth this year, just having 10 percent next year is actually recessionary given how the system works. Steve Keen had done a great job sort of modeling that and helping me understand that. And, as well, interestingly, got to interview the chief economist for Fannie Mae (OTCQB:FNMA) just a few months ago. He also sees a recession in 2019 but for different reasons, not for sure, but like 60 percent chance kind of a thing.

So there are a few out there who sort of see this. Of course, you won't see those people on TV too much because that's not how that works. So let's talk about how - because I love you have this Austrian background. We can talk about this in terms of monetary and credit cycle growth, and, of course, the key economists of today almost never talk about the role of debt in an economy. It's a wonderful thing. You should have more of it.

When you say the price of gold may do well in a recession, let's talk about what you actually mean by recession given that what you're talking about, I think, not to put words in your mouth, correct me if I'm wrong, is a recession that's coming as a result of the end of expansion of the credit cycle rather than as a business cycle recession. So talk about that and why that sort of recession is kind of a beast potentially.

Ronald Stoeferle: Yeah. I totally agree with your view, and I think - I mean, first of all, I want to say a recession, the definition, is not something negative. You actually need recessions because it makes the system, it makes market participants, it makes companies more robust. So I think artificially avoiding a recession and just putting liquidity into the market just to avoid this bad R word, that actually makes the system much more fragile and insecure. So the Austrian view is recessions are just something normal, they are something positive because it makes the whole system healthier.

Now, of course, we are seeing massively falling marginal utility of new debt. As you referred to, we always need a higher growth rate. And if we are talked about credit, for example, we are seeing that, at the moment, our monetary aggregates, like the broad monetary aggregates in the US, they're growing at a very, very low rate at the moment. So I think it's like two or three percent at the moment. And Dr. Lacy Hunt has done a tremendous job analyzing that kind of credit growth slowdowns, and she also came to the conclusion that a recession might hit the market very soon.

So it's that in combination with the flattening yield curve that we are seeing, that the yield curve will probably invert in a couple of months. And, of course, all the experts are coming out and saying, you know, this time it's really different. This time an inversion of the yield curve will have no consequence and it's not a sign that the recession on the horizon. But, you know, at the end it's not different this time.

But what we also did in the report was we just had a look at the numbers published by the CBO, the Congressional Budget Office and, I mean, I would say, if I'm polite, I would say it's a bit naïve to say that in the next ten years there will actually be no recession in the US. But still, under this assumption, very positive, very rosy economic outlook for the US. The CBO is seeing one billion annual deficit for the next ten years, so the cumulative deficit for 2018 to 2028 will be $13 billion all together, again, taking into account that there's no recession hitting the markets. And I think you don't have to have a PhD in economics or mathematics to show that there's not too much room for rising rates, especially for rising real rates.

And, of course, this problem that we're seeing is not only US-centric, we're seeing the same over here in Europe. Let's not forget the Italians, but also the Spanish and the French. They basically voted against this German-led austerity policy. So there we massive changes in those three very, very important countries in the Eurozone. So I think that's going to have massive consequences for their policies.

And, you know, all those little signs just lead me to the conclusion that you should have at least some exposure to gold. It shouldn't be two percent, it should probably be significantly more. But I think just from a risk/reward perspective, it's just a very, very attractive investment at the moment.

Chris: Absolutely, and I think one is a linguistic correction - you said $13 billion, it's $13 trillion. So with that, I want to talk about the impact on the price of gold because, in my research, and please correct me if I've got this wrong, but I don't see a super tight correlation with inflation and the price of gold. But I do see a pretty good correlation with the federal government in the United States running large deficits. It's admitting tons and tons of money into the system, and that often has a pretty good correlation as well as negative real rates of return.

And as inflation ticks up, I think, the way I'm looking at this, inflation is going to outpace the increase in interest rates. And I'm talking about the real rate of inflation. For instance, my Bureau of Labor Statistics tells me that inflation on an annual rate for medical care in my country is running 2.2 percent, and my state is being petitioned by my insurance company to have a 26 percent increase in my insurance premiums for my healthcare insurance. Something that confuses Europeans a lot because just a crazy system over here, but that's our system. So I see inflation running a lot hotter than even the interest rates going up.

Those are both gold positive, but if do have this recession, what are some reasons that you would think that gold might do well rather than sort of get clubbed in a deflationary outcome? Why would gold do well in this next recession?

Ronald Stoeferle: Well, actually, we crunched the numbers, and we analyzed the last couple of recessions, and the result is pretty clear. On average, the last couple of recessions, gold rose by 20 percent. So I think gold kind of discounts that there will be stimulus, that there will be monetary stimulus by the Central Banks, that there will be fiscal stimulus by politicians and so on. And, of course, when the recession hits equity markets tend to go weaker. We might see problems in real estate markets and so on. So everybody will seek for a safe haven in debt. Of course, we don't know if it's going to be the same again. Perhaps loads of money will go into bitcoin. I don't know, I think bitcoin and cryptocurrencies, they haven't experienced full business cycle yet, so nobody really knows how they're going to develop in a big crisis or in a crash scenario.

But I think there's going to be quite a bit on gold, of course. Now, as you rightly say, recessions tend to be deflationary. That's completely correct, so, for us, I think just to step back, inflation in our investments is a very, very important topic. So, if we are running one front that is some sort of an inflation diversifier and we are calculating our increment to inflation signal, so we actually don't care about all those CPI, PCE government statistics. It's nonsense because it's very subjective, it's always lagging, so we don't care about that. And, of course, we know that since the 1980s, as John Williams of Shadowstats said, I think they have changed the way they are calculating those baskets, they've changed it like a couple of dozen times.

So we all agree that the sins [PH] of price inflation is that it's much higher than those 1.5 or 2.0 percent that Central Bankers always hope for. But I think what's really important is to step back and explain, also from a linguistic point of view, what the Austrian School of Economics sees in inflation. So for us, inflation, from the Latin inflatio, to inflate something, means the expansion of the money supply while price inflation, which is continuously rising prices, it's only a consequence. So based on Murray Rothbard, he said that the first step is always monetary inflation, then we're seeing asset price inflation, and only the third stage is rising price inflation.

Now. all over the globe, we're seeing, at the moment, that inflationary pressure is rising actually. We're seeing that oil prices are rising time. However, nobody is bullish on oil at the moment for some reason. We've been one of the few bulls on oil in the last couple of years. We're seeing that wage inflation is becoming a problem. We're seeing that's a great study by Eric Cinnamond. He analyzed the conference calls with thousands of companies from the US, and he actually published a great piece. It's called, "Inflation Subsiding or Accelerating?" He's listed dozens of examples of rising costs and pricing, and he got it from those quarterly earning review calls.

So it seems that many CEOs in the US are very, very concerned about wage inflation, about massively rising input prices. And the interesting thing is Central Bankers are quite open. They always say they want more inflation. Of course, they say okay, we can accept some overshooting for the short term, like three or four percent, but then we will put the genie into the bottle again. It just doesn't work that way. So I think that monetary policy or managing an economy, if you study history, it just doesn't work that way. It's just too complex. You cannot put all market participants, human beings, into a big financial model. It just doesn't work that way.

And that makes me think that inflation might overshoot big time. And what we found out, and I think we wrote more than 1,500 pages of research about gold, we found out that actually the most important driver for gold is the direction of real rates. So given the fact that is all over the globe a big problem, I think I just cannot imagine that real rates will rise significantly because that would obviously be very negative for gold.

Chris: So real rates being a big driver for gold, I agree, I've seen that as well. Let me get to something though. We talked about the everything bubble. I've written about the everything bubble. Well, it's not really everything. It is stocks, bonds, and real estate. And, of course, it's massive bubbles there, a lot of pain coming. You know, speaking about Europe just very quickly, the junk debt being trading at one point at less than two percent just six months ago. Just massive loses coming to whoever's on the other side of that trade, obviously.

But I notice, Ronnie, maybe you can help me understand this, QE 3 comes along, it's the largest monetary printing experiment ever in the world's history. It's $85 billion a month. It comes out in 2011, and within just a few weeks after that gold and other commodities began a long, sustained fall which was very counterintuitive, to say the least. First, do you have any explanation for that, and second, would you agree with the idea that the everything bubble needs an asterisk because commodities have not been part of that bubble yet?

Ronald Stoeferle: Of course. Of course. Commodities and especially gold are probably the anti-bubble. When it comes to QE 3 that's a very good point that you're making. And it's hard to find like one reason why gold didn't really react to QE 3, but I think we should not forget that gold rose from $200 up to $1,900 within a couple of years. So it has made a huge move, and, of course, there was room for some consolidating now. Back then, nobody would have expected that it would be that dramatic. But still, I think many people always blame the bad manipulators and so on. Of course, there's intervention happening in the gold market, but there's also intervention happening in every market, like in the oil market. of course.

I mean, what the Central Banks are doing manipulation interest rates. That's definitely the biggest manipulation that nobody is really discussing but some nerdy Austrian economists. So I think if we have a look at the longer-term development of gold, gold is still up. It was up 14 percent last year in dollar terms. It is up in most of the major currencies this year. It's hitting new all-time highs in many emerging market currencies. Just have a look at gold price in Turkish lira, for example. So for them, gold is a perfect currency hedge for the Turks.

So I think this kind of divergence that we're seeing that most market participants thinking that gold is completely dead and the market actually telling us that we might be in the early stages of a new bull market, that makes me pretty confident because based on a Commitments of Trader's report, based on sentiment and so on, I think gold is actually quite a contrarian investment at the moment.

Chris: Well, gold prices really haven't been going anywhere for years here, and in recent months it feels like it's practically dead, just bumping around say, between $1,300, $1,360, somewhere in that zone. First, how do you explain that's it's really been going nowhere for years, and second, and I get this question, people ask well, why can't it just keep going nowhere for a lot longer? And I think that whether you believe it's manipulation or that the bullion banks just have a strangle-hold on the market, whatever you're thinking, it certainly hasn't been very exciting in terms of movement, asset class, recently all that much. How do you explain that, and what would make you think that the gold could become untethered from whatever forces are keeping it at bay?

Ronald Stoeferle: Well, I agree. It's been super boring the last couple of years. It's frustrating. I quoted a journalist from Germany. He said, gold is dancing, cha, cha, cha, one step forward, one step to the side, and one step back. It is kind of frustrating because there have been those couple of attempts to rise above this mess. If resistance at $1,360. $1,380. We didn't succeed. But then I have to quote another great colleague, Adrian Day, who said people are expecting too much from gold.

We should not forget that stocks are trading at or close to the all-time highs, that real estate is doing really well, that bond markets are still doing well, that cryptocurrencies are kind of stealing the show, that people kind of regained trust in the financial system, in banks and even in politicians. Inflation is not a big concern at the moment. We're seeing rising rates and so on. So, you know, let's face it, based on those things we should say that's actually not an extremely positive environment for gold. But still, it's doing pretty well.

And I think if those headwinds become tailwinds, meaning that, okay, there will be some volatility kicking in in equity markets, that the bond markets are perhaps kind of cracking, that people lose trust in the system again, I think that's really going to be the point in time when gold will pick up momentum, When all those wealth managers, private bankers, asset allocators all over the globe that used to say, you know, you should have at least five to ten percent gold in your portfolio, now they're saying gold, ridiculous. You shouldn't own it. You should own all those tech stocks in the US. But if that changes, and that's not going to happen from one day to another, that's a process, but once that changes, gold will pick up momentum big time.

Chris: Now, let's talk very quickly about one the most frustrating things that I know about in the gold market which is trying to actually determine supply and demand, stocks and flows. I can't get good data on the stocks. I'm wondering as you went through really researching the gold market, this is a question, Ronnie, where I'm trying to get to really understanding about what appears to me to be a pretty substantial movement, if not rush, of gold from the West to the East, from New York, from London, through Switzerland, ending up in China and India and places like that, and Russia increasingly.

First, how much importance do you ascribe to the flows of gold from West to East, and second, how much can you tell us about the stocks of gold. You know, that gold has to come from somewhere. Where is it coming from?

Ronald Stoeferle: Well, that's a very good point. I think that this move from the West to the East, as some historian once said, gold is always flowing to countries that prosper, that grow, that have got attractive demographics and so on, so it's pretty obvious that it's flowing from the West to the East. And it's no coincidence that by far the most important drivers in the gold market for the Central Banks are those emerging market Central Banks.

China, of course, they own much more gold than they officially publish. We're seeing that the Indian's are buying gold like crazy. We're seeing Russia, Russia has actually by far the highest gold coverage of their currency, the Russian ruble. It's Kazakhstan, it's Turkey, all those countries, they kind of want to hedge their dollar risks. They're building up reserves. Of course, they've got less gold reserves than the Western countries, but his is - that's really a long-term trend that we're seeing.

When it comes to stock to flow, I think that's one of the most important things that differentiates our analysis from other research pieces, and we actually don't care too much about just the annual or quarterly supply and demand of gold. So, from my point of view, it's pretty irrelevant if gold production is up 1.5 or down 1.5 percent next year because the stock of gold is so enormous compared to the flow. So there's roughly 190,000 tons of gold available that has been mined throughout history. Actually, nobody really knows if that number is accurate or it it's going to be even more.

But let's say, okay, it's 190,000 tons of gold. So in comparison to that, the annual flow, the annual production is extremely small with 3,300 tons at the moment. So that's, I think, a big difference that gold has compared to commodities that are consumed like oil or agricultural commodities and so on. So that's a huge difference and this stock to flow ratio is something that we analyzed really at length in the last couple of reports. It's really an important concept to understand. Where actually those flows come from, of course, it's from Western markets. I know the numbers from the Swiss refineries, and there's lots of gold coming over London and then over Switzerland, but it shifts mainly to China. How long can it continue? I don't know. Perhaps at some point there's not going to be enough gold available in the West anymore.

I think that the big thing, and this is also the concept of the de ____ [00:35:22] that we featured in the report, the big thing is that the whole world, actually, is trying to diversify out of the US dollar. So we are coming to a multipolar currency system sooner or later. That's a long process, and I think this year we have seen with the introduction of the oil futures in Shanghai, I think that's been really a big topic. Volumes are enormous in Shanghai. Nobody would have expected that, and that's just another nail in the coffin of the US dollar. And, of course, all those countries that are trying to avoid the US dollar in their trade, they are big holders of gold. So I think within the next curse of the crisis, I think there might be some revaluation of gold. This is a concept that we are also discussing at length in the report.

Chris: Yes, I hold gold mainly as a monetary asset, and I'm using it against monetary shenanigans, and I think, as you said, it's a surreal monetary landscape out there right now. It just totally is. Ten years ago, Ronnie, nobody could have convinced me that we'd be where we are today with Central Banks intervening constantly and printing like crazy with very little discussion with what the risks are if they fail which seems binary to me. They either fail spectacularly or they succeed with not a lot of middle ground. Feels like we should be talking about that more which is, of course, why you produce the report that you do, and I hold the podcast I do because people need to know about this.

And thank for bringing up your second key takeaway about that turning of the tide in the global monetary architecture which is really a fancy way of saying, if I could be not very political, a lot of countries are fed up with the United States sort of dictating their economic might and wills, imposing sanctions willy-nilly, or cutting banks or other individual at the individual level even out of the financial system.

So people, countries are looking for another way, and that kind of brings us to your third takeaway about the turning of the tide in technological progress. And you note that, in your view, cryptocurrencies, they're here to stay. But you summarize this as well and tie it to gold by saying that you think that cryptocurrencies and gold are friends, not enemies as they are sometimes described. Let's talk about that.

Ronald Stoeferle: Well, I think that, you know, I just like competition. I think competition makes market participants more resilient, stronger, and therefore I think that competition in the currency market is also something positive. Like Friedrich August von Hayek already wrote a couple decades ago. I think the fact that all those cryptocurrencies are coming up, I think that's a brilliant development. We all know that 90 percent or even more of them are rubbish and will not be around in a couple of years, but I'm also pretty positive that some will survive and will probably really change the landscape.

Now, I think from a philosophical point of few, I love the fact that people are discussing money again. That there's young people hanging around in social media but also meeting up in person and discuss is bitcoin money; is bitcoin better money than gold or the euro or dollar or whatever? That they start learning about monetary history. I think that's a beautiful thing that we're seeing at the moment. So from that perspective I think it's a great development. However, I think that, you know, gold is always, or many people in the gold industry do see the cryptos as an enemy of gold.

From my point of view, they can work together pretty well, and there's quite a lot of fantastic projects coming up at the moment that try to combine the oldest money, the oldest currency in history, physical gold, with new technology. And I think for the younger generation, the millennials, I'm not sure if they will actually go to a bank like over here in Austria and buy a physical coin of gold. Perhaps some of them won't even know what a bank actually is or does. They won't go to a coin dealership and buy physical gold or silver, but I think for them it's much more obvious that they would be interested in kind of digital gold that is linked to physical gold stored in a vault in I don't know, in Singapore, in Dubai, or in Switzerland. So I think, you know, that's this kind of challenge that we're seeing is something positive. I know that there's plenty of great minds, entrepreneurs working 24/7 on better solutions, so that makes me pretty confident going forward.

And we should not forget that if there's actually high physical demand by those platforms, it could also have an impact on the futures market. We all know at the moment there's like $240 billion US dollar traded in paper gold. But if there is, out of this crypto revolution coming, more physical demand, that might change the market. So perhaps I'm much more positive and much more optimistic about this angle of the gold market, but I just see that there is something developing. Of course, there will be many, many failures, but I think at the end it will be positive for the gold market.

Chris: Well, I love, Ronnie, how you put all of that, especially the idea that it at least it gets people talking about money and money issues which is important. And I love that people that I've talked with, younger people or older people, when they finally start to look at all these coins, many of which will be rubbish, that they can detect where the rubbish is because they want to understand, well, wait a minute, how many can be created and is there a limit on that? Oh gosh, that one's not good because they're created willy-nilly. And wait, who's doing the issuing and what are their motivations which are questions that you're never allowed to ask in public about the Federal Reserve like who are they and what's their motivation and how many of these things can they make? Bad answers come up to all of those if you dare to investigate.

But the piece that I really love in there is this idea that it doesn't have to be either/or. Either you like gold or you like cryptocurrencies. It's an and. And what I like is this idea that we should have an ecosystem of money systems out there, and the ones that are better will perform better, and money systems do different things and incentivize different things. And that's what we really need in this complex world that we're in. You know, this one size fits all fiat currency that's made by a small committee of unelected bureaucrats is obviously an old idea, one that I sincerely hope this next recession, which could be very barn burner, really dramatic recession/crisis, I really hope that one exposes us all more collectively to the idea that it's a really bad idea to turn over something as important as monetary policy to a small group of PhDs who hold a very, very, narrow, dogmatic view of how the world works.

And instead, we should have the free market of ideas and currencies out there competing, as they should. That's what nature teaches us. Everything in competition becomes more resilient over time. So I like that way of looking at it. And so I would really advice anybody who wants to begin to explore those ideas and, as well, looking at gold in great depth through a lens of understanding from monetary actions and policy and history, you got to get this report. It's, "In Gold We Trust" and it's just fantastic. Ronnie, where can people find it? How they can download it?

Ronald Stoeferle: Well, it's actually available for free on our webpage or There's a compact version which is like if you don't want to spend so much time in studying gold and everything around. But there's also the extended version, its also for free, and it can all be found on our webpage.

Chris: Oh, that's fantastic. And so the summary of all this, after 230 pages, where do you think we are? Gold is - are we at the beginning of a bull market here or something else?

Ronald Stoeferle: Yeah, that's what we wrote last year actually that we're at the beginning of a new stage of a bull market. We have seen a massive correction with a big drawdown, but we are seeing the Commitment of Trader's report is suggesting that there has been a washout. We're seeing that sentiment is really negative. We're seeing that nobody really cares about gold and especially mining stocks and especially about silver. Silver is probably the biggest contrarian investment or silver mining stocks are probably even more contrarian at the moment. So that makes me confident of the sector.

But we all know that the ____ [00:45:40] behavior in the sector is getting more extreme. I think it's also has got to do with career risk in the financial market, industry, so nobody really wants to make a contrarian call. But I know that once we go above this $1,360, $1,380 resistance, which is also the next line of a large inverse shoulder, head, shoulder formation, I think gold will hit $1,500, $1,600 pretty quickly. The most important thing is in comparison to all the monetary printing that we've seen in the last couple of years, actually, gold got significantly cheaper. Gold, in monetary terms, is dirt cheap at the moment. We're basically at the same levels like in 1971 when it comes to the gold backing of the US dollar. So I think it might sound a bit strange, but gold is a bargain at this level.

And, of course, we need some sort of catalyst. I think one of the main catalysts will probably be recession fears coming up and more volatility in equity markets that's going to go hand in hand, and we'll see it sooner or later.

Chris: And I agree as well with that earlier point that you made that oil is really - it's an asset that I think is badly undervalued at this point simply because it's below its marginal cost of production for all the new fields that need to be out there. So commodities below their marginal cost of production which, by the way, includes silver where it's direct silver mines, none of them are reporting being able to pull it out of the ground for an all-in cost of $16.40 or wherever it is at this exact moment.

So I love commodities below their cost of production, and so for that reason I like silver. And oil and gold are very highly correlated, and, of course, you look out just two, three years for oil, you see a big structural shortfall that exists. Unless there's a giant rip-roaring recession that kills demand, there's going to be a supply shortfall then. If not then, just a little later than then. So I love all of these things. And, of course, I like being a contrarian, I guess.

So with that, hey, Ronnie, thank you so much for your time today and this fascinating podcast. And how can people follow you and your work more closely?

Ronald Stoeferle: Well, I'm on Twitter, Ron Stoeferle S-T-O-E-F-E-R-L-E. That's my last name. I'm on Twitter. Of course, you can find all information about our company, what we're doing, where we're coming from, where we're going to on, L-I which stands for Lichtenstein where we're based. And there's also you can subscribe to our research for the several analysis and research reports that we're producing. Yeah, just google me, and you will find plenty of information probably.

Chris: Fantastic. Thanks again for your time and really, mostly thank you so much for putting out such a huge amount of work, making it free and really doing it in the spirit of educating people so that they can know what's happening and maybe protect their wealth. Very, very noble causes. So thank you for all of that and especially for spending some time with us today.

Ronald Stoeferle: Thank you very much, Chris. I also read your book a couple of years ago and it was definitely an eye-opener for me, so I have to thank you as well. Thank you very much.

Chris: You're most welcome.