“In Gold We Trust”
About two weeks ago we posted a link in our Gold update that referenced 10 charts that were published in the soon to be released “In Gold we Trust” Report. The report is now available and is written by Ronald Stoeferle, who is the managing partner at Incrementum AG in Liechtenstein, and Mark J. Valek ,who is the founding partner and investment manager.
This is the ninth edition of “In Gold we trust” and the link to the full report is below.
For those who have been concerned about the price decline in Gold this week, the report provides a good overview of some of the factors that favor higher Gold prices in the coming months and years. While deflation in the global economy may be gaining the slight upper hand, it is not yet clear that this will emerge as the primary trend.
Gold is a Store of Value During Deflation and Inflation
One of the common mis-conceptions traders and investors have about Gold is that it is only an inflationary hedge. It is true that Gold can perform extremely well during periods of high inflation. This can especially be true when currencies collapse in value.
Gold can also perform well during periods of deflation. One of the charts presented “in Gold we trust” highlights the deflationary periods that started in 1814, 1864, 1929 and 2008. During these periods Gold performed very well.
In one of the charts provided, Gold was up 100%, 40%, 44% and 5.6% during these deflationary periods. Commodities as a category were down -50%, -65%, -31% and -24% during the same time periods.
During inflationary periods Gold would likely achieve higher gains, but mostly because of the decline in purchasing power of paper money.
As the authors explain, in periods of “financial stress” Gold shows its real value. That’s why some analysts accurately describe Gold as the ultimate crisis hedge. So while deflation is a possible outcome in Europe and the US over the short term it does not necessarily mean that Gold prices will collapse like some are suggesting.
Even if Gold and Silver prices move lower over the next month or two, it is our view that depressed prices will not persist for very long. However, everyone has to do their own research and to come to their own conclusion.
The report provides a lot of great data points for those who are interested in reading it.
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