7th "In GOLD we TRUST" report - Highlights
Even though the consensus is convinced that the gold bull market has ended, we remain firmly of the opinion that the fundamental argument in favor of gold remains intact.
There exists no back-test for the current financial era. Never before have such enormous monetary policy experiments taken place on a global basis. If there ever was a need for monetary insurance, it is today.
In the course of the recent gold crash, the market has once again demonstrated its tendency to maximize pain. Massive technical damage has been inflicted. We are convinced that repairing the technical picture will take some time. Accordingly $1,480 is our 12-month target.
We think that the correction that began in September 2011 exhibits strong similarities to the mid cycle correction of 1974 to 1976. That phase was similar to the current one, especially with respect to the marked disinflation backdrop, the presence of rising real interest rates and extreme pessimism regarding gold-related investments.
This gold report is the first in which we offer a quantitative model of the gold price. The model justifies a considerable risk premium to the current price, although only small probabilities of occurrence of extreme scenarios have been factored in. Based on our conservative assumptions, we arrive at a long-term price target of $2,230.
Due to the clearly positive CoT data as well as extremely oversold conditions, we assume that a bottoming process will soon begin. Regarding the sentiment situation, we see anything but euphoria in gold. Skepticism, fear and panic never signal the end of a long term bull market. We therefore judge that our long-term price target of $2,300, first stated several years ago already, continues to be realistic.
Further topics of the report:
· Assessment of the current correction and the most recent events
· Stock-to-Flow Ratio as the most important reason for gold’s monetary importance
· The ongoing Remonetization of gold
· Reasons for “aurophobia”
· The expensive consequences of the cheap money policies
· Monetary Tectonics: Inflation versus Deflation
· Financial repression – the putative solution to the debt crisis
· Quantitative Valuation Model: Scenario Analysis
· Relative Value Analysis through Ratios· Gold stocks close to a trend change?