There will be no soft landing and the U.S. will enter a recession primarily due to the end of fiscal stimulus, predicted Ronald-Peter Stoeferle, managing partner, Incrementum AG.
In mid-November Stoeferle spoke to Kitco at the 2023 Precious Metals Summit Zurich event.
"Obviously the yield curve we've seen steepening lately, which is the ultimate sign that we're moving into recession, then the leading economic indicator, which has a perfect track record, but also credit is now contracting, if you have a look at M2 money supply, also contracting, so our indicators are clear, we're moving into recession," he said.
While the Fed has paused interest rate increases, Stoeferle said "at some point they will hit the panic button" and start lowering rates again, which will be the point when gold picks up momentum.
However, he doesn't think the Fed will go back to the old playbook of quantitative easing, "because then they would have completely lost the reputation that they've rebuilt over the last couple of quarters."
Regarding gold-price catalysts, Stoeferle named central bank buying and a reversal of the trend of Western investors selling gold ETFs.
"This is something that could also be some sort of a trigger for the next stage of this rally, actually Western financial investors have not participated in the rally," he said. "So far, we've seen six consecutive quarters of outflows in gold ETFs, and also there is a big divergence between the West and the East, so the North American and European ETFs were sold, 200 tonnes, while Asian ETFs were buying, so I think this is quite telling.
"Central bank demand being really robust, there's no Western financial demand but I think as soon as we hit new all-time [gold] highs in dollar terms, I think that this FOMO [fear of missing out] will kick in and that ETFs will become one of the triggers going forward," said Stoeferle.
"I think it's really important how much gold is flowing into emerging markets and it's actually not coming back," he added.
Asked about gold equities, Stoeferle differentiates between producers, royalty companies and juniors. He said gold producers are "producing decent cash flows and they're paying out nice dividends," while royalty companies "are doing quite okay, it's a perfect scenario for them actually in a cash-starved environment." Juniors and development companies are having a hard time, and he doesn't think risk appetite will return even if the Fed pivots to lowering interest rates.
Now, Stoeferle said Incrementum likes mid-tier producers in the 100,000 to 300,000-oz annual production range.
"There's good-value companies that really delivered that are sold down mainly for liquidity reasons," he said, while cautioning that now is not yet the time to take on too much risk.
https://www.kitco.com/news/2023-12-04/Gold-will-shoot-even-higher-after-the-Fed-hits-the-panic-button-Ronald-Peter-Stoeferle.html