1

June 1st, 2017 | Compact Version

Extended Version (170 pages) available at www.ingoldwetrust.report

Ronald-Peter Stoeferle
Mark J. Valek
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Introduction
We live in an age of advanced monetary surrealism. In Q1 2017 alone, the
largest central banks created the equivalent of almost USD 1,000 bn. worth of
central bank money ex nihilo. Naturally the fresh currency was not used to fund
philanthropic projects but to purchase financial securities 1. Although this ongoing
liquidity supernova has temporarily created an uneasy calm in financial markets,
we are strongly convinced that the real costs of this monetary madness will reveal
themselves down the line.

Base Money inflation and the price of Gold in USD

20000 2000

18000 1800
Central Bank Balance Sheets (USD bn.)

16000
1600

14000
1400

Gold (USD)
12000
1200
10000
1000
8000
800
6000

600
4000

2000 400

0 200
2007 2009 2011 2013 2015
PBOC SNB BOJ ECB FED Gold

Source: Bloomberg, Incrementum AG

whatever it takes! We believe that the monetary tsunami created in the past years, consisting of a
Mario Draghi flood of central bank money and new debt, has created a dangerous illusion: the
illusion of a carefree present at the expense of a fragile future. The frivolity
displayed by many investors is for example reflected by record-low volatility in
equities, which have acquired the nimbus of being without alternative, and is also
highlighted by the minimal spreads on corporate and government bonds. Almost a
decade of zero and negative interest rates has atomised any form of risk aversion.

While the quantitative easing programmes are still going at full throttle
in many places without the media paying much attention, the situation
in the USA looks decidedly different: seven years after the Fed funds rate had
been set to zero, the first interest rate hike by the Federal Reserve in December
2015 marked the end of the longest period of immobility in terms of interest rate
policy in history. To many market participants, this overdue step towards
normalising the monetary policy is the confirmation of the much-desired
comeback of the US economy.

1 With that amount of currency, one could purchase 20 Big Macs for every person in the world. Notably in the -
according to the Big Mac Index - most expensive jurisdiction, Switzerland. Alternatively, one could theoretically buy
one 1/10 oz. Gold coin for every person.
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However, the interest rate reversal that had been announced for years
got off to a sluggish start. Market participants became increasingly nervous in
2016 when it started turning out that central banks would not be remotely able to
stick to the speed of four interest rate hikes as announced. After the FOMC
meeting in March 2016, the first question that CNBC journalist Steve Liesman
asked Janet Yellen was:

"Does the Fed have a credibility problem []?" 2

We believe that the absence of the often-quoted sustainable economic recovery is

one factor to blame for the passivity of the Fed. The depreciation of the Chinese
currency and the still falling yields at the long end of the yield curve in 2016 are
two others, as a result of which the Fed had to procrastinate until December 2016.

Mind the Donald: 10Y Yields, Fed Fund Rate (left scale) & Gold (right
scale)

3% 1400

1300

2%
1200

1100
1%

1000

0% 900
12/2014 03/2015 06/2015 09/2015 12/2015 03/2016 06/2016 09/2016 12/2016 03/2017 06/2017

10Y Treasury Yield Fed Fund Rate upper Limit Gold USD

Source: Federal Reserve St. Louis, Incrementum AG

"The highly abnormal is The gold price celebrated a remarkable comeback during this hesitant
becoming uncomfortably phase of the Fed. Last year we confidently opened the In Gold We Trust report
normal." with the line Gold is back!. We had anticipated the passivity of the Fed as well as
Claudio Borio, BIS the return of the bull market. The gold price seemed to have experienced a
sustainable trend reversal in USD, and we felt our bullish stance had just been
confirmed.

But our gold(en) optimism was stopped in its tracks again in autumn 2016. The
gold price declined significantly, in particular in the last quarter of 2016, even
though the maximum drawdown has never exceeded 20%. We can therefore still
call the status quo a correction within the confines of a new bull market, but we
want to openly admit that we had not foreseen the dent in the gold price
performance. Unfortunately, our target price of USD 2,300 for June 2018
may therefore prove overly optimistic.

2 https://youtu.be/aodavML_cB8?t=15m

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But what was the trigger of the sudden reverse thrust of the gold price?

Source: https://de.wikipedia.org/wiki/Donald_Trump 3

"There are two ways to be fooled. Ironically, it was Donald J. Trump. The election of the presidential candidate
One is to believe what isnt true; originally unloved by Wall Street fuelled hopes of a renaissance of America on the
the other is to refuse to believe basis of a nationalistic growth policy. President Trump brought about a change in
what is true." sentiment, especially among a class of society that had lost its trust in the
Sren Kierkegaard economic system and political institutions. Stocks received another boost, and the
increase in the gold price was (temporarily) halted.

The Fed seems to be keen to use the new euphoria on the markets in order to push
the normalisation of monetary policy. Even if the journalistic mainstream is
"Its the economy, stupid."
Bill Clinton abundantly convinced of the sustainability of the US interest rate reversal, a
contradiction is embedded in the narrative of the economic upswing triggered by
Trump: if the economic development, as claimed by the Fed in the past years, was
"Its the economic, stupid."
Richard Lugner* actually rosy even prior to Trumps victory, the candidate promising in his central
(*Austrian equivalent of Donald message to make America great AGAIN would presumably not have won. The
Trump) narrative of a recovering US economy is the basis of the bull market in
equities.

" Stocks, bonds and real estate The valuation level of the US equity market is nowadays ambitious, to put it mildly
have all become as overvalued as - both in absolute numbers and in terms of the economic output. This prompts
we have ever seen any one of the conclusion that the U.S. is caught up for the third time within two
them individually in this country. decades in an illusionary bubble economy created by money supply
The end result of all of this inflation and equipped with an expiry date. In comparison with the earlier
money printing and interest rate two bubbles, however, the excess is not limited to certain sectors (technology in
manipulation is the worst 2000, credit in 2008), but it is omnipresent and includes various asset classes,
economic expansion since the especially also bonds and (again) property. In view of the current situation,
Great Depression and the the renowned analyst Jesse Felder rightly talks about an Everything
greatest wealth inequality since Bubble. 4 From our point of view, the concept of the classic investment portfolio,
that period." which calls for shares to satisfy the risk appetite and bonds as safety net, must be
Jesse Felder critically questioned.

3 This is Donald Trumps official presidential photo. Seriously!
4 cf. Welcome to the everything bubble, Jesse Felder, The Felder Report

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The "Everything Bubble": Financial Assets relative to disposable

personal income

Everything Bubble ?
550%

Housing Bubble

Financial Assets of Households / Disposable

500%
DotCom Bubble

Personal Income
450%

400%

350%

300%
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

Source: Incrementum AG, Jesse Felder, Federal Reserve St. Louis

While markets are already celebrating the future successes of Trumponomics, the
structural weakness of the US real economy is revealed yet again in the latest
growth figures. According to the most recent estimate, the US economy expanded
in Q1 2017 by a meagre 1.2 % y/y. In combination with an inflation rate of more
than 2%, this means that the U.S. is at the edge of stagflation - a scenario we have
warned about on several prior occasions. But markets are obviously taking a
different view than we are. At least for now.

"Policy, profit and positioning In the past years, rate cuts and other monetary stimuli have affected mainly asset

trends all argue for rotation price inflation. Last year, we wrote: Sooner or later, the reflation measures will

from deflation to inflation, from take hold, and asset price inflation will spill over into consumer prices. Given that

'ZIRP winners' to 'ZIRP losers', consumer price inflation cannot be fine-tuned by the central banks at their

from Wall Street to Main Street. discretion, a prolonged cycle of price inflation may now be looming ahead. 2016

As part of this rotation we expect might have been the year when price inflation turned the corner. However, the

real assets to outperform hopes of an economic upswing due to Trumponomics and the strong US dollar

financial assets." have caused inflation pressure to decrease for the time being. Upcoming
Michael Hartnett recession fears resulting in a U-turn by the Fed, and the consequential
depreciation of the US dollar would probably finalise the entry into a
new age of inflation. This will be the moment in which gold will begin
to shine again.

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Strong dollar supports disinflation: DXY at highest level since 2003

120

110

100

90

80

70

60

Dollar Index (DXY)

Source: Federal Reserve St. Louis, Incrementum AG

Low interest rates combined with the pressure to invest and FOMO,
have nurtured a treacherous sense of carelessness within many market
participants. Scenarios such as significantly higher inflation or a recession are
currently treated like black swans, although history shows that these events do
occur at regular intervals.

Where Things Stand

At the outset, we would like to go through a number of performance data. The
"Its all about relative supply
development since the publication of our previous report on 28 June 2016 has
curves the supply curve for
been slightly negative, both in terms of euro (-3.4%) and in terms of US dollar
bullion is far more inelastic than
(-3%). The full year of 2016 was like day and night. A fantastic first half was
is the case for paper money. It
followed by a disastrous second half, where the newly won confidence was brutally
really is that simple."
destroyed. Gold bulls were being tested again, with the market turning into a pain
David Rosenberg
maximiser. The big caesura in the performance had to do with the election of
Donald Trump.

Since the beginning of 2017, the picture has been clearly positive. After a rally from
USD 1,150 to almost 1,300 within a few weeks, a correction set in around the
middle of April, which now seems to be over.

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Gold in US dollar and euro since the previous Gold Report

1400 1250

1350
1200
1300

1250 1150

1200
1100
1150

1100 1050

Gold in USD (left scale) Gold in EUR (right scale)

Source: Federal Reserve St. Louis, Incrementum AG

The performance in this secular bull market is still impressive. The average annual
Gold is a classic appreciation
currency performance from 2001 to 2017 has been 10.15%. Gold outperformed
practically every other asset class and especially every other currency
by a significant degree, despite intermittent (sometimes sharp)
corrections. Since the beginning of 2017, the development is quite robust, too.
On average gold is up 5.88% ytd.

Gold performance since 2001 in various currencies (%)

EUR USD GBP AUD CAD CNY JPY CHF INR Mean
2001 8.10% 2.50% 5.40% 11.30% 8.80% 2.50% 17.40% 5.00% 5.80% 7.42%
2002 5.90% 24.70% 12.70% 13.50% 23.70% 24.80% 13.00% 3.90% 24.00% 16.24%
2003 -0.50% 19.60% 7.90% -10.50% -2.20% 19.50% 7.90% 7.00% 13.50% 6.91%
2004 -2.10% 5.20% -2.00% 1.40% -2.00% 5.20% 0.90% -3.00% 0.90% 0.50%
2005 35.10% 18.20% 31.80% 25.60% 14.50% 15.20% 35.70% 36.20% 22.80% 26.12%
2006 10.20% 22.80% 7.80% 14.40% 22.80% 18.80% 24.00% 13.90% 20.58% 17.24%
2007 18.80% 31.40% 29.70% 18.10% 11.50% 22.90% 23.40% 22.10% 17.40% 21.70%
2008 11.00% 5.80% 43.70% 33.00% 31.10% -1.00% -14.00% -0.30% 30.50% 15.53%
2009 20.50% 23.90% 12.10% -3.60% 5.90% 24.00% 27.10% 20.30% 18.40% 16.51%
2010 39.20% 29.80% 36.30% 15.10% 24.30% 25.30% 13.90% 17.40% 25.30% 25.18%
2011 12.70% 10.20% 9.20% 8.80% 11.90% 3.30% 3.90% 10.20% 30.40% 11.18%
2012 6.80% 7.00% 2.20% 5.40% 4.30% 6.20% 20.70% 4.20% 10.30% 7.46%
2013 -31.20% -23.20% -28.80% -18.50% -23.30% -30.30% -12.80% -30.20% -19.00% -24.14%
2014 12.10% -1.50% 5.00% 7.70% 7.90% 1.20% 12.30% 9.90% 0.80% 6.16%
2015 -0.30% -10.40% -5.20% 0.40% 7.50% -6.20% -10.1% -9.90% -5.90% -3.75%
2016 12.04% 8.50% 29.70% 10.10% 5.50% 16.50% 5.40% 10.40% 11.50% 12.27%
2017 3.02% 10.22% 5.63% 6.24% 10.35% 8.45% 4.24% 4.78% 4.32% 5.88%
Mean 10.50% 11.56% 12.50% 9.36% 10.37% 9.67% 10.21% 8.36% 13.87% 10.15%

Source: Federal Reserve St. Louis, Goldprice.org, Incrementum AG

The following chart shows the similarities between the 1970s and the status quo.
The analysis reveals the fact that the bear market since 2011 has been following
largely the same structure and depth as the mid-cycle correction from 1974 to
1976. However, we can see that the duration of both corrections diverges
significantly.

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Gold bull market 1970s vs. 2000 to date

1970 1971 1972 1973 1974 1975 1976 1977 1978

1350

Gold (indexed) 1970s and since 2000

450

150
2000 Bull Market
70s Bull Market

50
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Source: Federal Reserve Fred, Incrementum AG

Not only the absolute, but also the relative development is important for a
"If bond markets are smoking comprehensive assessment of the status quo of the gold market. Along with gold,
weed, then the stock market silver, and mining shares, industrial metals such as zinc, nickel, copper and energy
appears to be hooked on crack." commodities (especially coal and oil) marked stellar performances last year. All of
James Montier this happened in an environment where the US dollar climbed to a 14-year high.
We regard this as a remarkable development and as a prime example
of a bull market, whose starting gun has not been heard yet by the
majority of investors.

"Sell economic ignorance; buy We consider a bullish stock market currently as the most significant
gold." opportunity cost for gold. Therefore, a clear break-out of the gold price should
Tim Price only be occurring amid a stagnating or weaker equity market. If we now compare
the gold price performance with the development of equity prices, we can see that
the relative weakness of gold seems to be slowly coming to an end. Last year we
had already noticed that the intensity of the upward trend had declined
significantly. After almost five years of underperformance relative to the broad
equity market, the tables might slowly be turning now in favour of gold.

Gold/S&P500 ratio, 50-day and 200-day Moving Averages

180%

160%

140%

120%
Gold/S&P Ratio
50d Moving Average
100%
200d Moving Average
80%

60%

40%
2011 2012 2013 2014 2014 2015 2016 2017

Source: Federal Reserve St. Louis, Incrementum AG

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In a historical context, the relative valuation of commodities to equities

seems extremely low. In relation to the S&P500, the GSCI commodity index is
currently trading at the lowest level in 50 years. Also, the ratio sits significantly
below the long-term median of 4.1. Following the notion of mean reversion, we
should be seeing attractive investment opportunities.

GSCI/S&P500 ratio: equities expensive, commodities cheap?

10 Gulf Crisis 1990

9 GFC 2008
Oil Crisis
8 1973/1974

5
Median: 4.1

1
Dot.com Bubble
0
1971 1975 1979 1983 1988 1992 1996 2000 2004 2008 2013 2017
GSCI Commodity Index / S&P 500

Source: Dr. Torsten Dennin, Incrementum AG

Inflows into gold ETFs have been picking up since the beginning of
2016. To us, this key ratio represents Western financial investors who choose
ETFs as primary instrument to manage their gold exposure. In spite of the general
trend reversal, the euphoria revolving around Donald Trump has left its marks in
this area as well.

ETF holdings (in 1,000 ounces) vs. gold price (right scale)

90000 2000

1800
75000
1600
ETF Holdings (1,000) Ounces

60000 1400

1200
45000
1000

30000 800

600
15000
400

0 200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ETF Holdings Gold

Source: Bloomberg, Incrementum AG

As always, we feel it is important to point out that the rise of already

excessive debt levels progresses unnoticed. Let us look at the USA for

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example. The ratio of total debt to the US GDP has been around 150% in the past
150 years. Historically, there have only been two significant exceptions: the 1920s
(the roaring twenties), where a strong expansion of credit laid the foundation of
the stock market crash and the Great Depression; and the current phase, which
originated in the 1970s.

Unlike October 1929, even more debt was encouraged to build up in the economy
after the 1987 stock market crash, driven by Alan Greenspans loose interest rate
policy. In 2009, the ratio was at 378%, reaching an all-time-high. Since then,
gentle efforts have been made to deleverage, but at 365% we are still in unhealthy
regions. No trace therefore of deleveraging and austerity.

Total US credit market debt in % of GDP

400%
2009 Peak
378%

350% 1933 Depression 2008 Stockmarket

299% crash 371%
Total Debt to GDP (%)

300%
1987
Stockmarket
crash 230%
250% 1929 Stockmarket crash
185%

200%

Normal Range:
150%
130 - 170 %

100%
1870 1890 1910 1930 1950 1970 1990 2010

Source: Dr. David Evans, www.sciencespeak.com, Incrementum AG

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A Recession in the US: A White Swan

"Most financial traders are The future is always uncertain. It is nevertheless possible and
picking pennies in front a sensible to gather and interpret information in order to draw up
steamroller exposing themselves different future scenarios and consider reasons both for and against
to the high-impact rare event yet their potential occurrence. Based on the black swan concept, we want to
sleeping like babies, unaware of discuss black, gray and white swans.
it."
Nassim Taleb The surge in total indebtedness and money supply aggregates has made
the uncovered monetary system even more fragile than it already is
based on its fundamental nature. In the wake of the many non-conventional
monetary policy measures implemented by central banks, it is important that the
belatedly begun normalization of US monetary policy succeeds in order to
maintain investor confidence. We will examine potential scenarios that are liable
to cut the normalization effort short, which would ultimately lead to systemic
upheaval. Naturally, such a development would have a significant effect on the
gold price.

It is widely acknowledged that a US recession represents one of the greatest extant

"We are living in a fragile risk factors for international investors. In our opinion, financial market

interim period between the Great participants currently display a suspiciously pronounced degree of complacency.

Financial Crisis and another

crisis that is likely to be no less In the following we want to examine five indications which despite the currently

(and may possible be even more) prevailing optimistic sentiment suggest that a recession is far more likely than is

severe." generally believed. These signs are:

Thomas Mayer
1. Rising interest rates
2. Artificial asset price inflation
3. Consumer debt and slowing credit expansion
4. The duration of the current upswing
5. Stagnating tax revenues

Indication #1: Rising interest rates

As a long-term chart of the federal funds rate reveals, the vast majority of rate hike
"Our economic forecasting
cycles has led to a recession and every financial crisis was preceded by rate hikes as
record is nearly perfect."
well. The historical evidence is overwhelming in the past 100 years, 16
Janet Yellen
out of 19 rate hike cycles were followed by recessions. Only three cases
turned out to be exceptions to the rule. 5

5 These deliberations were inspired by van Hoisington - see Hoisington Quarterly Review and Outlook, Q1 2017

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Rate hike cycles and following recessions in the US

20
12 13
1
18 0,9
16 11 0,8
14
14 0,7
12 10 0,6
10 0,5
15
8 2 0,4
5 16
6
1 3 4 9 0,3
8
4
7
0,2
6 17?
2 0,1
0 0
1914
1919
1924
1929
1934
1939
1944
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
2014
US Recessions Effective Fed Fund Rate (pre 1955 Fed NY discount rate)

Source: Federal Reserve St. Louis, Federal Reserve New York, Incrementum AG

"It is hard to imagine a more This illustrates the boom-bust cycle and its relationship with monetary policy quite
stupid
"The or more dangerous
tightening way of
of policy that well. In our opinion, the most cogent and helpful explanation of this phenomenon
making decisions than
puts an end to the furtherby putting and the associated concatenations is provided by Austrian business cycle theory
those decisions in the hands of
expansion of an asset bubble and (ABCT). 6
people who pay no price for
the
beingsubsequent
wrong." reopening of the
Future rate hikes should therefore be looked forward to with great
liquidity Sowellare always
Thomasspigots
asymmetric." interest as a matter of principle.
www.acting-man.com

Indication #2: Artificial asset price inflation

A declared goal of the Fed's QE programs was the inflation of asset prices, which
was supposed to stimulate consumer spending down the road:

"we made a decision back in 2008, early 2009 we were going to have a wealth
affect. That was achieved, it made wealthy people wealthier but the point is, it
didn't trickle down... " 7

Richard Fisher, former president of the Federal Reserve of Dallas

"We have the worst revival of an We have often pointed out that such a monetary policy represents anything but a
economy since the Great sustainable approach. Every artificial inflation of asset prices will sooner or later
Depression. And believe me: end in a painful denouement for asset prices. In the current cycle, the surge
We're in a bubble right now." in asset prices has once again generated suspiciously extended
Donald Trump valuations. Apart from the ratio of income to total household wealth shown
earlier, the so-called Buffett indicator, i.e., the ratio of total market capitalization
to GDP, which is reportedly the favorite valuation indicator of legendary investor
Warren Buffett, is sending a clear warning signal. For the third time in slightly less
than two decades, it shows that the US stock market is significantly overvalued
relative to total economic output.

6 A detailed explanation of ABCT and its implications can inter alia be found in our book Austrian School for
Investors
7 http://www.realclearmarkets.com/video/2016/09/08/richard_fisher_wealth_effect_did_not_trickle_down.html

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Wilshire 5000 Index and Wilshire 5000/US GDP ratio

25000 250%

"Everything Bubble"
20000 200%

Subprime Bubble

Wilshire5000/GDP
15000 Tech Bubble 150%

Wilshire 5000
10000 100%

5000 50%

0 0%
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Wilshire 5000 Wilshire 5000 / GDP

Source: Federal Reserve St.Louis, Incrementum AG, Kevin Duffy 8

Numerous other valuation metrics also suggest that stocks are currently
(significantly) overvalued, among them also the well-known Shiller P/E ratio
(a.k.a. CAPE, or cyclically adjusted P/E ratio). The fact that rate hike cycles
invariably have a negative effect on stock market valuations makes the current
level of this ratio particularly worrisome - the recent reading of 29.1 is only slightly
exceeded by the manic figure posted in 1929 and the sheer lunacy of early 2000.

Indication #3: Consumer debt levels and a slowdown in credit

expansion

Interest rate signals deliberately manipulated by the central bank

create unnatural behavior patterns. For one thing, relatively wealthy
individuals think that they are becoming richer due to surging stock market and
real estate prices; but these higher prices are ephemeral, they represent phantom
wealth created by the money illusion, which can, and eventually will, disappear
faster than it was accumulated. For another thing, artificially low interest rates
undermine incentives to save and promote the taking up of additional debt. In
times of zero or near zero interest rates, society at large will tend to
eschew long-term, future-oriented saving in favor of conspicuous
consumption.

In April this year cumulative US household debt exceeded its pre-crisis level again
for the first time. While we regard the new record high in debt levels as a cause for
concern, the press welcomed the news as a thoroughly positive development. 9

8 See. "Mr. Market flunks the marshmallow test", Presentation from Kevin Duffy, Grants Spring Konferenz 2017
9 See: Household debt makes a comeback in the U.S

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Total US household debt outstanding (trillion USD)

13
"Credit is a system whereby a
12

Total US Household Debt (trillion USD).

person who cannot pay gets
11
another person who cannot pay
10
to guarantee that he can pay."
Charles Dickens 9

4
2003 Q1
2003 Q3
2004 Q1
2004 Q3
2005 Q1
2005 Q3
2006 Q1
2006 Q3
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
2016 Q3
2017 Q1
Other Student Loan Credit Card Auto Loan HE Revolving Mortgage
Source: Federal Reserve Bank New York, Incrementum AG

Indication #4: Duration of the economic upswing

There is usually very little consensus among economists on a great many issues: "If
"One day everything will be well, you put two economists in a room, you get two opinions, unless one of them is
that is our hope. Everythings Lord Keynes, in which case you get three opinions." 10 . Nowadays Lord Keynes
fine today, that is our illusion." would probably have to be replaced with Paul Krugman, who is almost as
Voltaire prominent and well-known for frequently supporting completely different
conclusions based on the same data points, depending on whatever pet agenda of
his is in need of buttressing). 11

"There is always some chance of There were 49 economic expansions since the founding of the United States, which
recession in any year, but the lasted 36 months on average. Looking exclusively at the 12 post-war expansion
evidence suggests that phases, the average duration of an upswing was 61 months. As of June 2017, the
expansions don't die of old age." current expansion has lasted 96 months, making it the third-longest in history.
Janet Yellen Should the current economic expansion continue for another 24
months, it would become the longest in US history. In light of the
evidence discussed above, we believe it is unlikely that the old record
will be broken.

Indication #5: Federal tax revenues are stagnating

An interesting development can currently be observed in the trend of tax revenue

growth rates, which typically correlate strongly with economic growth. Federal tax
receipts have recently stopped growing, which is historically quite a negative sign
for the economy's future performance. An outright decrease in tax receipts is as a
rule only seen during economic contractions.

10 This quote is generally attributed to Winston Churchill it shows that there is nothing new under the sun. Today
one would have to replace John Maynard Keynes with Paul Krugman.
11 Although this comment is a bit tongue in cheek, it is actually not merely a partisan assertion it is backed by
plenty of evidence, much of which can be found at a site run by Tom Woods, which is actually quite fair and
meticulous in its analysis of Krugmans economic fallacies, despite being explicitly dedicated to drawing attention to
them: http://contrakrugman.com/

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The consequences of a recession

Should the current expansion fail to become the longest in history and
US GDP growth indeed turn negative within the coming 24 months, we
believe the consequences could be grave. The knee-jerk reaction by the
government and the Fed would definitely comprise renewed stimulus measures in
order to arrest the downturn, which implies a U-turn in monetary policy. Currently
financial markets are almost exclusively focused on the planned normalization of
monetary policy. Almost no-one seems to expect an impending recession or a
return to loose monetary policy. Over the past 30 years, the Fed has implemented
an increasingly asymmetric monetary policy. The extent of rate cuts routinely
exceeded the extent of rate hikes.

It would be a big surprise, so to speak a black swan, if the response of

the authorities to the next economic downturn were to deviate from
the usual one.

"In a theater, it happened that a Since the normalization of monetary policy hasn't progressed sufficiently yet,
fire started offstage. The clown renewed stimulus measures would probably shake market confidence in the
came out to tell the audience. efficacy and sustainability of the monetary therapies applied to date. Historical
They thought it was a joke and experience indicates that the crumbling of such a deeply ingrained faith is often a
applauded. He told them again, wonder to behold; the best thing that can be said about it is that it will sell
and they became still more newspapers and raise the ratings of TV news programs. Moreover, the dosage
hilarious. This is the way, I of said monetary therapies are subject to the law of declining marginal
suppose, that the world will be utility, in other words, the next round of QE would probably have to be
destroyed amid the universal significantly larger than QE3 was. If the markets were to sense that
hilarity of wits and wags who such a development was likely, the gold price would probably rally
think it is all a joke." quite dramatically.
Sren Kierkegaard

Stagflation: A Gray Swan

As discussed above, we currently believe that the probability of a US recession is
significantly higher than is generally assumed. But how would a recession affect
price inflation dynamics?

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Contrary to the popular opinion that developed nations are characterized by very
"There seems to be an unstated low inflation, enormous monetary inflation has already occurred. Thus, asset
assumption that a central bank prices have increased to a rather conspicuous extent. It seems more than passing
that has so far not even been able strange that rising food prices are as a rule regarded as great calamity, while rising
to push consumer price inflation home prices are considered a blessing. Both simply reflect a decrease in
rates up by doing everything to purchasing power; whether it finds expression in home prices or food
debase its currency, will prices is not relevant to the fact that purchasing power has been lost.12
somehow be able to keep price
inflation in check if or when it A decisive factor likely to determine future price inflation dynamics
finally does rear its head. It will be the response of the US dollar to an economic contraction. In past
seems more likely to us that a recessions, the dollar tended to initially appreciate against most important foreign
chimpanzee will one day find the currencies. Then the Fed adopted an easy monetary policy and the dollar's external
answers to all unresolved value decreased again. The extent and persistence of these moves depended also
questions of theoretical physics." on the dollar's relative value at the outset of economic downturns, as well as on
www.acting-man.com other contingent circumstances (such as dollar shortages in the euro-dollar market
and similar market structural or psychological aspects). In that sense, the current
situation differs markedly from that prevailing at the beginning of the last
downturn, as the dollar has already appreciated considerably in recent years.
Persistent further strength in the dollar would be the exception rather than the rule
under these circumstances.

US dollar index: when will the tide turn?

40%

30% Strong Dollar

20%

10%

0%

-10%

-20%

-30% Weak Dollar

-40%
1975 1979 1983 1986 1990 1994 1998 2002 2006 2009 2013

USD Index (30 month change.)

Source: FRED, Incrementum AG

Should a US recession strike concurrently with a devaluation in the US dollar,

investors would be faced with a very difficult situation. While in 2008, it was
primarily concerns about liquidity and the fear that not enough
money would be printed were dominant (a situation known as a
deflation scare), the markets may arrive at a different assessment in
the next downturn. That would be particularly likely if confidence in the Fed's
ability to revive the economy with another round of stimulus measures were to
falter before they are even implemented. As soon as market participants consider
rising price inflation to be a serious possibility, a fundamental shift in general
market sentiment is likely to occur. The currently still prevailing expectation that

12 See: "Why Keynesian Economists Dont Understand Inflation", Frank Hollenbeck, Mises.org

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if there are problems, central banks will implement further inflationary

measures would be increasingly questioned if inflation expectations were to rise.

Further Potential Gray Swans

Below we briefly list a number of additional gray swans, which we believe have
strong potential to become relevant at some point.

A credit crisis in China

"The idea that China is now the A political crisis in the US in the context of an impeachment of president
driving economic power in the Trump
world, I think, is illusory or An escalation of geopolitical tensions in the Middle or Far East
somewhat of a fallacy." Hyper-deflation as a result of a global banking or government debt crisis
Kyle Bass An inflationary Boom in the US
Reorganization of the global monetary order including a (partial)
remonetization of gold

Gray Swans and their possible effect on the gold price

"The record of fiat currencies Gray Swan Influence on USD Expected Influence Expected Influence on
on Gold (in USD) inflation
through history, 100%, is Stagflation Depreciation positive inflationary
Credit crisis in China Appreciation positive uncertain
eventual failure. The record of Political crisis in the US Depreciation positive uncertain
gold for 5,000 years, 100%, is Geopolitical escalation in the Uncertain positive inflationary
Middle/ Far east
lack of failure." Hyper deflation Appreciation negative deflationary
Inflationary boom Depreciation strongly positive inflationary
Simon Mikhailovich Reset of global monetary Depreciation strongly positive inflationary
system

Source: Incrementum AG

Mining Shares
When our last gold report was published, the Gold Bugs Index (HUI)
"The great financial success
stood at 240 points. After a stunning rally of more than 180% in eight months,
stories are people who had cash
the sector suffered a 61.8% correction of the advance. Since the beginning of the
to buy at the bottom."
year, the tide has turned again and the technical picture has clearly brightened.
Russell Napier
In the following pages, we will discuss why we believe that the
turnaround last year marked the end of the cyclical bear market and
why the rally in the precious metals sector has probably only just
begun.

A glance at the market capitalization of gold mining companies reveals

Sometimes life hits you in the a significant valuation discrepancy compared to other asset classes. At
head with a brick. Dont lose the moment the entire HUI, which includes the 16 largest unhedged gold
faith. producers, is valued at a mere USD 99 bn. This amount represents just 0.4% of the
Steve Jobs market capitalization of all S&P 500 Index members. The market capitalization of
Apple alone exceeds that of the 16 companies in the index by 720%. Another
interesting numbers game: One could use the cash hoard of Apple
(AAPL) to purchase the entire Gold Bugs Index 2.5 times over, or

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alternatively buy 6,500 tons of gold. If Apple did the latter, it would be
the second largest gold holder in the world.

Market capitalization of the HUI vs. AAPL, in USD bn.

900

800

700

600

MCap (billions)
500

400

300

200

100

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Gold Bugs (HUI) - Market Cap Apple (AAPL) - Market Cap

Source: Bloomberg, Incrementum AG

If one looks at all bull markets in the Barron's Gold Mining Index (BGMI) 13, one
notices that the current uptrend is still relatively modest in terms of duration and
performance compared to its predecessors. Should we really be on the cusp of a
pronounced uptrend in the sector which we assume to be the case quite a bit of
upside potential would remain.

Bull markets compared: BGMI bull markets since 1942

800%
10/1942-02/1946 07/1960-03/1968 12/1971-08/1974

700% 08/1976-10/1980 11/2000-03/2008 10/2008-04/2011

01/2016-05/2017
600%

500%
We are
Performance

here!
400%

300%

200%

100%

0%
1 41 81 121 161 201 241 281 321 361 401
Number of Weeks

Source: Nowandfutures, TheDailyGold.com, Barrons, Incrementum AG

Jordan Roy-Byrne, an analyst whom we greatly respect, describes the

"A speculator is a man who
sector's status as bearish bull. While the fundamentals of the mining sector
observes the future, and acts
stabilized in the 2014-2015-period, early 2016 was the time of the final
before it occurs."
capitulation. At the time, precious metals mining stocks exhibited the worst 5 and
Bernard Baruch
10 year rolling performance in 90 years. During the final slump, they fell to an all-
time low relative to the S&P 500 Index, and their price to book ratios stood at the

13 The oldest existing gold mining index. Index data can be obtained at www.bgmi.us

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lowest level in 40 years (which is as far back as the data go). The chart below also
makes clear that the preceding bear market was an historically unique event. 14

Bear markets compared: BGMI bear markets since 1942

100% 08.1974 - 08.1976 03.1968 - 12.1969

02. - 11.2008 01.1996 - 10.2000

80% 10.1980 - 06.1982 01.1983 - 11.1986

Performance 03.1939 - 04.1942 04.2011 - 01.2016

60%

40%

20%

0%
1 41 81 121 161 201 241
Number of Weeks

Source: Nowandfutures, TheDailyGold.com, Barrons, Incrementum AG

Despite the confidence that we have expressed with respect to gold

miners, a number of factors have to be kept in mind:

Gold producers were able to lower their production costs in recent

years by implementing comprehensive cost cutting measures. The
decline in energy prices, which traditionally represent a significant share of
mining cash costs, was undoubtedly helpful in this context. Moreover, many
producers have cut their annual exploration budgets drastically. As gold
reserves are steadily depleted through mining, we expect a considerable
acceleration in M&A activity in coming years. We primarily expect to see
takeovers of exploration and development companies in politically stable
regions such as Australia and North America. This assessment was most
recently confirmed by the takeover of Integra Gold by Eldorado Gold.

In the short term, sentiment appears a tad over-optimistic to us. As

the Optix (optimism index, a mixture of a variety of sentiment and positioning
data) shown below indicates, sentiment in the GDX ETF is approaching
excessive optimism territory. In line with the seasonal pattern in mining
shares, a correction in the summer months may well provide a favorable entry
point.

14 See The Bearish Bull, Jordan Roy-Byrne, TheDailyGold.com

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GDX Optix

Source: Sentimentrader

The focus should be on conservatively managed companies which are

"The great menace to the life of not merely pursuing an agenda of growth at any price, but are instead
an industry is industrial self- prioritizing shareholder interests. From a valuation perspective, the growth
complacency." rate of free cash flows, reserves per share, and earnings growth per share strike us
Joyce Carol Oates as the most important financial metrics. Often these have to be assessed over
somewhat broader time frames than the quarterly song and dance that seems so
(needlessly) relevant to other sectors, as the mining business is subject to relatively
wide fluctuations based on seasonal factors, mine sequencing, capex cycles, and so
forth. One should try to avoid investing in companies with a habit of incessantly
diluting their shareholders by flooding the market with new share issues,
particularly if one aims to hedge oneself against the inflationary policies of central
banks.

"Put not your trust in money, but In our investment process, we are currently focused on developers and
put your money in trust." emerging producers. Based on the premise that the bull market in gold has
Oliver Wendell Homes Sr. resumed, we expect the gold-silver ratio to decline over the medium term from its
current elevated level. In such a scenario, particularly promising
investment opportunities should emerge in the stocks of silver mining
companies.

Conclusion
After years of zero interest rate policy, investors have become used to
the brave new world bereft of fixed rate income. Stocks are increasingly
"The optimist thinks this is the held for the cash flows they generate or the dividends they pay and are widely
best of all possible worlds. The considered to be without alternative. As surrogates for safe bonds, investment
pessimist fears it is true." portfolios fill up with ever more illiquid real estate, which only appears to be liquid
J. Robert Oppenheimer due to the miracle of securitization. Government bonds by contrast are no longer
purchased for their yields, but often to speculate on further price gains. Gold is
currently seen as too low in calories for yield-starved portfolios.

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Superficially, the current situation in financial markets appears

promising. According to the narrative propagated by the Federal Reserve, the
recovery of the economy is steadily progressing. New record
highs in stock market indexes and the decline in unemployment
rates to pre-crisis levels serve as evidence for the success of
current economic policy. After an extended period of extreme
monetary policy interventionism, the long-promised
normalization is underway. Calm has returned to China, which
was seen as the economic "problem child" in recent years and
not too long ago caused quite a bit of concern. Even in crisis-
ridden Europe the political and economic all-clear seem to be in
the air at present. Based on this picture, the prospects for
Source: Hedgeye
financial markets appear good and low risk aversion is held to be justified.

We believe this perception, which is reflected in market prices and

valuations, is incomplete and highly inconsistent. Most market
participants seem to be dismissive of the fact that asset prices have become
egregiously overvalued for the third time in less than two decades.

Moreover, many investors appear to disregard the negative

"Theres no harm in hoping for
effects of rate hikes on the business cycle and they ignore that
the best as long as you are
the US consumer debt has once again reached new record
prepared for the worst."
highs. Positioning seems to be based on the implicit
Stephen King
assumption that the current US economic expansion will
become the longest in history. Most ironic is probably the fact
that they are de facto celebrating the political fall-out
produced by years of misguided economic policies: the
election of probably the most unpredictable US president of all
time - Donald J. Trump.

It may appear as though our evaluation of the economic situation is

"Never underestimate the power
diametrically opposed to the prevailing consensus. One might well think
of stupid people in large groups."
that we are all alone with such a contrarian perspective. Up to a point that may be
George Carlin
true, but in our experience, we are not quite as alone with our views as the current
levels of asset prices may suggest. A growing number of our readers are
institutional investors who share our concerns. Paradoxically, it is precisely the
recent surge in asset prices that has goaded many of them into continuing to ride
the financial market merry-go-round, even if their heads are spinning by now. A
certain type of fear is currently rife: the fear of missing out. Many skeptics remain
on the dance floor even if they remain close to the exit. This raises the
question whether the exit will be big enough to accommodate all of
them.

One of the reasons why we are convinced that turmoil in financial markets is
"Societal scale increases. highly likely to strike in the not-too-distant future, is the insight that the current
Instability grows exponentially. monetary system is not sustainable. Its design inherently results in a continuous
Complexity breeds complexity." increase in overall debt levels, which have grown at a faster pace than economic
Jim Rickards output for decades. Over-indebtedness makes the creation of additional wealth
increasingly hard, and the economy becomes ever more crisis-prone as a result.

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The higher the levels of outstanding debt, the greater their interest rate sensitivity
we have been stuck in a zero interest rate trap for quite some time already.
Although the symptoms are obvious to almost everyone, there was to date no
broad public debate whatsoever regarding the need for fundamental reform of the
monetary system or the international monetary order.

Whether one fully agrees with our critical assessment of the system is
one thing; the question of whether one should hold an appropriate
share of one's liquid wealth in the form of a golden insurance reserve
is a different kettle of fish entirely. In order to make up one's mind regarding
this point, it may be helpful to ask oneself a few simple questions, such as:

When will I not need any gold in my portfolio?

Source: Hedgeye When...

debt levels can be sustained or can be credibly reduced
the threat of inflation is negligible
real interest rates are high
confidence in the monetary authority is (justifiably) strong
the political environment is steady and predictable
the geopolitical situation is stable
governments deregulate markets, simplify tax regulations and
respect civil liberties

In our opinion, the current environment speaks for itself: purchasing gold as a
"Our winnings will hedge should be the order of the day for prudent investors.
comefrom the people who
wake up one morning to find Where will the gold price go next?
their savings have been Two years ago, we made a quite audacious forecast, calling for gold to reach a price
devalued or bailed-inIts target of USD 2,300 by June 2018. At the current juncture that appears unlikely to
going to come from the happen. Nevertheless, the long term chart suggests that gold has pulled out of its
pension funds of teachers and rut. We continue to believe that the second phase of its secular bull market still lies
firefighters. The irony ahead. There are numerous reasons for this:
is that when gold finally pays
off, it will not be a cause for 1. The next US recession inevitably approaches - only the precise timing is
celebration." open to question. It is not only certain that another recession will come, it is just as
Brent Johnson certain how central banks will respond to it: by switching back to (or intensifying)
expansionary monetary policy, by implementing rate cuts, renewed rounds of
quantitative easing, and quite possibly some form of helicopter money program.
Should the next recession already begin before the process of policy normalization
is finalized, confidence in the measures implemented to date could well crumble to
disastrous effect. The following two criteria can be used to judge whether the Fed's
monetary policy normalization effort can be considered a success:

- positive real interest rates in a range from 1 to 2 percent are established.

Based on the Fed's consumer price inflation objective of 2%, this implies
that nominal interest rates should increase to around 3.5%.

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- the Federal Reserve's balance sheet is reduced to pre-crisis

levels.

Reduction of the Federal Reserve's balance sheet the litmus test for
policy normalization
5000 1
4500

4000 0,8
3500

3000 0,6
2500

2000 0,4
1500

1000 0,2
500

0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
0

Source: St. Louis Fed, Incrementum AG

According to what has been conveyed regarding the current state of debate at the
federal open market committee (FOMC), a cautious reduction of the balance sheet
I think gold should be part of is to be set into motion fairly soon (initially by stopping or tapering the re-
everybodys portfolio to some investment of proceeds from maturing bonds no specific figures were so far
degree because it diversifies released though). 15 Even if the Fed were to reduce its holdings of securities at the
your portfolio. Its alternative same pace at which it acquired them during its last QE program, i.e., if it were to
money. reduce them by USD 85 billion per month, it would take until sometime in 2021 to
Ray Dalio shrink the monetary base to its pre-crisis level. From our perspective one can
essentially rule out that this can be done without triggering a
recession. 16

2. Excessive global over-indebtedness is by now glaringly obvious. That

not only applies to developed countries, but to many emerging markets as well.
Moreover, all sectors of the economy are afflicted by huge debt burdens. Growing
one's way out of this mountain of debt appears essentially impossible. The easiest
way out of the situation would be a significant devaluation of the US dollar (and of
all other fiat currencies) against commodities, primarily against gold. In this way,
outstanding debt (in fiat money terms) could be made sustainable again. The
consequence would be high price inflation rates or a stagflationary
environment. A side effect would presumably be that gold's current
undervaluation as a monetary asset relative to the total monetary base would at
least decrease.

15 See: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20170503.pdf ; p.12
16 In the Fed's entire history there was only one occasion when it has deliberately allowed the money supply
to shrink (by less than 2% year-on-year under Paul Volcker in 1981). The only noteworthy episode of monetary
deflation under the Fed's watch occurred at the beginning of the Great Depression in 1930-1932 but that was entirely
involuntary.

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US monetary base vs. US gold reserves at market prices (log scale)

10000

1000

100

10

1
1918 1928 1938 1948 1958 1968 1978 1988 1998 2008

US Gold Reserves @ Market Prices US Monetary Base

Source: Incrementum AG, St. Louis Fed

Since the end of the classical gold standard, parity between the US monetary base
and US gold reserves was already restored on two occasions by an upward
revaluation of gold (in the mid 1930s and in the late 1970s). Whether a potential
dollar devaluation will happen in the framework of an international agreement or
in an uncoordinated manner remains to be seen.

3. De-dollarization has begun. We regard this process as an uncoordinated

form of dollar devaluation. Its main symptom is a gradual reduction of the US
dollar's importance as a global reserve currency. If central banks want to hold a
monetary asset that is liquid, stateless and above all requires no counterparty, it is
not debt securities denominated in other fiat currencies, but gold that represents
the only real alternative. That should become particularly obvious if or when the
currently still preferred foreign exchange reserves are devalued as the associated
securities held in central bank portfolios suffer price declines, and central banks
come under political pressure.

4. Occurrence of a black or gray swan event. Numerous potential

financial shocks can be envisaged in the current environment. Regardless of
whether such a shock is triggered by geopolitical tensions boiling over, or by
negative economic developments an appropriate allocation to gold will mitigate
the negative performance of assets that typically generate large losses in the wake
of such events.

5. Based on our analysis of market structure, sentiment and price

patterns, our assessment is that the medium to long term technical
picture looks promising. Speculative positions in futures markets have
corrected sufficiently to create a healthy basis for the advance to resume. The
Coppock curve gave a long term buy signal in late 2015, while sentiment data
indicate that skepticism in the market remains quite pronounced. We expect only
little upside momentum in the short term though, primarily based on seasonality,

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but also due to a number of signals from technical indicators that remain in
bearish territory.

Of course, the future is always uncertain, hence we want to present several

"There are three key biases in
scenarios outlining potential future gold price developments. The US dollar's
financial forecasting. Economists
status as the senior global reserve currency remains (for now) a constant that is
never forecast recessions, equity
underlying all of them. That is also why we believe that economic developments in
strategists are always bullish,
the US remain crucial for the price trend of gold. Since financial markets have
and bond strategists are always
fundamentally reassessed what the coming years are likely to bring in the wake of
bearish."
Albert Edwards the US presidential election, we align the time-line of our scenarios with the
Trump administration's term of office, which should last until early 2021. From
our perspective, the decisive factors for the gold price will be the
momentum of GDP growth, as well as the further progress made in
terms of the Fed's monetary policy normalization effort.

Scenario A: Relatively strong real economic growth

The proposed economic policy initiatives are implemented and take hold, the US
economy begins to grow strongly (>3% p.a.) and price inflation remains in an
acceptable range (<3%). Monetary policy normalization succeeds. The central
bank's experiment pays off.
The gold price should trade in a range from USD 700 to USD 1,000

Scenario B: Muddling through continues

Real US GDP growth and consumer price inflation remain in a range of 1-3% p.a.
In this case we would not expect the gold price to enter into the second phase of
the secular bull market we currently anticipate.
The gold price should remain in a range from USD 1,000 to USD 1,400
in this scenario.

Scenario C: High inflationary growth

Trump's economic policy initiatives are put into place, a large infrastructure
spending program is launched, US economic growth accelerates significantly (>3%
p.a.), but so does the consumer price inflation rate (>3%). Monetary policy
normalization succeeds only partially, as real interest rates remain very low or
even negative, due to the elevated consumer price inflation rate.
In this scenario, the gold price should trade in a range from around
USD 1,400 to USD 2,300.

Scenario D: One of the four events listed in the table below occurs. Recession,
stagflation and/or significant weakness in the US dollar push the gold price up
noticeably. In the wake of another US recession and the cessation of the monetary
policy normalization effort, significant changes to the global monetary order
cannot be ruled out. A very large gold price rally has to be expected in such an
environment.
Gold prices between USD 1,800 up to USD 5,000 appear possible in
this scenario.

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Term is characterized by Growth Monetary Normalisation Gold price

in USD

Scenario A: Real growth Successful; 700-1,000

Genuine Boom > 3% p.a. Real Interest Rates
>1.5%

Scenario B: Growth & Inflation not completed 1,000-1,400

Muddling Through 1.5-3% p.a.

Scenario C: Growth & Inflation not completed 1,400-2,300

Inflationary Boom > 3% p.a.

Scenario D: Growth / Normalization 1,800-5,000

Adverse Scenario Contraction paused or renewed
<1.5% easing
Source: Incrementum AG

Given the analyses presented in this year's In Gold We Trust report, it shouldn't be
"Gold is a currency. It always
too big a surprise that we assign the highest probability to the latter two scenarios.
has been. It always will be."
Similar to the 1930s and the 1970s, these scenarios would be difficult to navigate,
Brent Johnson
but at the same time provide quite interesting investment opportunities. The
product range of Incrementum includes strategies that are specifically
tailored to these scenarios.

If the bull market in precious metals continues, the performance of

"Let us not look back in anger,
mining stocks will be decidedly positive. Investors should continue to place
nor forward in fear, but around
their bets with conservatively managed companies in the sector, which rather than
in awareness."
pursuing a growth at any price agenda are focused on delivering strong returns to
James Thurber
shareholders. From a valuation perspective, growth in free cash flows, gold
reserves/resources per share, and earnings growth per share strike us as the most
important metrics.

This is a sector in which one must be particularly careful to avoid getting diluted by
a flood of share issuance. The sector's small size in terms of total market
capitalization is both a blessing and a curse. A blessing because outsized
"Security... it's simply the price gains can be achieved in boom times, and a curse because the flood of money
recognition that changes will flowing into the sector during bull markets invariably tempts managers of gold and
take place and the knowledge silver mining companies to misallocate capital as they are constantly under
that you're willing to deal with pressure to do something. This danger is usually particularly pronounced in the
whatever happens." late stages of bull markets, once everyone's memories of the hardships of the bust
Harry Browne period of the cycle have faded. In our investment process, we are currently
focused on developers and emerging producers. Based on the premise that
the bull market in gold has resumed, we expect the gold-silver ratio to decline over
the medium term. In this scenario, pure play silver mining stocks should
offer particularly interesting investment opportunities.

"Whether its the best of times or

In summary, we expect to see significant upheaval in coming years,
the worst of times, its the only
with noticeable effects on the gold price. We will monitor events very
time weve got."
carefully and provide commentary on a regular basis.
Art Buchwald

www.ingoldwetrust.report

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About Us

Ronald-Peter Stferle, CMT

Ronni is partner of Incrementum AG and responsible for Research and Portfolio Management.

He studied Business Administration and Finance in the USA and at the Vienna University of
Economics and Business Administration, and also gained work experience at the trading desk of a
bank during his studies. Upon graduation he joined the Research department of Erste Group,
where he published his first In Gold We Trust report in 2007. Over the years, the Gold Report has
proceeded to become one of the benchmark publications on gold, money, and inflation.

Since 2013 he has held the position as reader at scholarium in Vienna, and he also speaks at
Wiener Brse Akademie (i.e. the Vienna Stock Exchange Academy). In 2014, he co-authored the
book Austrian School for Investors and in 2017 Die Nullzinsfalle (The Zero Interest Rate Trap).
Moreover, he is an advisor for Tudor Gold Corp. (TUD), a significant explorer in British Columbias
Golden Triangle.

Mark J. Valek, CAIA

Mark is partner of Incrementum AG and responsible for Portfolio Management and Research.

While working full time, Mark studied Business Administration at the Vienna University of
Business Administration and has continuously worked in financial markets and asset
management since 1999. Prior to the establishment of Incrementum AG, he was with Raiffeisen
Capital Management for ten years, most recently as fund manager in the area of inflation
protection and alternative investments. He gained entrepreneurial experience as co-founder of
Philoro Edelmetalle GmbH.

Since 2013 he has held the position as reader at scholarium in Vienna, and he also speaks at
Wiener Brse Akademie (i.e. the Vienna Stock Exchange Academy). In 2014, he co-authored the
book Austrian School for Investors and in 2017 Die Nullzinsfalle (The Zero Interest Rate Trap).

Incrementum AG

Incrementum AG is an independent investment and asset management company based in Liechtenstein.

Independence and self-reliance are the cornerstones of our philosophy, which is why the four managing partners own
100% of the company. Prior to setting up Incrementum, we all worked in the investment and finance industry for years
in places like Frankfurt, Madrid, Toronto, Geneva, Zurich, and Vienna. We are very concerned about the economic
developments in recent years especially with respect to the global rise in debt and extreme monetary measures taken by
central banks. We are reluctant to believe that the basis of todays economy, i.e. the uncovered credit money system, is
sustainable. This means that particularly when it comes to investments, acting parties should look beyond the horizon of
the current monetary system. We want to re-think investment strategies and implement them in a way that is in line with
todays requirements.

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We sincerely want to thank the following friends for their outstanding support:

Marc Waldhausen, Tobias Mller, Sebastian Mller, Nikolaus Jilch, Demelza Hays, Yannick
Mhring, Lars Haugen, Bawerk.net, Philip Barton, Brent Johnson, Florian Grummes, Katja
Stferle, Markus Blaschzok, Thomas Vesely, Carsten Ringler, Georg Bhler, Gregor Hochreiter,
Nikolaus Jilch, Atle Willems, Hans Fredrik Hansen, Pascal Hgli, Luis Enrique, David Holzinger,
Markus Rossmiller, Pater Tenebrarum, Veronika Svihalkova and Florian Hulan.

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