Transcription
Our main takeaway of this year's report is basically: gold is not a contrarian investment anymore, but we're far away from, you know, the end of this cycle. So, we're somewhere like in the second half of this cycle. You're a big baseball fan obviously, so in baseball terms, it would probably be like the fifth or sixth inning.
Greetings and welcome to our Wealthy On show. My name is Trey Reich of Bristol Gold Group, and we're here today with Ronnie Sturflula of Incrementum AG, an asset manager based in, of all places, Liechtenstein. And Ronnie is known at the firm for overseeing portfolio management and research activities, but around the world he is best known for his annual stewardship of a truly behemoth undertaking: Incrementum's annual publication of what really is the industry bible—the annual report in the gold trade known as *In Gold We Trust*.
If I have it correct, this is the 19th year of this endeavor, and it continues to get larger, more comprehensive, and more overwhelming each year. The 2025 edition was just published on May 15th. And all I can say is there's simply nothing like it in scale or depth. So Ronnie, I hope you've had a few good nights of sleep since publication, and thanks for taking the time to be with us today.
Thanks, Trey. Yeah, I had some sleep. It's getting better, but I'm kind of in what the Federal Reserve would say is the tapering mode now.
Well, there are many aspects to the report that I think Wealthy On viewers would find interesting. It's absolutely chalk full of analysis, narratives, charts, raw data, and etcetera. It's also available, I believe, in four languages, including Japanese. But most notably, the folks that run Incrementum have chosen to make this report available to everyone, free of charge. So it's almost like a massive community service effort conducted by Incrementum on an annual basis for the benefit of the gold community.
So Ronnie, how can Wealthy On viewers obtain their free copy of the report we're going to discuss?
Well, just have a look at in gold we trust.report. You can download the report totally free of charge. You don't even have to register for our services. Just download the report. I'm kind of aware that not everybody is keen on reading 440 pages about gold. So there's also a compact version, which is still 40 pages. There's a video that summarizes this year's report; there's a slide deck which also summarizes the best charts of this year's report. So just have a look at in gold we trust.report.
Perfect. And last year's title was *The New Gold Playbook*. This year's title is *The Big Long*, sort of referring to *The Big Short*, the movie that everybody knows about, et cetera, et cetera, and how that played out over time. But from your perspective, not to put you on the spot from the very beginning, but how would you compare the two? In other words, anybody who read last year's 440-page report, why should they read this year's?
Good question, Trey. I think this *New Gold Playbook* that we described last year basically made the case for gold being more and more of an emerging markets topic—that the center of the gold world is not in the US or Europe anymore, but rather in China, India, and the Arabic world. I think that has played out pretty well, with demand not only from central banks but also private investor demand in emerging markets being really pretty robust. But then, on the other hand, what we forecasted last year was that at some point the Western financial investor will start allocating in gold again. I think this has played out last year. Let's not forget the largest purchases from central banks were made by a European country—by Poland, actually. And we've also seen that this trend of outflows from gold ETFs has reversed last year. So we're seeing more demand coming from the US and also from Europe. But I would say that the majority of investors that I'm talking to—when I say, "Well, we're still excited about gold, and now perhaps it would be time to allocate more capital in what we call performance gold, being silver, mining stocks, also to some degree commodities"—most of them… you brought up a topic I was going to ask you about later, but it's very intriguing. So let's cover it now. You talk about two parts of gold: one being the safety gold.
Safe haven gold.
Yes. Safe haven gold and performance. The other one is performance gold.
Yeah. Exactly. So we made that distinction because, Trey, I think that when it comes to mining stocks, for example, my view has always been that it's a super interesting and also very challenging asset class. I lost lots of hair, actually, over the last couple of years navigating the markets of mining stocks and also junior mining stocks, and our view is that it is not a long-only asset class. You really have to understand the cycle; you have to understand where we are in that cycle. So that's why we came up with this distinction between performance gold, which has to be managed in a very, very active way, and then what we call safe haven gold, which is basically: don't stare at the price chart every day. It is something really for the long game. Ideally, you inherit it to your kids or to your grandchildren. And for this safe haven gold, I think it's important that you care about counterparty risk. So you obviously want to have physical gold. You want to store it in a safe jurisdiction, perhaps outside of the banking system. But this distinction between physical safe haven gold and performance gold is really important. And I would say that one of the key takeaways of this year's report is actually referring to *The Big Short*, this fabulous movie that I watched, obviously, again in preparation for this year's report. It was like, you know, those contrarian and kind of shrewd investors like Michael Burry that in 2005, 2006, already kind of realized, "Okay, something is completely wrong in this system," and now we're seeing something similar in the monetary system. And now I can tell you, Trey, that there are people that really couldn't care less about our monetary system, about inflation, about monetary history, that now approach me a little bit like, you know, perhaps like 2007 or even 2008 in *The Big Short*, when many people kind of woke up and realized, "Okay, the you know what is hitting the fan." So that reminded me very much of this current setup where, for example, we are openly talking about a revaluation of US gold reserves. We're now talking about auditing Fort Knox—all those things that were kind of a big topic within the gold bar community are now becoming mainstream. So our main takeaway of this year's report is basically: gold is not a contrarian investment anymore, but we're far away from, you know, the end of this cycle. So we're somewhere like in the second half of this cycle. You're a big baseball fan, obviously. So in baseball terms, it would probably be like the fifth or sixth inning, something like that. But now is the time where performance gold should be focused on: mining stocks and especially silver.
So that's what I was going to ask you—that the components of performance gold are mining stocks and silver.
Yes, to some degree also commodities, which is probably even more of a bigger underweight by the institutional asset management community, but also Bitcoin. And I know that this causes quite a lot of discussion, especially in the gold community, but our take has always been that both gold and Bitcoin should be in a well-diversified, let's say, hard asset or sound money portfolio. So we actually run two funds that combine gold with Bitcoin, and the results are staggering. So performance gold for us is primarily silver and mining stocks, but also to some degree commodities as well as Bitcoin.
Got it. And we're going to throw up a chart here—one of your charts on the three secular gold bull markets—and you like to talk about the three different phases of a bull market, and I think you're saying we are in the second phase of the current bull market. Do you want to elaborate a little bit on your bull market rationale?
So, when I was still working in the bank, Trey, my boss approached me and said, "You know, you have to get like a certification. You should do the CFA." And I said, "No, I don't know. That's really demanding, and that's not something that I really enjoy." So I proposed doing the CMT, which is the Chartered Market Technician—which is the CFA basically for technical analysis and market analysis. And I really enjoyed that education and doing that program. And one of the main, let's say, foundations of technical analysis is the so-called Dow theory. And the Dow theory says that every bull market, every big trend, has three different stages. The first stage is the accumulation phase, where the sentiment is extremely negative, where everybody is bearish, where if you say, "I'm buying this or that," at a cocktail party, people will ridicule you because it's just so contrarian. The second stage, which is the longest one, is the so-called public participation phase. This is the phase where basically the mainstream wakes up, banks start covering that asset, raising their forecasts, where the media picks up on that idea, and this is the longest and broadest phase of the bull market. And then the third stage is obviously the mania phase—that's the distribution phase where those investors that did those contrarian investments early on start selling to, you know, what is called dump money or momentum chasers. And my take is, Trey, that we're somewhere in the middle of this public participation phase. So gold is not a contrarian investment anymore. Like in the year 2020, when we published our *In Gold We Trust* report back then and we said our price target for the end of this decade is $4,800, you know, people said, "No, are they crazy? What are they drinking? What are they smoking?" So we're not there. We are now in a stage where everybody is kind of feeling comfortable being bullish on gold. So when you go to a cocktail party and say, "You know, I like gold," people say, "Yeah, you know, I also like gold. I bought some recently. I'm getting interested in mining stocks—let's say Newmont or Barrick or Franco-Nevada." But people don't ask you yet for the hottest silver junior miner, for example. So we're not there yet. That's going to happen in this final stage. So from my point of view, this phase of the bull market will be more and more driven by Western investors, and a friend of mine said that actually, you know, the Western financial investor basically completely missed out on that trend, and the majority of people say, "Well, now it's already too late to buy gold again; it's already too expensive." So we're kind of climbing this wall of worry, and that makes me pretty confident that we're not at the end of this trend. And if you have a look at this chart where we compare the current bull market to previous bull markets, you can see that in the 1970s, for example, we had 209 all-time highs. In the 2000s, we had 106 all-time highs. And now, so far, we had 76 all-time highs. So clearly we're in a trending phase where there's also more CTAs coming in, more, you know, let's say, momentum chasers, and I think that this current consolidation is a very, very important and a very healthy one. But from my point of view, we're not in this mania stage. That's going to happen sooner or later, and I would clearly see that we should hit our long-term price target at least, which is $4,800, over the course of this third and final stage of the bull market.
So I had planned to sort of hit technicals last, but since you brought them up, you, in the report, cover several very compelling technicals—because I really think technicals are a secondary thing, but since we're talking about it, you mentioned the Optex model, the Midas Touch Gold model, and the gold-to-Dow ratio. Could you just give us a brief synopsis on where those three stand?
Yeah. Well, the Optex, which is done by Sentimentrader, I think that's very interesting that we're already seeing kind of extremely bearish sentiment when it comes to mining stocks and also to silver, and pretty much a neutral setup when it comes to gold itself, which is telling me, "Okay, we've seen a consolidation, a validation." Were they higher before? Were they higher and they came down, or they just haven't gotten…?
No, no, they were obviously higher. So they were like in euphoria mode. But the fact that it's cooling off so quickly is a very encouraging sign. So that kind of confirms my view that the market has lost confidence in gold pretty quickly, which is something that you normally don't see at the end of every trend. The Midas Touch model, by my friend Florian Gomex, it went to a somewhat bearish signal quite recently, which also confirms my view that we shouldn't expect too much from gold over the next couple of weeks. So usually the seasonals are not very favorable for gold. I can tell you, Trey, that every year we publish a report around mid-May, and you know the date when we basically hit the send button, it's always—gold is always trending down; it's always in the reds; it's always correcting. So and people say, "Well, you just published 400 pages about gold, and gold is selling off. You must be like the poorest market timer ever." But this is always—usually we're making a bottom around July, July, August. So don't expect too much from gold at these levels. And let's not forget, you know, we're up 23, 24% year-to-date. That's a massive move. That's a massive move within a very short time frame. So we have to digest that move—like, you know, running up a hill, sometimes you have to slow down, you have to catch your breath again, and that's what we are doing at the moment, I think.
So you brought up the year-to-date performance, and by the way, that feeling that you were mentioning that whenever you publish the report, you may be confusing postpartum depression with…
No, I'm just kidding. You know, once you do a big report like this, it's always tough to exhale.
But anyway, looking at gold's performance last year, you know, the S&P—at the beginning of last year, nobody thought stocks were going to go up. We were going to have a recession in 2024. The Bloomberg strategist poll in December of '23 was the most bearish it had been in 25 years. And then, of course, we had 25.2% performance or something like that for the S&P. And of course, by the end of the year, the same strategists were more bullish about '25 than they had been since '90. So that's just the way the world works in equity land. But throughout that whole thing, gold was up 27%, outperforming stocks last year, and this year—that infamous one minute on April 22nd where gold traded at $2,035, which I have on my wall in the office—that lasted, you know, about 15 minutes, but at that moment we were up 33% for the year, which is—I don't think anyone in the gold trading community or on Wall Street would have expected that in, you know, five weeks. So the question becomes: there are all these—for decades you and I have followed fundamental trends like eroding Fed credibility, anti-dollar sentiment, de-dollarization, the US debt levels and deficit—but obviously some of them are hitting these seminal inflection points where they really matter. So if you were going to sort of stack them up, what would you rank as your fundamental reasons why gold has done so spectacularly well so far this year and is likely to continue?
Well, I think first of all, it's a loss of trust in the US, in US leadership. That's obviously something that I'm experiencing firsthand over here in Europe, and I think it's pretty similar in Asia as well. So that's one thing, and I think the best confirmation of that is, if you remember Liberation Day, well, there was quite some panic in equity markets, and what you usually would expect is the US dollar trading stronger, trading up, and also, you know, more flows into US treasuries, but we saw exactly the opposite. So the US dollar was actually down; yields went up. So I think that was another sign for this paradigm shift that we're seeing. There's lots of capital leaving the United States now, going into Europe. The German DAX index, for example, is one of the best-performing equity markets globally. And I think that, you know, for the US dollar now, we're seeing—I think Bank of America had that recently—being bearish on the US dollar is quite a consensus trade. So I would expect the US dollar to bounce back a bit, but a weak US dollar is actually one of the foundations of my thesis for gold going forward. Now, I think, Trey, that one of the things that really astonishes me is the fact that, you know, over the last couple of weeks—I think like mid-February—the market was discounting four to five rate cuts by the Federal Reserve. Now we are at one. Usually we would have expected gold to face big headwinds in such a scenario, but actually, you know, gold was not really affected by that, and therefore I think that this bull market is really standing on a very, very strong foundation, which is, as I've mentioned, this loss of trust in US leadership. Then, on the second hand, I don't think that actually… equities are kind of the enemy of gold; it's rather bonds, and obviously bonds are a far bigger asset class than equities. And if you have a look at the yields in Japan, but also over here in Europe, if you have a look at US Treasury yields, you can see that this foundation of every institutional portfolio is now really being questioned. And I think that's really a strong case for gold being kind of the anti-bond. Then we're seeing still very strong demand from China. We all know that the People's Bank of China owns significantly more gold than they officially announced. But it's also private demand that is still—it seems—very price-insensitive. And then I would say one very important trigger going forward, and we have a big chapter on that and we also feature a conversation that I had with Luke Roman and Louis Vincent, is, of course, this whole topic about the Mar-a-Lago accord—how will the US kind of redesign our monetary system to deal with the Triffin dilemma? Is some sort of a big currency reform going to happen? And I mean Scott Bessent, he said, you know, he knows that something like this is going to happen. He said he wants to be part of that solution or of that development. And she also—which is your firm's view of structural dollar decline being part of the Trump agenda.
So folks at home can see your point, but go continue.
Yeah. So and Scott Bessent said, you know, people called him a gold bug, and he was working for Soros. He's good friends with Stan Druckenmiller—probably the greatest trader of the last couple of decades. So I think he clearly understands what's going on and what has to be done, and therefore I would say that a weaker dollar, structural decline, is something that we will see over the next couple of quarters, probably. So I would be—on a relative basis—I would be—even though based on the fundamentals it sounds crazy—but I think the yen has room to go. Many Asian currencies and even the euro probably will do pretty well versus the US dollar because the world wants and the world needs a weaker US dollar. Now the big question is if such a, let's say, controlled devaluation—if that's really going to work. So we write in the report—it's like asking for warm ice lollies or trying to square the economic circle. That's obviously something risky, but if you have a look at the dollar chart, we haven't seen anything yet. So if we go back to levels—for example 2011, where we also saw the peak of the last big gold bull market at $1,900—the US dollar index was trading at 75. So that would still be roughly 25 percentage points down. So I think that's going to happen. I think that's also one of the reasons why Donald Trump is now trying to make concessions and trying to warm up the world for this development. And again, a Mar-a-Lago accord—it's not a question of if, but rather of when it's going to happen. And of course, we can talk about the details at length. We talk about, for example, gold-backed bonds. Trudy Shelton has come up with that idea. There's this very important paper by Stephen Mirren. There's great papers by Michael McNair about that topic. It's a very complex topic, but I think this will really become center stage over the next couple of months.
You mentioned the Triffin dilemma, which, briefly for viewers, is the dilemma that no individual country can forever issue the reserve currency for the whole world because it will lead to artificial external demand and a structural current account deficit, which is unsustainable. That's what you're referring to.
Yeah. So Triffin said basically that the world needs a steady supply of the reserve currency for trade, for investment, and also for reserves. But then, on the other hand, you also need national stability. So the US issuing the reserve currency must maintain fiscal discipline and monetary discipline to preserve confidence in its currency. So this is kind of the dilemma that we're in, and you know there's a couple of solutions for that. Keynes talked about the banker at Bretton Woods, actually. And my take is that we would need a neutral reserve currency that is—obviously—neutral, but it also has to be highly liquid. It has to be traded 24/7 with a tight spread. It has to be accepted all over the globe. And I don't think that the Chinese yuan really…
fits that criteria. I'm not sure about Bitcoin, but I think that gold, um, would work pretty pretty well.
So, so you perhaps we're seeing some sort of a silent remonetization of gold currently, and the fact, Trey, that the US has imported 2,000 tons of gold over the last couple of months, um, that kind of confirms that view. So what I was going to ask—this is a perfect play—do you believe, and I don't—I think I don't think there's many of us—but I think I believe, and do you believe that gold will, other than foreign exchange reserves, you know, play a role in the evolving monetary system?
I think it always has played a major role. Okay. But it was—it wasn't something that central bankers were very keen on talking about.
Mhm. Um, I think Bernanke said its goal is just a tradition. Um, I once talked to a—to a very renowned central banker, and uh, and I—I will never forget that uh, that conversation, and he said, "Mr. One thing that central bankers don't like—and you need a big pause—transparency."
So, so I think, you know, the fact that, you know, gold is still by far the most important um, reserve of basically every central bank globally. Um, the IMF holds more than 3,000 tons of gold. Um, all those emerging market countries that are doing so well um, from an economic point of view that have, you know, um, um, high real rates where capital is—is—is flowing into those countries, um, they're increasing their um, uh, their—their—their gold holdings. Um, on the other hand, we're seeing that, for example, the—the—the euro system, so um, uh, the central banks in the—in the European—are in—in the Euro zone, they're—they're actually um, they're valuing their gold mark to market and not like the US at—at 42, which gave them actually um, all those losses that they had to um, um, that they had to live with over the last couple of years. They were pretty well compensated by the surge of uh, uh, of gold recently. So um, it actually um, for the—for the Swiss National Bank, for example, which uh, is—is kind of being run like a fat hedge fund these days, um, actually their gold holdings of I think more than 1,000 tons um, actually made up for—for most of—most of the losses that they've made.
So I think this—this silent remonetization is—is happening. I think it's getting a little—little louder, and um, and that's not a—you know, that's—that's really a global trend, and—and if you—if you connect the dots globally, I think it's—I think that gold will play a major—major role going forward, and—and I think, you know, if that's—that's going to happen, I think um, people will say, "Well, I should have bought more gold when it was trading at 3,000—200. It was just dirt cheap."
Right. You mentioned the Swiss and the money that they made on their gold holdings. It's incredible to remember that they sold 1,200 tons in that late 90s period. I mean, England gets all the attention for that 300-ton sale right at the end, but the Swiss were sellers for a decade. And it—remember that was just in—looking back—what an incredible—incredibly bad decision that was.
Absolutely. Absolutely. I mean, on a—on a per capita basis, the Swiss still has, I think, the largest amount of gold. Um, but you know, the opportunity costs of selling that gold—they were enormous, and we had it also in my home country, Austria, where um, just to—to basically come up with a—with a balanced budget in one year, um, they've been selling more than 200 tons of gold, um, and you know, the opportunity costs are—are—are—are enormous, and—Trey—one—one—one thing that I forgot before is, you know, talking about the new monetary system, it's not only the gold purchases by central banks. It's also the repatriation trend of gold um, that is I think very—very important. It basically started in 2011, and since then, more than 2,00—I think 300 tons of gold were being repatriated. So basically brought back home from London, from New York, um, to Poland, to—to Austria, to Germany. Um, and that's really a big international uh, uh, trend, and also, you know, seeking physical audits, full sovereign custody now in the US, you know, uh, it—it was a big topic a couple of weeks ago. Now it—it—it kind of um, um, Trump forgot about that, or—or perhaps not, but you know, auditing Fort Knox—that was like a really big topic quite recently.
So, I think those are all signs that gold is really coming back, let's say, center stage of the—of the next monetary system. And to show how a partial cover clause could work, if you work through the math with me, if we took the Fed's $6.7 trillion balance sheet and we assumed a 25% cover clause for all central banks, that would mean that the Treasury's 261 million ounces of gold that's held on the Fed's balance sheet would have to be valued at about 6,400 an ounce. So my point in bringing up this math is, even for very—very—very large balance sheets like the Fed, with gold in the 3000s, you know, a move to 6,000 wouldn't necessarily cause a revolution or social unrest or something. We're—we're in that realm where it's—it's pretty thinkable.
Exactly. And—and—and you know, we're—we're um, um, we are again discussing this—this so-called shadow gold price that—that—that we talked about um, um, uh, previously in—in—in—in other—in Gold We Trust reports, and—and—and obviously, from a—I would say on a monetary—if you—if you have a monetary view on gold like we have, um, you always have to—to—to consider the fact that—that M2 is—is growing roughly by—by—by 7%, I think, since the year 1900. Um, actually, that—that—that M2 growth was fairly muted over the last couple of years. Um, and that kind of confirms my view that gold is already kind of smelling that something's going to—going to happen, like my friend Larry Leard, he wrote the book called The Big Print. So The Big Print could be one of the reasons for the big long in gold. Um, but again, from a—from a monetary point of view, I think gold is—is—is—is very—very cheap. So we come up with uh, historic gold coverage ratios um, of 25%—of 40%. Um, and then also various different monetary aggregates like um, um, um, central bank uh, u—um—um—um narrow—narrow money supply, but also we have your chart on historic uh, money base—historic base. We'll throw that. So, so that's—and then we arrive, if we—if we just um, you know, uh, reach like long-term averages, um, we're talking about significantly higher prices, and—and—and—and also, you know, usually big trends—they don't end uh, at—at the long-term averages, but at the extremes. So um, we—we can easily um, come up with um, with prices between 8 to $10,000 US um, based on those historical comparisons um, if there is like some sort of a monetary—of a—of a gold backing of our monetary aggregates again, and usually um, you know, um, that goes hand in hand with, let's say, falling confidence—falling trust uh, in the system, and—and—and obviously, I mean, it's—it's no coincidence that our report is In Gold We Trust, and—and back—back then, 19 years ago, when—when I came up with the first In Gold We Trust report, to be honest, I didn't understand the importance of trust—not—not only when it comes to money, but you know, when it comes um, to business, when it comes to our society, when it comes to the media, when it comes to science—trust is really something that—that glues us together, and—and—and this erosion of trust that we've seen over the last couple of years is something that is—is actually pretty—pretty worrisome, and—and I think, you know, the less trust people have in—in our system, um, the more trust they will—will—will put on gold because it's something that, you know, um, has delivered—has—has um, held its um, how do you say—its—its expectations or—or—or its um, its characteristics over the last—not only centuries, but—but—but also over the last 5,000 years or whatever. So—so that's basically—it's the—it's the inverse of the trust in our monetary system.
H, so uh, on a micro level, that we in June had the Basel 3 accord taking effect, and I have read uh, treatments of the fact that part of the reason for gold's recent strength could be that gold is being reclassified from a—a tier three to a tier one asset, and its reserve requirements will go way down, and it will also make gold far more attractive in a physical form than a derivative form. And that may be why we've had a lot of the flushing out of COMEX and paper gold type positions. As you move around out there, have you come into contact with that, or do you think that's overthinking a bit?
To—to be honest, Trey, I think that many people mix up this—this um, HQLA um, with tier one and tier three capital. Um, I—I talked to um, to—to—to many bankers, and um, um, you know, Basel—at Basel 3, um, physical gold is tier one, while paper gold is tier three, basically. So the—the system is—is kind of—the system itself is rewarding metal over—over let's say—metadata. Um, but then on the other hand, you know, talking to—to—to bankers, I have to say they couldn't care less about gold. So, so, um, if you—if—if you're like talking to a treasurer in a—in a—in a big bank, if you're talking to people on the trading desks, um, uh, gold for them is still something, you know, that—that—that—that that has risen obviously, but, um, but they don't care about it. Yeah. So, so I think that—that let's say—we in the gold world—we—we—we think that, you know, everybody is—is—is—is waking up in the morning and—and just staring at the gold chart, and that's—that's like the most important thing. But—but then, you know, somebody—somebody told me that there's actually more people in the United States that believe that Elvis is still alive than people that actually own any physical gold. And I think that's—that's a pretty good—that's a pretty good way to describe that. So, you know, I think that we make a little bit too much out of uh, uh, out of this um, um, um, Basel 3 that I don't really see um, um, um, playing out in—in—in the real world. But, you know, if it's going to happen, um, so be it. Yeah, I'd be happy about it.
Terrific. So, uh, I've got a couple of sort of random questions as we've used up a lot of your time, but one of them is in the—in the report you talk about different methods to start to approach the concept of calculating, you know, an appropriate intrinsic value for gold. Can you just give us a brief uh, you know, brush stroke on which methods you have found the most compelling?
Well, you know, I'm not only from Austria, but I also adhere to the Austrian School of Economics. So, so value is something highly subjective. Um, um, there is no intrinsic value from—from my point of view. What's—what's the value of a—of a fun goof or a Picasso painting? It's—it's actually what—what people are willing to pay. What's the price of um, you know, um, or let's say this um, declining marginal utility after a long hike? You know, the—the first beer is excellent, but um, the marginal value of the fifth beer is obviously um, far lower. So, um, I always have a somewhat hard time um, saying, you know, just based on our model, this is the fair value of gold. Um, it's just—and this, you know, that's—that's—that's a fascination that I still have for the topic of gold—that actually, if you really want to understand—or if you try to understand gold, you have to understand everything—you have to understand geopolitics—you have to understand inflation—opportunity costs—equity markets—where interest rates are going, um, um, so—so it's a highly—highly complex thing. Based on our um, Incrementum gold price model, which is a very simplistic model, it's basically has some sort of a trust factor. Um, so how—how high is trust in um, let's say, the monetary backing of the US dollar, and how high is um, um, uh, the growth of M2? Based on that, our base case is still $4,800 by the end of this decade. Again, we said that in 2020, people thought we're crazy. We stick to that price target. If there's um, um, a second wave of inflation happening, and I cannot rule that out actually, um, then our model says we can go up to $8,900 by the end of this decade. So, that basically says, well, gold isn't dirt cheap anymore. Um, but still there's um, I would say there's some asymmetry because I don't see any um, I don't see too much selling pressure um, um, u for the time being, and—and therefore I would say, like we talked about at the beginning, now in this next stage of the bull market, now it's really um, time to consider those performance gold assets because, let's face it, silver has been a disappointment. Um, we're now seeing the fifth year in a row where um, where actually demand is higher than supply. Um, we haven't seen any investment demand really kicking in. Um, mining stocks, Trey, I mean, you know everything about that. Um, they were a big disappointment last year; this year they've done—they've done better, but they haven't shown this um, this let's say 3 to 1 uh, leverage on—on gold so far. So, so I would say that the—the—the more—more—more appealing for us as asset managers, the more appealing risk-reward ratios are actually in those um, those performance um, gold asset classes that haven't—that haven't done so well. But it's always like gold going first, and then with a slight delay, there's silver—mining stocks—commodities um, following gold, and then they're starting to outperform gold, and um, so that would be my take going forward, and—and let's face it, you know, um, if you're at the cocktail party back again and you say, "I like gold, um, but I even more like silver, and I even more like mining stocks," people will say, "Mining stocks? Come on, they've been such a big disappointment." Um, so that's definitely more contrarian than—than gold at the moment still.
And just rounding out this thought for where we are in the cycle, uh, I really enjoyed your chart, sort of a pie chart we'll put up on the asset um, dispersal—at uh, family offices, where things are invested and the percentage that gold represents. Can you just talk a little bit about how small the gold allocations are?
Yeah. So, so Trey, that was—that's one of my favorite um, visuals of this year's report. That's—that's based uh, on UBS data, and um, um, that's for international family offices where um, at the end of 2023, they had gold allocation—gold and precious metals—of just 1%, um, which is, you know, the same league like infrastructure and—and art. Um, so—so is there um, some uh, potential coming from the institutional side? Definitely. And I can tell you that in one of our funds, there was one small um, uh, Swiss pension fund actually starting to allocate capital. So it's—it's slowly starting, and—and therefore, if we come back to the big short, I think it's—it's—it's probably like 2007 where also like um, usually let's say that the bigger an institution, um, the more bureaucratic and—and—and the longer it takes for them, you know, to make any decision. And—and we're seeing now for some smaller um, institutional players, some small family offices, um, but also pension funds, they're now, you know, they're asking us, "Yeah, this gold thing, and also mining stocks—that's something that we're kind of considering." Um, and I think this is really um, the potential for gold going forward—those um, market participants that are heavily underweight gold—not allocated in mining stocks at all—even though they're, you know, they've got the—the best balance sheets that I've ever seen, you know, they're free cash flow monsters. They—they've been paying down their debt; they're increasing their dividends; they're um, they're—they're buying back their stock. They're really in a very—very healthy shape. Um, but nobody's allocated yet. So I think that's—that's really the—the—the future demand will come from those uh, institutional players that aren't allocated um, um, at all.
Terrific. And for our US viewers, there are some fairly significant hurdles to getting involved in your products directly, while the In Gold We Trust report is out there for everyone to appreciate. um, uh, for the rest of the world—from Canadian through Europe and around the world. What's the best way for uh, individual investors to get in touch with Incrementum?
Well, yeah, Trey, um, uh, it's—it's—it's interesting that, you know, everyone on this planet—Yeah.—from—from—from New Zealand to—to—to—to Greenland. Although we don't know what's going to happen to Greenland, so that's perhaps not the best example. Um, but everybody on this planet can—can buy our funds. Um, but US citizens and US uh, uh, uh, residents. Um, but for everybody uh, else, just have a look at our web page, Incrementum. We're an asset manager based in—in Liechtenstein—from my point of view, one of the best jurisdictions within Europe. Um, not a member of the European Union. Um, we've got the Swiss Franc as our currency. It's a very small um, country. Uh, one out of five countries on this planet without any debt—without any government debt. So, just have a look at our web page, Incrementum. We're heavily focused, I would say, in the um, real asset space. So commodities um, uh, gold, but also um, Bitcoin—that's—that's in our DNA—value investing. We do not only offer um, um, investment funds but also um, private wealth management services. So just have a look at our web page, uh, Incrementum. Or if you're from the United States, then—then perhaps ingoldwetrust.report—report—because the next time I—I—I enter the US, I want to be safe and not be delivered to—to Guantanamo right away. So, better play it safe.
Excellent. Well, thank you very much for your generous commitment of time, and even more for your dedication to the In Gold We Trust franchise, which we really appreciate out here in the gold community. So, thanks very much, Ronnie. We look forward to checking up with you in a few months or so.
Thank you very much, Trey. It's been a pleasure. And yeah, same—same to you. Thanks for—for everything that you do for the community. I—I really appreciate it. And I'm a subscriber of your services as well. So, thank you very much.
Thank you.