Liechtenstein-based Incrementum AG this week published the 13th edition of its 'In Gold We Trust' report. The 339-page publication contains an astonishing array of tables and charts, and is quite impossible to summarise adequately (not least because the report doesn't contain an executive summary). A few sections stand out, however, especially the observations on historic prices for commodities and gold-mining shares, and predictions for the gold price.

In a chart that compares the Goldman Sachs Commodity Index against the Dow Jones Industrial Average Index, Incrementum illustrates that commodity prices generally are at their lowest level since the 1960s. The only other occasions since 1900 when commodities were similarly undervalued relative to equities were just ahead of Black Thursday (October 24, 1929) and during the excesses of the dotcom bubble. Both periods were followed by a bull market for commodities. 

In addition to the potential in commodity markets generally, Incrementum describes itself as "convinced" that "we are in the early stages of a new gold bull market". The authors do warn, however, that "gold investors should not fall into the trap of having too-high price expectations". Although the precious metal is "still facing considerable headwinds", the report notes various factors that will be favourable to the metal, including deteriorating economic figures, the discontinuation in US interest rate hikes, and the probable end of quantitative tightening later this year. 

Incrementum has much to say with regard to gold-mining equities. The report criticises "several years of creative destruction in the sector" but considers that most companies are now on a "much healthier footing". Relative to their own history, and to the price of gold, mining stocks "continue to appear attractively valued". 

The gold sector has met with enormous scepticism since 2011, and the Philadelphia Gold and Silver Index is lower against the S&P 500 Index than it was in 2000 (when the last big boom began) and at the same level as in 2016 (when a 170% rally began).

Moreover, Incrementum notes that Barron's Gold Mining Index (BGMI; the oldest available gold-mining index) is now at its lowest level relative to gold in 78 years. 

In the report's final section, 'Quo Vadis, Aurum', Incrementum gives its key takeaways on the metal's future. The authors conclude that the erosion of trust globally will play into gold's hands eventually, and the metal only recently reconfirmed its status as an excellent hedge against stock market slumps.

However, the Midas Touch gold model has been in 'sell mode' since May 20, and the immediate outlook for gold is "rather unfavourable". Indeed, Incrementum warns that the current short position in the precious metal "might be large enough to trigger the typical pre-summer panic sell-off towards June or July". 

Nevertheless, looking ahead Incrementum expects the political and economic tension between the US and China, and other uncertainties elsewhere, to support the gold price. "As soon as the gold price breaks through the resistance at US$1,360-1,380/oz, a gold price of US$1,800/oz seems within reach in the medium term."