Gold and Cryptocurrencies are friends, not foes

Ronald-Peter Stoeferle, author of the "In Gold We Trust" report looks at the future for gold, the impact of geopolitical turbulence on the precious metal, and gold's relationship to cryptocurrencies.

Like Comment
Related Content

At the age of 14, Ronald-Peter Stoeferle, bought his first share, and his fascination with the financial markets was further fuelled during the dotcom boom. He has felt this passion ever since, which is why he is happy to have found his vocation at a young age.

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.

This interview was originally conducted in February 2018. 

You've been writing the “In Gold We Trust” report for 13 years . What makes you so interested in the gold markets?

I just love studying the various characteristics and angles of gold. Understanding various fields like history, monetary policy, (geo)politics, technical analysis, opportunity costs etc.  are crucial to understand gold and making forecasts.

Therefore, supporting the wealth management of our clients by analysing the strengths of an investment in gold and mining stocks is an enduring yet rewarding task. Investing in gold is not a short-term ride on a speculative wave but aims at a medium to long-term investment perspective, it’s not striving for a “The sky is the limit”-buzz, but for sustainable capital preservation in times of huge monetary experiments.

 What are your thoughts on where the gold market will move next?

As we have communicated extensively in the last couple of months, we are in the middle of a big “monetary U-turn”. QT and rising rates have already caused great havoc and events in Q42018 clearly showed that the market does not appreciate the end of the 10year long liquidity party.

Our central point is this: The global boom, fuelled by ultra-low interest rates and the never-ending expansion of the money supply and credit, is on shaky ground. The likelihood of the boom turning into a bust is high – much higher than the mainstream expects. 

How does the global political and economic state play into how gold is valued?

Again and again gold has proven to be the real safe haven, both when it comes to political and to economic turbulences. Thus, the more fragile the economic or the political situation is, the better gold performs. Gold is one of the few assets that can be bought and sold all over the world and in contrast to most assets, gold has no counterparty risk. Gold is nobody’s asset or liability. Thus, in a deflationary contraction or as a result of a haircut it cannot simply disappear, as do all other assets.

From our point of view, in 2019 many economies will be slipping into a recession. How does the gold price perform in recessions? Short answer: Very well! On the one hand investors are looking for safe havens in times of crisis, and gold is the classical safe haven asset; on the other hand many investors will anticipate monetary and fiscal stimulus and buy gold for inflation protection.

Where do you see cryptocurrencies’ role within the commodities and investment space?

Cryptocurrencies are here to stay, despite the fact that as with every new technology there is a lot of trial-and-error going. Time will tell, which business models are viable. In general, I believe that gold and cryptocurrencies are friends, not foes. In fact, a collaborative approach would play to the strengths of both. The first gold-based cryptocurrencies are underway as we speak. This could tremendously facilitate not only the purchase of gold, but also the use of gold as medium of exchange, aka money.

Ronald-Peter Stoeferle is a speaker at the upcoming Mines and Money London, taking place 25-27 November at the Business Design Centre. 

Andrew Thake

Head of Content, Mines and Money