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‘In Gold We Trust’ Report Forecasts $2,300/Oz By June 2018

(Kitco News) – Incrementum AG is still sticking with its $2,300-an-ounce longer-term forecast for gold, calling for this to be hit in the next two years.

In the 10th annual “In Gold We Trust” report Tuesday, authors Ronald-Peter Stoeferle and Mark J. Valek described the first quarter as the strongest period for gold in 30 years, with the metal emerging from a bear market that had been in force since 2013.

In particular, analysts cited ultra-low global interest rates, including negative rates adopted by some central banks in their effort to jump-start economic growth.

“Gold is increasingly attractive in this environment,” the report said. “It used to be said that gold doesn’t pay interest; now it can be said that it doesn’t cost interest.”

Furthermore, any moves to unleash so-called “helicopter money” into the economy likely will jump-start inflation, the report said.

Gold had been dinged the last few years by the perception the U.S. economy was recovering, thereby helping the U.S. dollar and leading to expectations of normalization of U.S. interest rates. However, the Federal Reserve hiked only once by 25 basis points back in December. And, said Incrementum AG, now it appears that the U.S. economic expansion may have run its course.

“We believe the time for investing in inflation-sensitive assets has come,” said the report, also describing mining stocks as “interesting opportunities.”

The annual report listed a long-term target of $2,300 an ounce back in 2008, when gold was trading around $800 an ounce. The metal got up to around $1,920 in 2011 after a decade-long bull run, before falling back below $1,100 late last year, then rallying again. Incrementum AG said it stands by its thesis that gold will rally, arguing that central bankers cannot create a “self-sustaining” economic expansion by printing money.

“According to our perception, the events of the past year are validating our views and we are maintaining our gold price target of $2,300 by June 2018,” Incrementum AG said.

Governments have undertaken “structural over-indebtedness” in many parts of the world, spending cuts are “illusory” and massive tax increases are seen as counter-productive, the report said. As a result, central banks have undertaken a monetary “all-or-nothing gamble.”

Meanwhile, actions by central banks have led to a “bubble” in interest-rate markets, decimating free-market price discovery, the report said. The authors describe interest rates as being at the lowest level in 5,000 years.

“When this bubble inevitably bursts, it will be abundantly clear how valuable an insurance policy in the form of gold truly is.”

Incrementum AG suggested a new recession is “inevitable” and there is even potential for “stagflation,” which is the combination of stagnation and inflation.

The authors said they would not be surprised if there is a short-term correction in the market.

“However, we don’t expect a very deep correction, since it appears as though many potential buyers are waiting on the sidelines, eager to buy dips,” the authors said. “Relative strength in silver and mining stocks gives us confidence as well. Positive seasonality in the second half of the year should also provide a tailwind. All in all, conditions for the new bull market to become firmly established appear to be quite favorable from a technical perspective.”