Gold Is in a ‘Super Bull Market,’ the Next Inflation Wave Is Coming (Uncut) 02-04-2025

Gold Is in a ‘Super Bull Market,’ the Next Inflation Wave Is Coming | Ronald-Peter Stoeferle

This is Kitco News special coverage of the Future Minerals Forum. Hello and welcome back to Kitco Mining here at the Future Minerals Forum in Riyadh in Saudi Arabia with me, Paul Harris. Joining me today is Ronald-Peter Snöfeli, Managing Partner and Fund Manager at Incrementum.

Ronald-Peter, welcome to Kitco. The same as Paul. German or English? Yes, no, no, English, Peter.

We’re at the Future Minerals Forum. It’s an amazing event. My first time here.

I understand it’s your first time here as well. What is the vibe you’re picking up on? What has really impressed you about the event? Well, it’s amazing. It’s my first time in Saudi Arabia, the first time at the conference.

And I think that compared to conferences in the Western world, I would say the general atmosphere is extremely positive. It’s this kind of, OK, let’s do that kind of attitude. What’s also interesting is I think it’s a very young crowd and lots of women, actually, compared to Western mining conferences, where for the last 18 years, I always used to be one of the youngest kids.

And I feel that I’m still one of the younger ones. So I really, really enjoy the atmosphere. It’s a huge conference.

They set it up four years ago. It’s supposed to be 27,000 people. So I really like it.

I had my view about the country of Saudi Arabia. The view that is probably being delivered in the Western media, but it’s completely different. So I will definitely come back.

I will definitely come to that conference. And I mean, just for example, this ministerial roundtable that they had was the largest gathering of mining ministers ever. And I think that’s already quite telling.

So I just have to say, everybody, just come here and visit the country and go to this conference. It’s spectacular. I agree with what you say.

Does it signal, to what extent or not, does it signal that perhaps the balance of power in mineral financing, the mineral industry, is shifting, is tilting away from North America? Yes. This is exactly the leitmotif of last year’s Ingold Wealth Trust report, the new gold playbook, where we said actually the center of the gold world isn’t in Zurich, in London, in New York anymore. It’s moving to Dubai, to Shanghai, to Mumbai and also to Saudi Arabia.

And just one number. I mean, I think few people know that Dubai is responsible for 25% of the global gold trade now. They’re the second largest gold market in the world.

And I think this positive vibe that I’m seeing here definitely confirms that. And I think that people here are definitely thinking more long term. They don’t regard gold as a trade.

They regard it as money, as sound money. There is a very high cultural affinity for gold. And this is pretty similar to India, to Turkey, to China, obviously, where people, you know, they don’t get nervous when the price of gold is down 1.5% per day.

I think it’s really a different view on gold. And, you know, the numbers are almost two thirds of physical demand nowadays coming from emerging markets. And I think that’s also one of the reasons why the gold price is holding up so spectacularly well, because the majority of the demand is now coming from countries where they really want to have the physical stuff, and not paper contracts.

And I think, you know, this slow shift has clearly picked up momentum. And it’s not only central banks from emerging markets buying gold in enormous size, but also private individuals for investment demand, but also for jewelry. To echo your comments about the affinity to gold, we’ve had the privilege to interview a couple of Saudi ministers here at the event.

And the ministers are dressed in golden robes. Saudi Arabia now has the 15th largest central bank reserves. I was checking the data on World Gold Council at just over 320 tons.

Let’s talk more about gold itself. Gold has traded down from its record high of 2,800 US dollars per ounce, which is set at the end of October last year. But it’s still at a very healthy 2,650 dollars per ounce.

What is your outlook for the gold price this year? And what do you think will be the main drivers for the gold price this year? So, Paul, I would say for… To start with, I’m so impressed about this resilience of the gold price. We shouldn’t forget the US dollar, the Dixie index is up since October, basically 10%. Now, this is for, you know, for stocks, for mining stocks.

That’s not something special. But for the US dollar, actually, a 10% move in such a short time frame. That’s spectacular.

Then we’re seeing that 10-year yields approaching 5%. And we’re actually seeing the fact that while our market participants have expected four to five rate cuts for 2025, now majority is seeing like one or two rate cuts. So this would, let’s say in the old playbook, this would be like a horror scenario for the price of gold.

But still the price of gold is holding up so well. And let’s not forget, you know, gold was up 27% in US dollar terms last year. It was up 37% in Australian dollars and I think also Canadian dollars.

It was up 40% in Japanese yen terms. We could also, of course, say, you know, it’s not the price of gold rising, but rather the purchasing power of those fiat currencies collapsing by one third in just one year. I mean, that’s pretty staggering.

But the fact that gold is holding up so tremendously well after such a big run and with so many different headwinds like the US dollar yields, obviously, I think this is a clear sign of strength. So this bull market is, I don’t, I wouldn’t say it’s like the beginning. I think we’re just halfway through.

We’re perhaps like in a, to stay in football or in soccer terms. Yeah, perhaps it’s kind of a little halftime break. And I would have expected, to be honest, I’m on record saying that I’m for the short term, a little bit of a bearish bull.

I thought, OK, we would need more time to digest this spectacular move, this breakout from this pattern. But it seems that there’s so much capital waiting on the sidelines. And let’s not forget, Western financial investors haven’t participated in that rally yet.

So the GLD flows were actually down slightly last year. You would expect massive inflows into the ETFs in a year like 2024. So that makes me very, very confident.

We’ve been spot on with our model and our forecast last year. We predicted US$2,660. And for this year, 2025, our model says almost US$3,000.

OK, so the higher for longer scenario is playing out regarding US interest rates. Now, next week, the United States will have a new president as Donald Trump is sworn in as the 47th president. Is the gold prices, the gold sector, is it all about US debt? Is it all about US interest rates? Can Donald Trump have any impact on that? I think that the expectations when it comes to Donald Trump are very high.

He’s going to solve all the problems in the world. There might be some disappointment, I would say. He will probably not end every war.

I’m not so certain regarding the US debt situation. Actually, the US is adding every 100 days one trillion of additional debt. And that’s just from a political and from a legal point of view, it’s not that easy slashing the expenses and slashing the debt.

Can the US grow out of the situation? Perhaps I just had a very inspiring conversation with a friend of mine who said, you know, what Trump will do will move US GDP growth to 5% every year and we will just outgrow this debt problem. We’ll see. I think that, to be honest, it is like when it comes to gold and Donald Trump, his first term was very, very positive for gold.

And I would say this is just one driver for the price of gold. So, I would say that the big picture view for gold is actually that it’s not acting like a long-term bond anymore. There has been a complete decoupling.

If you have a look at charts and follow, you know, the development of, for example, the 20-year bond at Hanson Majority, since 2020, this long bond is down 44%, while the price of gold is up 72%. So, I think that measured in bond terms and fixed income is still by far the biggest asset class, much bigger than equities. You can tell that gold is actually in a super bull market at the moment.

And I think this is really where the future demand will come from. This will be investors that will realize, well, actually, with my traditional 60-40 portfolio, this would probably not work out in an environment of higher inflation volatility. And I think that even though many people think that inflation is dead, I think the next inflation wave is actually just building up.

So, therefore, will there be negative news for gold from Donald Trump? Perhaps, but I think there’s no way that he will really change those very, very bullish long-term dynamics that the gold price has at the moment. You mentioned a moment ago that central bank buying is moving eastwards in the world. Now, Donald Trump also seems to be pushing a more adversarial relationship with China, increasing perceptions of geopolitical uncertainty, geopolitical risk.

In that context, do you expect that to be a driver for even more central bank buying? Yes, and we’re seeing that this trend, you know, central banks are basically soaking up almost 30% of the annual gold production every year since year 2022. I think this will continue. But, Paul, do you know where during his first term, what was the first trip abroad of Donald Trump? I cannot remember.

Saudi Arabia. So, I think that Donald Trump completely understands the importance of the petrodollar and this strategic relationship between Saudi Arabia and the United States. Of course, a lot has changed since his first term, especially when it comes to China.

But I think, and we will be writing about that in our upcoming Gold With Trust report, I think it’s very, very interesting. The BRICS, and we wrote about delaurorization for many years, but the BRICS obviously have an enormous success. If you look at the last meeting in Kazan, for example, and the report that they put out, it seems that they’re becoming more and more self-confident.

So, I think the BRICS, it’s clearly a block that is forming. Western world versus the BRICS. Now, the interesting thing is that at the last meeting, Saudi Arabia was actually invited to join the BRICS.

Same goes for Argentina. Same goes for Indonesia. Indonesia just joined, but Argentina basically said, okay, no, we’re not accepting the invitation.

We’re more on Team USA. Saudi Arabia hasn’t accepted yet, but hasn’t declined it either. So, they’re still considering it.

They’re basically trying to play a middle ground, looking to benefit from both sides. One thing it does want to do, you mentioned the oil petrodollar construct, which was implemented several decades ago. Saudi Arabia is indeed looking to be able to sell its oil in other currencies than the U.S. dollar.

So, that is one thing where it is perhaps more aligned with the BRICS. Now, let’s talk about perhaps the future of gold or gold in the modern age. The World Gold Council is working to create digital gold, a project aimed at revolutionizing how gold is traded and used as a financial asset.

So, they can trade similarly to cryptocurrencies with the visibility down to one hundredth of a gram, which would make it also accessible to a younger generation, perhaps more tech savvy investors. With digital gold perhaps being able to trade similarly to cryptocurrencies in the future, to what extent or not do you think that would attract new institutional and individual investors to gold? That’s a great question. I mean, I think it’s an important innovation.

But will it really be a competitor to cryptocurrencies? I don’t know. Because if you look at the demographics of cryptocurrency investors or say speculators, traders, whatever, it tends to be very much of the younger crowd. And I don’t know about you, Paul, but if I look back, you know, the last couple of years, you know, the music that I listen to, the way that I dress, the way that I party now compared to when I was a teenager, like 17 or 18 years ago, is a different one.

So, I think if you’re younger, you enjoy the volatility, you enjoy, you know, the wild ride. Well, when you turn older, you want to have it a little bit more conservative. If you know what I mean.

So, I’m not sure if it’s really gonna be, if it’s gonna take a large part of the market share of crypto investors. I’m not sure. But what I can tell you is we are running two funds that combine gold and Bitcoin.

And we’re seeing that many Bitcoin investors that really get it, that understand the stop-to-flow ratio, that understand scarcity, that understand our monetary system, understand the Austrian school of economics, they start buying gold. So, it’s going both directions, actually. While I would say the younger crowd is really focused on this crypto space, you know, those meme coins and all that.

I would, you know, like Fartcoin, yeah. I don’t think that Fartcoin is a very sound investment that Warren Buffett would suggest buying. But that’s a part of this whole mania.

I imagine younger investors only really like the volatility when it’s going up. Of course. So, even if gold is, a mechanism of buying and selling, holding gold is created that’s equivalent to cryptocurrency, do you think younger people still see it as, you know, grandpa’s investment? To some degree, yes.

But we’ve got, as you know, we’ve got a lot of comparisons regarding the purchasing power of gold. And I think, you know, what people don’t or most people kind of get wrong is the fact that, you know, gold doesn’t make you rich overnight. It doesn’t make you poor overnight, obviously.

But it’s really there to protect your purchasing power over long timeframes. Now, what we do, for example, is we’ve got the gold beer ratio, which shows you the purchasing power, one ounce of gold at the Munich Oktoberfest. We did the same with ski tickets, as Austrians tend to be really not good at skiing anymore, but it’s our favorite national sport.

So, people are complaining, you know, that the ski tickets get more and more expensive. Measured in gold, actually, it’s getting cheaper and cheaper. And we did the same with iPhones.

And this was a chart or an infograph that was extremely popular with the younger generation, because they realized, well, actually, in gold terms, the prices of an iPhone are not going up every year. They’re rather going down. So, what we really try to do is educate the younger generation, because, you know, as I’ve said, you tend to become a little bit more conservative.

But if you reach them when they’re young, like, I mean, I had my first contact with gold, getting like little gold ounces from my grandparents, you know, for Christmas and for birthdays. So, I think it’s important, even though they might be more interested in Bitcoin, crypto, whatever, to just introduce them to the virtues of gold. But what’s really important, Paul, is just one more thought.

I think we really have to differentiate between the Western investors at the moment and emerging markets. So, we didn’t see any inflows from Western investors yet. They’re basically all sitting outside.

They are seeing the gold party and they think, okay, is it now too late to join the party? The admission ticket is pretty high, but then on the other hand, you know, the party is going on. And I think that there’s so much capital waiting on the sidelines from Western financial investors who haven’t participated in that rally yet. And this basically is shown on the gold chart that every small dip is being bought.

And that makes me very confident going forward, because the Western financial investor hasn’t participated in that rally yet. Another potential change that could help boost is if banks are able to use gold as a tier one asset in which they can hold their reserves. If that ends up being the case, what potential impact could that have on gold demand and, of course, the gold price? Well, we touched that topic in one of our previous In Gold We Trust reports, because it was a big thing in the gold scene.

I talked to, I would say, seven different people in different banks in Europe. So, it was pretty interesting to see that they’ve got no interest in gold at all. So, if you’re really talking to people from the banks, for them, buying gold on their balance sheet isn’t a big topic.

If you talk to big industrial companies, holding gold on their balance sheets is not a big thing. If you talk to institutional investors, holding gold for their investment vehicles isn’t really a big thing. So, for example, in most of our funds, in the so-called usage funds, we’re not allowed to hold physical gold just by the legal framework.

Perhaps it’s to some degree financial repression. It is perfectly fine to hold government debt and put 10 times leverage on that. So, I would say, to what I found out in my research and lots of conversations, it’s not really a big topic for people inside the banking industry at the moment.

I can understand that. The gold companies, the gold producers don’t even hold gold on their balance sheets. They don’t see it as necessary or attractive.

So, if they’re not, why would anybody else? Let’s talk about gold stocks a little. Investors have been disappointed that higher gold prices have not supercharged gold stock prices or performance. Have investors given up on gold stocks? Can companies win them back? If so, how? Well, I think that if you are a generalist investor and you think that, well, actually gold is doing well, I want to have some more leverage on the price of gold.

Let’s have a look at mining stocks. What do those generalist investors usually buy? They buy the largest stocks. If you have a look at the charts of Newmont, Berwick, well, actually, last year, I think they were flat or even slightly down.

So, then as a generalist investor, you ask yourself, why actually are they not able to make any money? By the way, I think that both Berwick and Newmont will have a pretty good year ahead. And I think that from a contrarian point of view, it’s a pretty good setup at the moment because everybody loves to hate those two stocks. But of course, as a generalist investor, you start questioning your investment consideration.

And, you know, a large institutional buyer won’t buy into a junior mining stock. Doesn’t have the time to research like a mid-tier company, a developing company. You want to go for the liquid big guys.

So, I think that at some point it is probably coming back because if you just have a look at the balance sheet and the cash flows that most of the mining companies are producing at the moment, the margins that they have at the moment with, you know, gold prices being up significantly last year, while cost inflation seems to be, you know, fairly under control. I think most of the companies did a pretty good job in the last couple of months to actually put in place programs to, you know, to control the cost inflation that they had big time in 2022 and 2023. So, that makes them pretty confident.

But I think we will really need to see excellent performance and outperformance of the largest mining stocks versus the price of gold. Then I think this will open up more momentum and more flows into the sector. I agree with you there.

I’ve had many conversations with generalist investors. And as you say, they don’t have the time to do the research. So, they tend to look at the sector leaders, the big companies and make their decision there.

And as you mentioned, their performance, you know, Newmont, Barrick, etc., has been pretty mediocre. So, generalist investors see that and say, nothing special here. Let’s forget the sector.

Thanks, but no thanks. I spoke with Tom Palmer, CEO of Newmont yesterday. And he’s very conscious of this issue.

And he said this year, the company is going to be getting back to a tier one cost position. It is the sector leader. It is the biggest company in the space.

If it does get back to a tier one cost position, maybe generalist investors will see that and start being attracted to Andon again. Let’s hope so. Okay, let’s wrap this up, Ronny.

How do you see 2025 playing out in the gold space? Well, as I’ve said before, I’m not too bullish for the next couple of weeks, to be honest. I think that the dollar will probably, could explode higher, but it’s already pretty overbought. The sentiment is very positive.

But I would see some sort of a last leg up in the US dollar. Then I would say like in the second quarter, end of the second quarter, beginning of the third quarter, I would see that the dollar really starting a downtrend. So, that might be one trigger.

Then, of course, when it comes to interest rates, I think that markets are positioned in a very, very hawkish way. So, that could change pretty quickly. As I’ve said, in the Western world, nobody is really invested in gold yet, which is from a contrarian point of view, it’s also very positive.

What makes me a little bit concerned or what’s perhaps telling me that we’re not in the final third of this move in gold is the fact that commodities are still underperforming. But then on the other hand, for example, energy has done pretty well the last couple of weeks. Copper has done really well and some other commodities, while iron ore, for example, is down big time in the last couple of weeks.

But we shouldn’t forget the enormous strength of the US dollar. But I think in the commodity space, and I’m perhaps a little bit biased because we just did set up a new commodity fund, and we got lots of criticism for that, which is from a contrarian point of view, that’s a good sign. And the sentiment regarding commodities based on the Bank of America study is the most negative one since 2017.

So, everybody hates commodities now because everybody is bearish on China, obviously. But we don’t really see any strong trend in commodities yet. The second thing is we don’t see any outperformance by silver yet.

Normally, at the later stage of the gold bull market, silver should really be outperforming gold. Last year, we’ve seen a tiny outperformance, but still the gold-silver ratio is telling me actually that silver is both on a relative and an absolute basis, it’s just tremendously undervalued. And as a confirmation indicator for gold, it’s telling me, okay, it will have lags.

And then the mining space, as we discussed, we don’t see any real outperformance of the mining space compared to gold. So, that suggests to me, as I’ve said at the beginning, we’re somewhere in the middle of this bull market in gold. We will see enormous outperformance of silver, enormous outperformance of the mining stocks.

I think that commodities are a great idea at the moment. So, that makes me really excited about our products, our industry, and also the upcoming gold interest report. Well, let’s hope so.

I look forward to catching up with you later on this year to see how that thesis is playing out. Ronald Peter Sturphillie, vielen Dank. Thank you very much for joining us today.

Vielen Dank, Paul. It was a pleasure. Thank you very much.

And we have a lot more to come from the Future Minerals Forum here in Riyadh in Saudi Arabia. So, stay tuned and hit that subscribe button. I’m Paul Harris and this is Kitco Mining.

This is Kitco News special coverage of the Future Minerals Forum. See you next time.