In a keynote at the recent World Gold Forum, Ronald-Peter Stoeferle of Incrementum honed in on gold’s recent performance, suggesting that at this point it’s time to take the opportunity to buy. 

Stoeferle, who is a partner at Incrementum and the originator of the annual In Gold We Trust report, explained that a bull market has three stages: accumulation, public participation and distribution.

“I think we’re in the first third of this public participation phase, so every dip should probably be bought,” he told listeners at the online event.

Get into gold before the masses arrive

Putting that idea into context, Stoeferle explained that the first bull market phase, the accumulation stage, is when “the most knowledgeable and contrarian investors” begin to buy.

“We’ve probably seen that from 2016 until 2018,” he said, noting that these knowledgeable and contrarian buyers enter the market because they believe a turning point is near.

The second public participation stage is the longest, noted Stoeferle, and that is when most trend-following investors jump into the market. “Prices start to rise rapidly in this phase and the news becomes more optimistic, and analysts raise their price forecasts,” he commented.

As mentioned, in his opinion the gold space is at the beginning of this second phase right now. “W e are in this public participation phase, and I think that — as I’ve said — every dip should be bought, and we should ride this bull market,” he emphasized.

He believes it’s important to get in before the third distribution phase happens — that’s when the general public gets wind of what’s going on and enters the market ” on the presumption that the current trend will continue forever.”

Stoeferle added, “In this phase, the very same informed investors who began buying in the first place begin to sell before anyone else starts.”

5 more takeaways on gold from Stoeferle

Stoeferle’s presentation at the World Gold Forum was wide ranging, covering a variety of topics beyond the stages of a bull market. The other points he made include:

• The real black swan isn’t the coronavirus — “The proper metaphor for the corona crisis is a so-called ‘gray rhino,’ which refers to a highly probable but neglected threat that has an enormous impact,” said Stoeferle. He added, “Actions by politicians and central bankers and their impact on the real economy … that’s the black swan.”
• Central bank trust is a bubble right now — Stoeferle noted that financial market participants have been conditioned to expect central bankers to come to the rescue “every time the markets correct.” However, he said, “From my point of view, one of the biggest bubbles out there that still exists is the trust in central bankers. And this trust in central bankers is tested at the moment.”
• Gold has done what it’s supposed to do — While there was some concern when gold sold off along with other assets in mid-March, Stoeferle pointed out that over time the yellow metal has done what it’s supposed to do — first, it gave investors liquidity, and then it acted as a portfolio stabilizer, providing “a good hedge against crashing equities.”
• If you like gold, you should like silver too — “Since 1718, silver has never been cheaper relative to gold,” Stoeferle commented. “So if you expect a bull market in gold, then you should probably also consider buying some silver, which is probably much more contrarian than gold and commodities at the moment.”
• Mining stocks also present a buying opportunity — Displaying a chart comparing gold to the Barron’s Gold Mining Index, Stoeferle said mining stocks are “dirt cheap” compared to gold. “Y ou can see that the current uptrend is still relatively weak compared to its predecessors, so should we actually be at the beginning of a pronounced uptrend in precious metals stocks … there remains plenty of upside potential,” he said.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.