Inflation 'a huge tornado'

IT could take several years to tackle inflation, delegates at the Precious Metals Summit in Beaver Creek, Colorado, heard last week.
Inflation 'a huge tornado' Inflation 'a huge tornado' Inflation 'a huge tornado' Inflation 'a huge tornado' Inflation 'a huge tornado'

Ronald-Peter Stöferle

Incrementum AG managing partner and investment manager Ronald-Peter Stöferle told the forum $50 trillion had been wiped from global markets so far this year - more than the combined GDP of the US and China.
 
"I would say that's a huge tornado," he said.
 
"It's naïve to think gold can completely decouple from financial markets."
 
Gold dipped to two-year lows of less than $1700 an ounce last week ahead of strong US labour figures and a larger-than-expected potential interest rate rise.
 
ANZ Research said the break below $1675/oz suggested the price could fall to $1600/oz and cut its three-month price target to that level.
 
Despite interest rates rising from 0% this time last year to nearly 4%, Sprott Asset Management senior portfolio manager John Hathaway said rate rises to date had been insufficient to tackle inflation.
 
"The thought that inflation can be defeated in six months, or a year, is totally fallacious," he said.
 
Hathaway believes the US is headed for an L-shaped recession.
 
"That's what happened in the ‘70s and I think that's what needs to happen again to conquer inflation," he said.
 
Stöferle predicts equity markets are in for a rough few weeks but believes the end of the current interest rate hiking cycle is nearing.
 
"I have to call BS on this soft landing," he said.
 
"I think it's going to be a nasty recession."
 
Hathaway said estimates for earnings growth in the S&P 500 in the current half were "hilarious".
 
"We're heading for a much steeper recession than what's being priced in," he said.
 
"If the Fed pivoted tomorrow you can't stop what's already in motion."
 
Stöferle said there should be more focus on fiscal policy than central bank policy.
 
Hathaway agreed, saying he hoped the market would move away from the "obsession" with Fed policy.
 
He also said the pattern of a strong US dollar being bad for gold was "just a phase or a short-term irritant", while ANZ sees the dollar peaking in the first quarter of 2023.
 
Stöferle noted that while there had been a "brutal" bear market in US dollar gold, gold in other currencies was holding up.
 
"Eventually people will realise gold is a good inflation hedge," he said.
 
"At some point gold will become less of a satellite asset - it will become a core asset."
 
According to ANZ, gold has only ever finished lower once during a rate-hike cycle.
 
"There's a pathway for gold to trade much higher," Hathaway said.

 

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