Pater Tenebrarum

About the Author Pater Tenebrarum

I'm an independent analyst and have been involved with financial markets for 31 years. I write economic and market analyses for independent research organizations and a European hedge fund consultancy. I'm the main author of the blog 'Acting Man', which presents articles on the markets and the economy, a mixture of commentary on current events as well as economic theory and history from an Austrian school of economics viewpoint.

The Gold Standard: 2015 Report on Gold

As every year around this time, our good friends Ronald Stoeferle and Mark Valek, the managers of the Incrementum Fund, have published their annual “In Gold We Trust” report, the extended version of which can be downloaded below.




This year’s report is slightly longer than the 2014 report and discusses practically the entire breadth of gold-related topics, including highly instructive excursions into economic theory, monetary history and an extensive discussion of current political and economic trends.

For the past few years, gold investors certainly had little to write home about. In dollar terms, gold has essentially been going nowhere, with a slight downward bias. Actually, the past three years in the USD gold price look a bit like the past 18 years of “global warming”.

And yet, a lot depends on one’s home currency. Gold’s sideways trend in dollar terms actually represents a small victory, given the strong rally in the dollar in 2014. As a result, gold price charts actually look quite encouraging in terms of most non-dollar currencies. In fact, its performance in euro and yen terms over the past 18 months has been none too shabby.

Moreover, as Ronnie and Mark point out, gold has held up extremely well in a disinflationary environment in which many commodities such as crude oil have been obliterated. As our readers know, we believe that the underlying bid that is supporting gold is from people who are looking at the third huge asset bubble blown by loose monetary policy within the past two decades and are feeling increasingly queasy. It can’t hurt to hold some insurance – and sooner or later it will be essential.

Naturally, while the party in “risk” still rages, it is widely held that this time is somehow different. Actually, every slice of economic history is unique, but as Mark Twain noted, history often does tend to rhyme. There is one thing that unites all credit expansions: they eventually all blow up – as in, no exceptions. In this sense, it is never different.


Gold in currencies

Gold priced in US dollars, euro and yen over the past 18 months. Gold may look weakish in dollar terms, but it certainly looks just fine in terms of every other major currency, via StockCharts, click to enlarge.


Since the last financial crisis, even more debt has been piled up all over the world. Much of this debt is collateralized by hopelessly overvalued assets, ranging from real estate to securities (it seems unlikely that many art works are bought on credit, but the vast money supply growth of recent years has certainly spilled over into this particular sector as well). More and more debt has come to depend solely on faith: the faith that governments will continue to be able to roll over their debt indefinitely without endangering the value of the currencies they issue.

Ronnie and Mark inter alia discuss Japan, the public debt of which by now amounts to 19 times its tax revenues. It seems obvious that buyers of the government’s debt can no longer merely rely on being made whole by its coercive powers of taxation. That leaves only the central bank’s proverbial printing press as a backstop to this debtberg. Well, we have seen it all before – countless times in fact. Somehow we have yet to see it end happily.


goudenmunt2 A solidus issued by Roman Emperor Heliogabalus, who ruled from AD218-222


Stater, Croesus

One of the earliest known gold coins, the gold stater minted by King Croesus (who ruled Lydia from 561 – 546 BC). Incidentally, the coin depicted above sold for €63,000 at an auction (approx $70,500)


If you wonder why one should buy and hold gold while “missing out” on the seemingly unstoppable expansion in stock, bond and assorted real estate prices, the 2015 “In Gold We Trust” report should make the matter abundantly clear.

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