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50 Slides for Gold Bulls – The New Incrementum Chart Book Introduction


A Companion Update to this Year’s “In Gold We Trust” Report

Our good friends Ronnie Stoeferle and Mark Valek of Incrementum AG have just published a new chart book, which recaps and updates charts originally shown in this year’s 10th anniversary edition of the “In Gold We Trust” report and provides an overview of recent developments relevant to the gold market. The chart book can be downloaded in PDF form via the link at the end of this post.

Queen Elizabeth

Queen Elizabeth skeptically eyes what little is left of England’s once sizable gold hoard.

Her mien seems to indicate regret. Well-known socialist financial guru Gordon Brown ordered the sale of half of the UK’s gold in 1999, at prices that had just reached 20 year lows. Not surprisingly, these prices have never been seen again. While he created a once-in-a-lifetime buying opportunity for the rest of the world, the Queen possibly suspects that regrets over this ill-conceived disposal could one day easily become a great deal more intense.

Photo credit: Getty Images

We show one of the updated charts below, namely the proprietary Incrementum inflation signal. The calculation of the signal is based exclusively on market-derived inputs. It tends to be far more sensitive to changes in inflation/ deflation pressures than many other gauges, which results in more timely responses to changes in these pressures. At present it clearly indicates that the environment for precious metals remains favorable.

Incrementum Inflation Signal

The Incrementum Inflation Signal: current conditions are favorable for precious metals and other inflation-sensitive assets.

The Big Bad Bear

Many well-known mainstream financial media seemed uncharacteristically silent about the 11 year long (and quite relentless) gold bull market from 1999-2011. Occasionally a disparaging remark was dropped, or a few sentences ascribed to Warren Buffett were quoted (something about Martians scratching their heads in wonderment when looking at gold hoards gathering dust in vaults on Earth). Compared to the rah-rah-rah that usually tends to accompany rising stock prices, gold’s rally almost had the air of a funeral.

If memory serves, most of Wall Street officially discovered the bull market around 2009 – 2010, not exactly an example of the most rapid or timely embrace of a strong uptrend either (there were a few notable exceptions). Quite a few WS houses only became truly enthusiastic about gold a few months before it peaked and remained that way for almost an entire year thereafter, a time period during which gold basically went nowhere – until it broke down, that is.

Over the past few years a lot of ink has been spilled on the bear market that started in late 2011 though. Around mid 2013, numerous authors writing for the above mentioned publications were suddenly kissed by the muse and discovered they had a great deal to say about the bear market in gold. Even endearing new terms for gold entered the lexicon (“pet rock”). Falling gold prices seemed to be a very effective antidote for writer’s bloc.

We have penned several missives on gold’s role as the J.R. Ewing of the investment world – it is essentially the asset they love to hate. There are of course very good reasons for this, many of which we have discussed in depth in “Gold and the Grave Dancers”.

That is not the point of the above though. We mainly want to remind readers of the unusual efforts expended between mid 2013 and late 2015 on producing a veritable flood of screeds proclaiming gold’s imminent demise. This backdrop serves as the mise-en-scène for the following table from the chart book, which shows the annual performance of gold since 2001 in terms of nine major currencies:

As you can see, there is a time for everything. Even including the massive correction of 2011 – 2015 (in USD; 2011 – 2013 in EUR), gold is beating the annualized returns of other major financial asset classes by a huge margin over the past 16 years.

Gold Performance Table

Gold’s annual performance since 2001 in terms of nine major currencies.

2013 was indeed quite a bad year for gold; and to be sure, 2015 wasn’t much to write home about either. Other than that, gold’s average annual gain of 10.85% (in terms of all currencies combined) or 11.94% in USD terms, means it has vastly outperformed every other major asset class since 2001 – click to enlarge.

Points of Departure

Naturally, there is no guarantee whatsoever that gold will resume its outperformance in coming years, but we believe the secular bull market still has some life left. In fact, long term bull markets in gold and commodities traditionally tend to deliver their greatest gains in the final rally phase (this is so because these assets are driven by fear rather than greed – and fear always produces price spikes).

The next chart illustrates the relative price performance of gold, the SPX and the 30 year t-bond since mid 1999. The yields of the latter two are not included in this comparison, i.e., on a total return basis they have done better than is shown here – but a huge performance gap would remain even so:

Whether gold, stocks or bonds are the better investment obviously depends on one’s starting point, but it is worth noting that the one we have chosen above – the 19.5 year low in gold in 1999 – is never mentioned as a viable point of departure in the mainstream financial media. And yet, they will glibly parrot truisms like “buy low, sell high”.

A great many authors like to focus on gold’s manic spike high on January 21 1980, which obviously puts the metal’s subsequent performance in the worst possible light. This makes very little sense though, considering that the final 41% gain of that particular rally was produced in the span of just five trading days.

Obviously it was a very unique situation – indeed, it was a speculative blow-off driven by fears over the Soviet Union’s brazen invasion of Afghanistan on December 24 1979. On the eve of the invasion gold traded at $473 – a time at which its advance had already been egged on considerably by the Iranian revolution. It peaked exactly one month later at $850. A mere five trading days before the peak it traded at $603.

Performance Comparison Chart

Price performance of gold, stocks and bonds since mid 1999. We’re not sure what the Martians would say to this, except maybe “we should have bought some”.


The Incrementum chart book attempts to help to answer the question whether gold remains an attractive investment. After all, it is no longer the bargain it was back in 1999-2001 – but that certainly doesn’t mean its secular advance is necessarily done. We think there is every reason to believe its best days are yet to come.

Warren Buffett

Meet Warren Buffett’s gold advisor. If you see him, hide the women and children. Image credit: Tim Burton Productions.

Download link: Incrementum Chart Book – 50 Slides for Gold Bulls

Charts by: Incrementum, StockCharts


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Pater Tenebrarum
Pater Tenebrarum is an independent analyst and economist/social theorist. He has been involved with financial markets in various capacities for 39 years and currently writes economic and market analyses for independent research organizations and a European hedge fund consultancy as well as being the main author of the acting-man blog.
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