Gold Fundamentals: Still Positive

Mr Boeckh, previously editor-in-chief of the Bank Credit Analyst, a monthly publication offering one of the most in depth macro-economic views of monetary conditions around the world, writes the Boeckh Investment Letter. The focus is on the long-term drivers of assets rather than short-term fluctuations. They constantly bring to light the state of money and credit movement within the context of long-term fundamental forces such as inflation and rate trends, debt supercycles, and Schumpeter’s creative destruction.  Boeckh also authored the 2010 book The Great Reflation: How Investors Can Profit From the New World of Money.

Below are a few macro themes and a few charts before the downloads:


1.  Tail risks are receding: the eurozone is holding together, Greece recently got an S&P upgrade, China has executed a soft landing and the U.S., despite its dysfunctional politics, has a number of things working in its favor.
2. Global growth will remain weak: leading indicators are not providing any evidence of an imminent return to trend growth rates in emerging or developed nations.
3. Central banks will likely step up the flood of liquidity and low interest rates will remain in place, as key central banks are set to drop inflation targets in favor of nominal GDP and labor market outcomes.
4. While excess capacity and labor market slack imply that the short-term inflation outlook is benign, shifting central bank policy and stepped-up government intervention may result in a pickup in inflationary expectations in the coming year.

Here is an excerpt from their latest letter spelling out the current fundamentals of the gold market.

Chart 13 shows the inflation-adjusted gold price using the world CPI from the IMF as the deflator. Significantly higher inflation in emerging markets especially during the 1985-1995 period results in a much lower real price for gold from an international perspective. Using the IMF’s CPI data as a deflator over very long periods is not suitable for a precise calculation, but it does serve to illustrate a key point. Gold looks a lot less frothy to the many billions of people who live in high inflation countries.


Download the content here:

Gold Fundamentals Still Positive

 Asset Allocation: December 2012






It has been proven time and time again that investment success has two key ingredients – understanding and acting on the few things that really matter, and focusing on sound process. Consistently good outcomes are the result of following those principles. This is what The Boeckh Investment Letter strives to bring to its clients and is why it has an outstanding track record.

Our approach is based on the following:

  • Money and credit movements are critical in determining basic trends in key investment markets;
  • Eclecticism and reliance on a variety of different tools and thought processes produce consistency in results;
  • Simplicity is essential in cutting through the constant chatter of the noise peddlers and getting to the key factors affecting markets;
  • Challenging collective “wisdom”;
  • Focus on aligning investment policy with the long-term fundamental forces such as Schumpeter’s creative destruction, Kondratiev’s long wave, corporative profitability, inflation and interest rate trends and the debt supercycle.