I had the chance to reconnect today with one of the young emerging leaders of the gold market, Ronald Stoeferle, publisher of “In Gold We Trust”, the world’s definitive annual report on gold.
During this fascinating interview, Ronald spoke to what contrarian buyers are doing right now, and further explained, “the point of maximum pessimism” has been reached, to where in response, staggering physical demand nearly broke the leveraged paper gold system over the last week.
Starting out by commenting on the ugly sentiment displayed at last week’s European Gold Conference in Zurich, Ronald said, “If you compare the situation at the hotel bar to last year and the year before…[patronage] increased dramatically—so people were really frustrated. From a psychological point of view, it was a really interesting time to attend a gold miners conference…[because] last year’s sentiment was already extremely negative, [but] this year it was just horrible…I think this was a gathering of the last [remaining] gold bulls in Europe.”
Further speaking to sentiment, Ronald added that, “We’ve already reached the point of maximum pessimism…We’ve seen a huge move downwards, extremely high volume, and the ‘bursting gold bubble’ [headline]…all over Europe, and all over the world. That’s a textbook panic…[Additionally], there were 15 journalists calling me on Monday…[including] many former colleagues, people who haven’t called me in years and they were [all] really panicking…They have no clue what’s going on, [and] they [all] think…Cyprus was responsible for this take-down…[So] over the last week we’ve seen desperation, panic, and anger.”
However, these are the best markets for contrarian buyers Ronald explained, as,“Buying [pays] when there’s blood on the street—even if it’s yours…[So] from my point of view, [this] is probably the biggest buying opportunity in this bull market—I would compare it to 1987 for stocks…as you know…[after] 1987 we’ve saw 13 years of a bull market….[So] going forward; three months, one year, two years [from now]—everybody will probably say, ‘S***, I should have bought gold in the middle of April of 2013, that was a huge buying opportunity. Everybody was panicking, [and] sentiment was at all-time lows’.”
In terms of mining stocks which have been beaten worst of all, Ronald explained that, “[In Europe], everyone is long Nestle…pharma companies…[and] the utilities—[all] very crowded trades from my point of view. But nobody is confident when it comes to gold mining stocks. As a contrarian, that makes me really confident, so I’m going long the miners…you have to be extremely selective…[but] I think it’s the most contrarian trade you can make at the moment.“
Speaking to the major issue of paper-delivery default, Ronald said, “We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players…[it's] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.“
As a final comment to reassure battered gold bulls, Ronald stated that, “Physical gold is cash, and it’s probably the most solid and safest [form of] cash that one can own.“