The Synchronous Bull Market Indicator 1

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 The Synchronous Bull Market Indicator 2

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 The Synchronous Bull Market Indicator 3

The Synchronous Bull

Market Indicator
There will always be bull markets followed by bear
markets followed by bull markets.
John Templeton

• According to the logic of the Synchronous Bull • In March 2023, the Synchronous Bull Market
Market Indicator, gold and equity markets move Indicator confirms a new secular gold bull market

antagonistically. When stocks are engaged in a that started in January 2022.

long-term bullish trend, gold is confined to a long-

• The primary factor behind these long-term trends
term bearish trend and vice versa.
is the rise or fall of investor confidence,

As a result, since the 1970s, there have only been specifically confidence in the robustness of the

four successive long-term bullish trends in gold economy and the stability of the financial system.

and the S&P 500: This is not merely a theoretical concept; it can be
gauged and assessed, albeit indirectly.

1) the gold bull market of the 1970s

• A strategy that follows these long-term confidence
2) the equity bull markets of the 1980s and 1990s
cycles can yield substantial additional returns
3) the gold bull market from September 2000
compared to a pure buy-and-hold strategy.
until September 2011
4) the equity bull market from October 2011 until
December 2021

Dietmar Knoll
Dietmar Knoll is a banker and worked for four decades in corporate banking at Deutsche Bank
AG, most recently as a restructuring expert in risk management advisory. In his retirement, he is
researching the question of what really drives the price of gold.

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 The Synchronous Bull Market Indicator 4

The Synchronous Bull Market Indicator

In last year’s In Gold We Trust report1, the Synchronous Equity and

Gold Price Model (SEGPM) was introduced, demonstrating that the
price trends of US equities and gold in the past 50 years can be
attributed to just two factors: money supply development, which acts as the
primary driver, and investor confidence, which serves as the control mechanism
for the distribution of value between these two assets. 2

The reason this ratio (the S&P Investor confidence is characterized as the trust investors have in the resilience of
500 to Gold Ratio) is popular the economy and the stability of the financial system. While this metric cannot be
and worth monitoring is because assessed directly, a review of the trends over the past five decades indicates that
it can easily gauge the ‘mood’ of the S&P 500/gold ratio is an appropriate and trustworthy substitute.
the investment community. A
low ratio indicates investors are This year’s article aims to furnish interested investors with an accessible tool that,
feeling pessimistic about the leveraging the insights of the SEGPM, can be utilized to detect early and reliably
outlook for the economy and secular bull markets for equities and gold, enabling investors to consistently
financial markets, whilst a high execute an alternating trend-following strategy that is founded on factual evidence.
ratio suggests investors are This tool will be called the Synchronous Bull Market Indicator (SBMI).
optimistic.
Perth Mint Backtesting a strategy that follows the guidelines of the SBMI reveals that the
potential return from this strategy surpasses the return of a pure buy-and-hold
strategy (in stocks, gold, or a 50/50 allocation) by a factor of at least 15 over the
past 50 years.

How are bull and bear markets officially defined?

The average man doesn't wish to The US Securities and Exchange Commission (SEC) defines a bull market as: “A
be told that it is a bull or a bear time when equity prices are rising and market sentiment is optimistic. Generally, a
market. What he desires is to be bull market occurs when there is a rise of 20% or more in a broad market index
told specifically which particular over at least a two-month period”. Conversely, for a bear market, the same
stock to buy or sell. He wants to conditions apply but with the signs reversed.
get something for nothing. He
does not wish to work. He doesn't While it’s straightforward to verify whether an asset or market has experienced a
even wish to have to think. rise or fall of 20% within a specified time period, assessing market sentiment, i.e.,
Jesse L. Livermore the collective mood of market participants, is a more complex undertaking.

The most prevalent method for capturing market sentiment is by conducting

surveys of market participants. Additionally, market data such as trading volume,
market volatility, or momentum may be utilized. Ultimately, the goal is to gather a
summary sentiment assessment from the largest possible number of statistically
reliable components.

Investors today have a range of different instruments to choose from. However,

their statements and results frequently differ. Furthermore, there is almost always
an inadequate long-term database, making a coherent cycle analysis extending
back decades challenging. As a result, many investors ignore this critical

-
1
“The Synchronous Equity and Gold Price Model,” In Gold We Trust report 2022
2
You can reach the author at [email protected].

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 The Synchronous Bull Market Indicator 5

component of the SEC definition, or they take optimistic market sentiment for
granted, assuming that prices will continue to grow positively.

The monetary managers are A result of this is that nearly any asset or market can transform into a
fond of telling us that they have bull market, as long as the currency used to measure prices is weak
substituted ‘responsible money enough. Current examples of this thesis can be found in the equity markets of
management’ for the gold countries such as Venezuela or Turkey. The most impressive historical example,
standard. But there is no historic however, is the German equity market during the Weimar Republic. In the period
record of responsible paper from January 1918 to November 1923, the equity index of the Statistisches
money management ... The Reichsamt, which is quoted in paper marks, rose by around 21,300,000,000%.
record taken, as a whole is one of But was the German equity market also trading in a bull market at that
hyperinflation, devaluation and time?
monetary chaos.
Equity Index of the Statistisches Reichsamt, in Paper Marks and
Henry Hazlitt Gold Marks (log), 100 = 01/1918, 01/1918-12/2023
100,000,000,000,000
Equities in
Paper Marks
1,000,000,000,000
+21.3 trn %

10,000,000,000

100,000,000

1,000,000

10,000
Equities in
Gold Marks
100 -97 % -74 %

1
1918 1919 1920 1921 1922 1923

Equities in Paper Marks Equities in Gold Marks

Source: Wikipedia, Author's calculations, Incrementum AG

More paper money cannot make A clear answer is obtained by quoting the equity index in gold marks.
a society richer, of course, – it is The equity index, measured in hard currency, had decreased by around
just more printed-paper. 74% of its value by the time of the currency reform in November 1932. A
Otherwise, why is it that there year earlier, however, the loss of value, measured in gold marks, had reached a
are still poor countries and poor maximum of approximately 97%. Therefore, the supposed bull market turned out
people around? to be a bear market. In other words, the formal bull market was a result of the
Hans-Hermann Hoppe extreme devaluation of money. Investors fell victim to the money illusion, which is
the confusion between the real and nominal value of money that can happen
during times of high inflation.

Identifying secular bull markets reliably and at an

early stage
To determine whether an asset is in a bull market, observing its price development
only in currency terms is not sufficient due to the constant money supply inflation
inherent in unbacked fiat money systems. Instead, it is more appropriate to use the
relative performance of different asset classes as a basis to eliminate the disruptive
influences of money supply inflation.

The Synchronous Equity and Gold Price Model has demonstrated a reliable and
predictable correlation between the money supply and the prices of equities and
gold for over 50 years, but only when these two asset classes are analyzed together.

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 The Synchronous Bull Market Indicator 6

This is mainly due to the fact that there are periods when gold gains more value
than equities due to the money supply in the system, and other periods when the
opposite occurs.

… it’s worth pointing out that Investors tend to purchase gold as a hedge against various economic and financial
there have been previous concerns such as increasing debt, inflation, a weakening US dollar, a recession, a
attempts to link changes in the stock market crash, or the need for a financial system reset. In contrast, stocks are
stock market and the gold price commonly bought when the economy is robust, growth rates are high, outlooks are
to changes in the money supply. favorable, earnings are strong, unemployment rates are low, and inflation is
These attempts failed. With moderate.
regard to the stock market they
Gold/S&P 500 Ratio (log), and S&P 500/Gold Ratio (log), 01/1970-
failed because a strong positive 03/2023
8.0
correlation between the senior 6.08 5.41 1.52 2.62
Gold Bull Stock Bull Gold Bull Stock Bull
equity index and the money 4.0 Market Market Market Market

supply only exists during equity

bull markets, that is, the money 2.0 ?

supply in isolation fails to 1.0

account for the major swings in
the stock market. 0.5
?
Steve Saville
0.3

0.16 0.18 0.66 0.46

0.1
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Gold/S&P 500 Ratio S&P 500/Gold Ratio

Source: kitco.com, multpl.com, Author's calculations, Incrementum AG

[G]old and the S&P 500 are at Thus, the SEGPM utilizes the S&P 500/gold ratio to gauge investor
opposite ends of a virtual confidence. Not only is this a highly dependable tool, but it is also incredibly
investment seesaw. Due to their useful in identifying market sentiment for both equities and gold, and in
respective natures, if one is in a recognizing key turning points for bull and bear markets in the long term.
long-term bull market then the
other must be in a long-term The following table shows the performance of the S&P 500 and gold during bull
bear market. markets. The respective development of the US M2 money supply is also shown.
Steve Saville

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 The Synchronous Bull Market Indicator 7

Gold S&P 500 M2

Bull market Duration p.a. p.a. p.a.
in USD in points in USD bn
Gold Jan 70 34.99 90.31 589.60
Jan 80 674.58 110.90 1,482.70
Increase + 1,828% 34.5% + 23% 2.0% 151% 9.8%

S&P 500 Feb 80 665.89 115.30 1,494.60

Aug 00 274.52 1,485.46 4,817.50
Increase - 59% -4.3% + 1,188% 13.6% 222% 6.0%

Gold Sep 00 273.67 1,468.05 4,853.20

Sep 11 1,780.65 1,173.88 9,525.80
Increase + 551% 18.5% - 20% -2.0% 96% 6.3%

S&P 500 Oct 11 1,667.89 1,207.22 9,559.50

Dec 21 1,786.65 4,674.77 21,553.10
Increase + 7% 0.75% + 287% 14.5% 125% 8.5%
Source: Author’s calculations, Incrementum AG

The best moves in precious The chart and table above provide clear evidence that secular gold bull
metals (excluding the 1960s) all markets are always accompanied by secular equity bear markets, and
occurred during secular bear vice versa. Therefore, gold can be an excellent hedge against secular equity bear
markets in US equities. markets.
Jordan Roy-Byrne
If there is still a small increase in the US dollar value of the respective bear market
asset, this is only due to the decline in the value of the currency, which is brought
about by the steady expansion of the US money supply.

Investor confidence as the key driver of all four

secular market phases over the past 50 years.
... confidence, fairness, The following is an attempt to describe the four previous secular bull markets of
corruption, money illusion, and the past 50 years from the perspective of investor confidence:
stories. These are real
motivations for real people. They 1. Falling trend of the 1970s (low point of the S&P 500/gold
are ubiquitous. The presumption ratio: 0.1644 in January 1980)
of mainstream macroeconomics Concerns stemmed from a number of factors, including the decoupling of the US
that they have no important role dollar from gold, which raised doubts about the stability of the global financial
strikes us as absurd. system. Contributing factors included the rapidly growing debt in the aftermath of
Robert J. Shiller the Vietnam War, the breakdown of the Bretton Woods system, the two oil price
shocks, escalating inflation, and persistent economic weakness worldwide.

2. Rising trend of the 1980s/1990s (high point of the

S&P 500/gold ratio: 5.411 in August 2000)
This trend was the result of an unprecedented period of wealth generation that
benefited a large portion of the world. The drivers of this trend include the
ascendance of neoliberalism in the Western world, the integration of China into
the global economy, the collapse of the Soviet Union, the opening up of Eastern
Europe, the rapid expansion of globalization, and the extraordinary growth of the
IT sector.

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 The Synchronous Bull Market Indicator 8

3. Falling trend until 2011 (low point of the S&P 500/gold

ratio: 0.6592 in September 2011)
This trend resulted from a sequence of existential crises. These crises were
triggered by various drivers including the bursting of the equity market bubble at
the beginning of the century, the terrorist attack of September 11, 2001, the
subsequent War on Terror, the Global Financial Crisis and the subsequent
economic crisis, as well as the sovereign debt crisis in Europe.

4. Rising trend until 2021 (preliminary high of the

S&P 500/gold ratio: 2.6165 in December 2021)
No one knows how the greatest This trend resulted from central bank omnipotence. Formerly boring central banks
monetary policy experiment of evolved into powerful and political institutions. Whether it was the bank bailout,
all time will turn out. It is the euro crisis or the Covid-19 pandemic, central banks’ actions proved decisive
possible that the supposed and successful, at least in the short term, in preventing economic systems,
omnipotence of central banks financial markets, and entire societies from a truly deep slide into existential
will eventually turn into crises.
impotence.
Flossbach von Storch
Investment strategy implications
A sound investment strategy should be constructed based on a thorough
assessment of the investor’s unique financial position and must be in line with
their personal investment goals. Such an individually tailored investment strategy
should also allow for some flexibility. For example, the allocation to equities or
precious metals may be adjusted based on the overall economic environment. This
approach can help to ensure that the investment strategy remains aligned with the
investor’s goals and objectives.

The Synchronous Bull Market Indicator (SBMI) can provide valuable services
when it comes to determining this allocation. Investing in gold with the flexible
part of a portfolio may not make sense when financial markets are characterized by
confidence and trust. This is because the opportunity costs, in the form of lost
equity market returns, can quickly exceed the potential price losses of a crisis that
might occur in the future.

On the other hand, when it comes to equities, there is often an overwillingness to

accept temporary losses with the argument that their prices have always risen in
the long run. This overlooks the fact that, despite high inflation, it can sometimes
take decades before old nominal highs are reached and surpassed again after a
market crash. Thus opportunity costs in the form of lost increases in the value of
gold may quickly grow.

Fundamental Insights Lead to the SBMI

In the business world, the Investor confidence, like the economy, operates in short-term and
rearview mirror is always long-term cycles. However, the inflection points of secular bull markets, which
clearer than the windshield. are critical for successful investing, can only be determined with absolute certainty
Warren Buffett in retrospect. Nonetheless, investors must make their decisions in advance.

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 The Synchronous Bull Market Indicator 9

A reliable method to determine secular trends in investor confidence in a timely

manner is by comparing the current S&P 500/gold ratio with its longer-term
average. If the present ratio is lower than this longer-term average, it indicates a
decreasing trend, while a ratio above the average suggests an increasing trend in
confidence. The longer-term the average is formed, the more reliable the results
are. However, waiting for confirmation of a trend change may mean that gains
from the new trend will be missed due to adherence to the old, already expired
trend. Investors must try to anticipate the trend in advance, but the turning points
of secular bull markets that are essential for successful investment can be difficult
to pinpoint.

It is better to be roughly right A method is therefore sought that indicates the trend reversal as promptly and
than precisely wrong. reliably as possible and largely avoids false signals (meaning trend reversals that
John Maynard Keynes are initially indicated but not confirmed later). The SBMI uses the
comparison of the S&P 500/gold ratio with its 40-month moving
average to achieve this goal.

S&P 500/Gold Ratio (log), 01/1970-03/2023

8.00
Confirmed after 23 months

Gold Bull Stock Bull Gold Bull Stock Bull

Market Market Market Market
4.00

2.00 ?
1st false 3rd false
signal signal
1.00
Confirmed after 9 months

Confirmed after 15 months

0.50
2nd false
signal
0.25

0.13
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

S&P 500/Gold Ratio 40 Month MA

Source: kitco.com, multpl.com, Autho's calculations, Incrementum AG

All three trend reversals of the past 50 years are reliably confirmed, and the time
lag remains reasonable at around 1 to 2 years. A chart that is easier to interpret can
be obtained by displaying the percentage deviation of the current S&P 500/gold
ratio from its 40-month moving average, instead of showing the development of
the ratio itself.

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 The Synchronous Bull Market Indicator 10

The SBMI: Deviation from 40 Months MA of S&P 500/Gold Ratio,

01/1970-03/2023
100
Gold Bull Stock Bull Gold Bull Stock Bull
80 Market Market Market Market
60 1st false
signal
40 Confirmed by indicator
in Jun 2001
20

-20
2nd false 3rd false
-40 signal signal
Confirmed by indicator
-60 Confirmed by indicator
in Jan 2013
in Dec 1981
Turning point Turning point Turning point Potential
-80 Sep 2011
Jan 1980 Aug 2000 turning point
-100 Dec 2021
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Stock Bull Market Gold Bull Market

Source: kitco.com, multpl.com, Author's calculations, Incrementum AG

The longer the bull market lasts A bull market in equities (blue areas) is indicated when the current
the more severely investors will ratio is above its 40-month moving average. Conversely, a bull market in
be affected with amnesia; after gold (yellow areas) is indicated when the current ratio is below its moving average.
five years or so, many people no This representation method has a significant advantage: The strength of each bull
longer believe that bear markets market, indicated by the amplitude of the percentage deviation from the 40-month
are possible. moving average, is clearly visible. This is important because a small deviation from
Benjamin Graham the moving average may not provide enough evidence of a trend reversal.

Trend reversal points in investor confidence are

central to the SBMI. What insights can be gathered
from history?
The initial observation is that, to date, the secular turning points of investor
confidence have always aligned with the respective last peaks of the prevailing bull
market asset: The first instance occurred in January 1980 with the peak of the gold
price averaging USD 675 per month; the second was in August 2000 with the peak
Courtesy of Hedgeye of the S&P 500 averaging 1,485 points per month; and the third was in September
2011 with the peak of gold averaging USD 1,781 per month.

The gold bull market of the 1970s and the equity bull market of the 1980s and
1990s share the commonality that the substantial increase in the respective bull
market asset eventually led to significant exaggeration or a bubble. Consequently,
the trend reversal in each case resulted from the crash of the bull market asset
rather than the emerging strength of a counterpart. However, in both instances,
the crash did not occur until 2-3 years later.

The trend reversal in September 2011 was different, as it arose from the emerging
strength of the equity market. Unlike in the previous cases, the price of the former
bull market asset, gold, remained quite stable for more than a year after its cycle
high, while the S&P 500 rose by more than 20% during that period.

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 The Synchronous Bull Market Indicator 11

Over the past 50 years, there have been a total of

three instances of false signals. What are their
similarities?
Central banks have gotten out of The initial false signal occurred due to a significant decline in the price of gold,
the central banking business and which fell from around USD 184 in December 1974 to approximately USD 110 in
into the central planning August 1976. This was brought about by fundamental shifts in the gold market,
business, meaning that they are most notably the lifting of the ban on gold ownership in the United States and the
devoted to raising up-if they can- decision by the US and the IMF to restructure the global monetary system without
economic growth and gold’s playing a central role, leading to sizeable gold auction sales. Moreover, the
employment through the dubious 1974 recession appeared to be over, and global equity prices experienced a
means of suppressing interest temporary surge.
rates and printing money. The
nice thing about gold is that you However, the great uncertainty that arose after the failure of the Bretton Woods
can’t print it. system had made itself felt again by September 1976. Continued currency crises,
James Grant monetary interventions, and economic dysfunctions were unmistakable signs. This
ultimately resulted in the incredible second phase of the gold bull market, which
propelled the price of gold to USD 675 by January 1980.

The two other false signals were both triggered by an equity market crash: Black
Monday on October 19, 1987, and the Covid-19 crash in 2020. In both cases, the
equity bull market had been running for several years and had become relatively
weak. The memory of the Federal Reserve’s role in managing the Covid-19 crisis is
still fresh in people’s minds. However, this is likely no longer the case with regard
to Black Monday. Following the crash, then-Federal Reserve Chairman Alan
Greenspan issued a strong statement on October 20, 1987: “The Federal Reserve,
consistent with its responsibilities as the Nation’s central bank, affirmed today its
readiness to serve as a source of liquidity to support the economic and financial
system”.

The Federal Reserve resuscitated the bull market in both cases. Some 15 months
after Black Monday, the S&P 500 was back at its pre-crash high. In the course of
the Covid-19 crisis, the reflation required only a record-breaking six months.

The world changes! So we’re in a Ultimately, then, it can be argued that it was the Federal Reserve that restored
situation today where the only confidence in financial markets with its unlimited monetary firepower. As a result,
policymakers that have flexibility the “Fed put” narrative has been alive and well for 35 years. The primary
are central banks. But they don’t beneficiary of this insurance against asset losses has been the equity market. Thus,
have the instruments! So they’ve many investors perceive this narrative as an inevitable force of nature, as there are
had to experiment, and the more almost no equity traders left who are acquainted with any central bank
you experiment, the more intervention that strays from it. “Buy the dip” is then the logical response.
uncertainty and the higher the
risk of collateral damage. In the 1970s the situation was vastly different, as the Federal Reserve’s ability to
Mohammed El Erian create unlimited new US dollars after the dollar was detached from gold did not
increase confidence, nor did it lead to steadily rising equity prices. Rather, it was
the source of vehement mistrust and fueled a historically unprecedented explosion
in the price of gold.

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 The Synchronous Bull Market Indicator 12

How great would the investment success have been

for an investor who consistently followed the
recommendations of the SBMI?
You don’t have to be brilliant, To reiterate, the SBMI identifies bull markets for either equities or gold by
only a little bit wiser than the comparing the current S&P 500/gold ratio, using monthly average prices, with its
other guys, on average, for a 40-month moving average. If the current value exceeds the 40-month moving
long, long time. average, then there is generally a bull market for equities, while if the current value
Charlie Munger falls below the moving average, then there is a bull market for gold.

To achieve a clear and robust course of action and eliminate slight distortions,
rebalancing of the adaptable part of the portfolio ought to occur only when the
disparity of the present S&P 500/gold ratio from its 40-month moving average
exceeds the range of plus or minus 5%.

The following table starts with an initial investment of one ounce of gold and
shows all reallocations in detail. Additional investments were not considered.

Reallocations Holdings

S&P 500 Gold Price S&P 500 Oz Gold

Jul 71 Start 1.00 Oz Gold 42.40 1.00

1. Apr 76 Sell 1.00 Oz Gold Buy 1.26 S&P 500 101.90 127.91 1.26

2. Oct 77 Sell 1.26 S&P 500 Buy 0.74 Oz Gold 93.74 158.85 0.74

3. Jan 82 Sell 0.74 Oz Gold Buy 2.43 S&P 500 117.30 384.16 2.43

4. Nov 87 Sell 2.43 S&P 500 Buy 1.27 Oz Gold 245.00 468.14 1.27

5. Oct 88 Sell 1.27 Oz Gold Buy 1.86 S&P 500 277.40 406.39 1.86

6. Aug 01 Sell 1.86 S&P 500 Buy 8.04 Oz Gold 1,178.50 272.66 8.04

7. Feb 13 Sell 8.04 Oz Gold Buy 8.67 S&P 500 1,512.31 1,630.69 8.67

8. Mar 20 Sell 8.67 S&P 500 Buy 14.44 Oz Gold 2,652.39 1,591.93 14.44

9. Feb 21 Sell 14.44 Oz Gold Buy 6.72 S&P 500 3,883.43 1,808.18 6.72

Jul 71 Starting Investment 1.00

Mar 23 Current Value/Holding 6.72
Source: Author’s calculations, Incrementum AG

The next chart shows the backtesting of the trend-following model based on the
recommendations of the Synchronous Bull Market Indicator compared to

1) a pure equity investment

2) a pure gold investment
3) a 50/50 approach.

The initial investment in all four variants is USD 42.40, the average price for an
ounce of gold in July 1971.

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 The Synchronous Bull Market Indicator 13

Backtest: Trend Following Model SBMI, S&P 500, Gold, and 50/50
Index, 42.40 = 07/1971 (log), 07/1971-03/2023
62,500
~26,500 USD

12,500

2,500

~1,800 USD
500

100

20
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
S&P 500 Gold 50/50 Index
SBMI Gold SBMI S&P 500
Source: kitco.com, multpl.com, Author's calculations, Incrementum AG

Additionally, let’s look at a numerical overview of the percentage performance of

all four investment alternatives, broken down by five individual decades and the
entire investment period:
Trend Following
S&P 500 Gold 50/50 Index
SBMI
1xS&P + 1.5 Oz Gold

1971 - 1981 07/1971 99.00 42.40 162.60 42.40

12/1981 123.80 410.12 738.98 303.49

Delta 24.80 367.72 576.38 261.09
in % 25.05 867.26 354.48 615.78

% p.a. 2.17 24.34 15.64 20.80

1981-1991 12/1981 123.80 410.12 738.98 303.49

12/1991 388.51 361.88 931.33 722.63

Delta 264.71 -48.24 192.35 419.14
in % 213.82 -11.76 26.03 138.11

% p.a. 12.12 -1.24 2.34 9.06

1991 - 2001 12/1991 388.51 361.88 931.33 722.63

12/2001 1,144.93 275.99 1,558.92 2,218.96

Delta 756.42 -85.89 627.59 1,496.33

in % 194.70 -23.73 67.39 207.07

% p.a. 11.41 -2.67 5.29 11.87

2001 - 2011 12/2001 1,144.93 275.99 1,558.92 2,218.96

12/2011 1,243.32 1,652.73 3,722.42 13,287.95

Delta 98.39 1,376.74 2,163.50 11,068.99

in % 8.59 498.84 138.78 498.84

% p.a. 0.83 19.60 9.09 19.60

2011 - 2021 12/2011 1,243.32 1,652.73 3,722.42 13,287.95

12/2021 4,674.77 1,786.65 7,354.75 31,414.45

Delta 3,431.45 133.92 3,632.33 18,126.51

in % 275.99 8.10 97.58 136.41

% p.a. 14.16 0.78 7.05 8.99

1971 - 2023 07/1971 99.00 42.40 162.60 42.40

03/2023 3,968.56 1,912.73 6,837.66 26,668.72

Delta 3,869.56 1,870.33 6,675.06 26,626.32

in % 3,908.65 4,411.16 4,105.20 62,797.93

% p.a. 7.41 7.65 7.50 13.28
Source: Author’s calculations, Incrementum AG

Both charts make it clear that consistently following the recommendations of the
SBMI with a flexible portion of your portfolio, translates into taking good

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 The Synchronous Bull Market Indicator 14

advantage of the secular trends in investor confidence and achieving a truly

exceptional result with only a few investment decisions.

Where Are We Today?

Gold’s Perfect Storm investment From a purely technical perspective, the last trend change towards gold – the
thesis argues that gold is at the penultimate interim high in the S&P 500/gold ratio of 2.42 in September 2018 –
beginning of a multiyear bull turned out to be a false signal at the beginning of 2021, as the stock market was
market with ‘a few hundred able to outperform the gold price again from mid-2020 onwards – after a
dollars of downside, and a few temporary weakness at the beginning of the Covid-19 pandemic. The last high in
thousand dollars of upside’. The investor confidence was in December 2021 with an S&P 500/gold ratio of 2.62.
framework is based on three Since then, investor confidence has been falling, i.e. gold is outperforming the S&P
phases: testing the limits of 500.
monetary policy, testing the
limits of credit markets, and In January 2023, the current S&P 500/gold ratio was again noticeably
testing the limits of fiat below its 40-month average. After a short reversal in favour of the S&P 500 in
currencies. February, there is again an indication of a new secular gold bull market in March.
Diego Parilla However, at 3.7%, the undershooting of the 40-month average remains below the
5% action trigger.

The Federal Reserve must choose In this respect, the development of the next few months remains extremely
between inflation and market exciting. If investor confidence continues to decline and the performance
chaos. advantage for gold thus also solidifies, the third secular gold bull market since
The Economist 1970 should become established. In view of the trends towards de-globalization
that have been evident for some time now, the already existing weakness in global
growth, the potential for a tumultuous shift to a multipolar world order where
China and Russia challenge the dominance of the US, and mounting tensions in
the global financial system, including the overt use of the US dollar as a weapon, it
is not unreasonable to expect an extended period of declining investor confidence
worldwide.

All the more so as doubts are increasingly emerging as to whether Western central
banks can actually successfully curb inflation without plunging the world into a
deep recession or jeopardizing the stability of the financial system.

What Are the concrete Prospects of the

emerging new Gold Bull Market?

First of all, it should be noted that historical empirical values naturally offer no
guarantee for future developments. Nevertheless, the following forecasts seem
obvious:

• On the length of the new gold bull market: Since the early 1970s, every
secular bull market - whether for gold or the S&P 500 - has lasted at least 10
years. In this respect, it is reasonable to assume that the new gold bull market
that started at the beginning of 2022 should also continue at least until the end
of 2030.

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 The Synchronous Bull Market Indicator 15

• On the development of the confidence level: The first gold bull market
in the 1970s started from a comparatively high level of investor confidence
(83% percentile) and declined in the further course to the all-time low. The
second gold bull market starting in September 2000 started at the all-time
high in investor confidence and declined to a severely below-average level (25%
percentile) as it progressed.

The current gold bull market starts again at a high confidence level, which roughly
corresponds to the initial situation at the beginning of the 1970s. If the decline in
confidence in the new gold bull market is to be defined as the average of the
previous two secular lows in the preceding cycles, the S&P 500/gold ratio would
arithmetically be 0.41 (10% percentile). A second assumption would be that the
loss of confidence is no greater than in 2008, when the S&P 500/gold ratio
bottomed out at 0.66 (25% percentile).

On a concrete price forecast for the S&P 500 and gold

for the end of 2030
The S&P 500/gold ratio by itself says nothing about the prices of both
assets, but only something about the exchange ratio. However, with the
help of the Synchronous Equity and Gold Price Model presented in the In Gold We
Trust report 2022, concrete price targets can be derived, provided that, in addition
to the S&P 500/gold ratio – as a control valve for value allocation – a projection is
also made regarding the M2 money supply – as the basic driver of asset prices.

Rapid increases in the quantity As the wild roller coaster ride of money supply development since 2020 at the
of money produce inflation. latest shows – +27% yoy in February 2021, -2.4% yoy in February 2023 - , M2 is
Sharp decreases produce hardly reliable to predict in the short run. In the long run, however, historical
depression. cycles exist that can be used for forecasting. Below is the annualized 8-year rate of
Milton Friedman change of M2 money supply, i.e. exactly for the period remaining until the end of
2030.

US M2 Money Supply, Annualized Rolling 8-Year Change, in %,

01/1920-02/2023
14
Dec 1946
12
Mar 1983
10
Dec 1923 Jan 2022
Scenario 2
8 7% p.a.
from 12.1%
6 to 3.9%
-8.2% from 10.2% from 8.7%
4 to 3.0% to ?
Dec 1955 -7.2%
from 8.6% Scenario 1
2 Apr 1995
to -1.3% 3% p.a.
-9.9%
Dec 2030
0

-2 Dec 1933
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

US M2 Money Supply
Source: Federal Reserve St. Louis, longtermtrends.com, Author's calculations, Incrementum AG

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 The Synchronous Bull Market Indicator 16

Quantitative easing is NOT going If the current oscillation pattern continues, a sharply declining growth rate of
away. Every major country is around 3% p.a. would be expected for the next 8 years. Against the background of a
running a deficit. If they are all consistent fight against inflation by the Federal Reserve and then probably also
net borrowers then who is the restrictive lending by US commercial banks, such a value would be quite plausible.
lender? The central banks. For
this reason – QE is not going However, if the Federal Reserve is forced to rescue the economy or the financial
away for a long time. system, this could lead to permanently high money supply growth. As the chart
Jeffrey Gundlach above shows, the 8-year growth rate in the inflationary phases of the 1970s and
1980s was over 10% p.a. In this respect, an inflationary growth rate of 7% p.a.
would not be implausible for such a case.

For a well-founded price estimate, it is therefore appropriate to calculate at least

four different scenarios:

Money supply growth 3%p.a. ≈ money supply of USD 26,900bn in 2030:

Low point in investor
Forecast S&P 500 Forecast Gold Price
confidence
Mean (0.41) ~1,920 ~ USD 4,700
Similar to 2008 (0.66) ~2,740 ~ USD 4,150

Money supply growth 7%p.a. ≈ money supply of USD 36,500bn in 2030:

Low point in investor
Forecast S&P 500 Forecast Gold Price
confidence
Mean (0.41) ~2,600 ~ USD 6,350
Similar to 2008 (0.66) ~3,720 ~ USD 5,630

Essentially, all models are The great advantage of the Synchronous Equity and Gold Price Model is that the
wrong, but some are useful. S&P 500 and gold are “thought” together and therefore every forecast for the
Georg Box S&P 500 also automatically yields a gold price forecast and vice versa. However, it
is a prerequisite that a determination is made on the money supply, because it
alone determines the joint value of both assets.

It may puzzle that this simple correlation between the money supply
and the value of a joint asset of the S&P 500 and 1.5 ounces of gold
should actually exist. And likewise that this relationship has apparently
received no attention to date. The fact is, however, that the deviations between the
model and reality over the past 40 years have been merely within the following
ranges:

Deviation Range Months within Range in % of all months

+/- 20% 454 95%
+/- 15% 349 73%
+/- 10% 258 54%
+/- 5% 162 34%

And this across all different economic cycles, capital market phases, bank credit
cycles, and monetary and fiscal policy targets and measures.

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 The Synchronous Bull Market Indicator 17

Can the recommendations of the SBMI be applied

directly to markets outside the United States?
Basically, it is appropriate to attribute the exchange ratio respectively the relative
valuation of equities and gold to five factors:

1) global economic and confidence trends

Courtesy of Hedgeye 2) local economic and confidence trends
3) the composition and quality of the companies included in the index
4) the gold price in USD
5) the exchange rate development of the local currency.

If a local equity index is compared to the price of gold in local currency, it

eliminates the last two factors. The same result could be attained by "converting"
the local equity index into US dollars and comparing it with the price of gold in US
dollars.

The impact of global economic and confidence trends is somewhat uniform across
the world. As a result, the only factors that could result in differences in equity
index performance are the local economic and confidence circumstances, which
are critical in the long run for determining the structural success or failure of
companies within a given economic area, as well as the composition of the local
index.

Since the currency-adjusted gold price is the same worldwide, it is logical that
equity markets of different strengths would cause different trend reversal points
and shift recommendations based on the equity/gold ratio.

Below is a global heat map showing the bull market status for equities
and gold. The blue and gold colors indicate the presence of bull markets for
equities or gold, respectively; and the percentages represent the deviation of the
current equity/gold ratio from its 40-month moving average, which is a measure of
Courtesy of Hedgeye the relative strength of the bull market.

When examining the past twelve months, a trend emerges where the
previously dominant equity bull market is gradually transitioning to a

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 The Synchronous Bull Market Indicator 18

gold bull market. On the other hand, the strength of the local gold bull markets
is currently relatively weak, which means that the potential reversal is not a
certainty.

Three simple conclusions that you should consider:

Bull markets are more fun than • Regardless of whether you consider gold to be a barbaric relic or equity
bear markets. markets to be gambling casinos, success in investing in both depends on
Bob Farrell investor confidence.
• If the SBMI for the US market suggests an occasional reallocation, it’s
important to check whether the indicated confidence shift is also present
globally. If there is any doubt, it may be best not to rush the rebalancing. After
all, a few months are unlikely to have a significant impact on sustained success
in a secular trend.
• If your investment focus is outside the US, it is important to monitor investor
confidence in relevant markets and react accordingly. However, you should
always keep an eye on US markets. This is because the US has a dominant
share of global equity market capitalization and the COMEX and the US dollar
are important factors in global gold pricing. As a result, most global influences
on capital markets tend to originate from the United States.

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About Us 19

About Us
Ronald-Peter Stöferle, CMT

Ronnie is managing partner of Incrementum AG and responsible for

Research and Portfolio Management.

He studied business administration and finance in the USA and at the Vienna
University of Economics and Business Administration, and also gained work
experience at the trading desk of a bank during his studies. Upon graduation he
joined the research department of Erste Group, where in 2007 he published his
first In Gold We Trust report. Over the years, the In Gold We Trust report has
become one of the benchmark publications on gold, money, and inflation.

Since 2013 he has held the position as reader at scholarium in Vienna, and he also
speaks at Wiener Börse Akademie (the Vienna Stock Exchange Academy). In 2014,
he co-authored the international bestseller Austrian School for Investors, and in
2019 The Zero Interest Trap. He is a member of the board of directors at Tudor
Gold Corp. (TUD), and Goldstorm Metals Corp. (GSTM). Moreover, he is an
advisor to Matterhorn Asset Management, a global leader in wealth preservation
in the form of physical gold stored outside the banking system.

Mark J. Valek, CAIA

Mark is a partner of Incrementum AG and responsible for Portfolio

Management and Research.

While working full-time, Mark studied business administration at the Vienna

University of Business Administration and has continuously worked in financial
markets and asset management since 1999. Prior to the establishment of
Incrementum AG, he was with Raiffeisen Capital Management for ten years, most
recently as fund manager in the area of inflation protection and alternative
investments. He gained entrepreneurial experience as co-founder of philoro
Edelmetalle GmbH.

Since 2013 he has held the position as reader at scholarium in Vienna, and he also
speaks at Wiener Börse Akademie (the Vienna Stock Exchange Academy). In 2014,
he co-authored the book Austrian School for Investors.
About Us 20

Incrementum AG

Incrementum AG is a boutique investment and asset management

company based in Liechtenstein. Independence and self-reliance are the
cornerstones of our philosophy, which is why the five partners own 100% of the
company.

Our goal is to offer solid and innovative investment solutions that do

justice to the opportunities and risks of today’s prevalent complex and
fragile environment.

https://www.incrementum.li/en

We would like to thank the following people for their outstanding

support in creating the In Gold We Trust report 2023:

Gregor Hochreiter, Richard Knirschnig, Jeannine Grassinger, Lois Hasenauer-

Ebner, Stefan Thume, Florian Hulan, Theresa Kammel, Handre van Heerden,
Katrin Hatzl-Dürnberger, Ted Butler, Peter Young, Andreas Merkle, Thomas
Vesely, Fabian Grummes, Niko Jilch, Florian Grummes, Hans Fredrik Hansen,
Julien Desrosiers, Elizabeth and Charley Sweet, Marc Waldhausen, Dietmar Knoll,
Max Urbitsch, Trey Reik, James Eagle, Herwig Zöttl, Tavi Costa, Tom Pohnert,
Brent Johnson, Grant Williams, Markus Hofstädter, Jochen Staiger, Ilse Bauer,
Paul Wong, Fabian Wintersberger, Leopold Quell, Match-Maker Ventures, Harald
Steinbichler, Richard Schodde, David Schrottenbaum, Metals Focus, our friends at
the World Gold Council, the whole wonderful team at Incrementum AG and of
course our families!

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 About Us 21
The In Gold We Trust Report Team

Gregor Hochreiter Richard Knirschnig Jeannine Grassinger Stefan Thume

Editor-in-chief Quantitative analysis & Assistant Webdesign & media
charts

Peter Árendáš Georg Bartel Ted Butler Julien Desrosiers

Contributor Contributor Contributor Contributor

James Eagle Fabian Grummes Florian Grummes Lois Hasenauer-Ebner

Contributor Contributor Contributor Quantitative analysis &
charts

Katrin Hatzl-Dürnberger Handre van Heerden Philip Hurtado Nikolaus Jilch

Proof reading Contributor Contributor Contributor

Emil Kalinowski Theresa Kammel Ronan Manly Charley Sweet

Contributor Contributor Contributor Proof reading

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About Us 22

Contact
Incrementum AG
Im Alten Riet 102
9494 – Schaan/Liechtenstein
www.incrementum.li
www.ingoldwetrust.li
Email: [email protected]

Disclaimer

This publication is for information purposes only and does not

represent investment advice, investment analysis nor an invitation to
buy or sell financial instruments. Specifically, the document does not serve as
a substitute for individual investment or other advice. All publications of
Incrementum AG are considered marketing communications or other information
and are not investment recommendations within the context of the Market Abuse
Regulation. Marketing communications and other information are not published
in compliance with the legal provisions promoting the independence of investment
recommendations and are not subject to the prohibition of trading following the
dissemination of investment recommendations.
Investment recommendations are not published by Incrementum AG
as a matter of principle.

The information contained in this publication is based on the state of knowledge at

the time of preparation and may be changed at any time without further notice.
Unless otherwise stated in the publication, no updates will be made. The authors
have taken the greatest possible care in selecting the sources of information used
and ( as well as Incrementum AG) accept no liability for the accuracy,
completeness or timeliness of the information or sources of information provided
or any liability or damages of any kind arising therefrom.

Copyright: 2023 Incrementum AG. All rights reserved.

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Company Descriptions 23

Company Descriptions

Agnico Eagle
Agnico Eagle is a senior Canadian gold mining company, and third-largest gold
producer in the world, with operating mines located in Canada, Australia, Finland
and Mexico, as well as exploration and development activities in these countries
and the United States.
www.agnicoeagle.com

Asante Gold
Asante Gold has developed its 400,000 oz per year production profile through
organic growth and focused acquisitions. We believe in responsible development
and strive to be Ghana’s foremost gold producer and employer of choice.
www.asantegold.com

Aurion Resources
Aurion is a well-funded, Canadian explorer operating in an emerging major gold
camp in Finland’s Central Lapland. The Company is making new discoveries on its
Flagship Risti and Launi projects, and JVs with B2Gold and Kinross.
www.aurionresources.com

Caledonia Mining
Caledonia Mining is a profitable, dividend-paying gold miner, with a strong growth
profile; since November 2021 has acquired Maligreen, Motapa and Bilboes. Its
vision is to become a Zimbabwe focused multi-asset gold producer.
www.caledoniamining.com

Dakota Gold
Dakota Gold (NYSE American: DC) is a South Dakota-based responsible gold
exploration and development company with a specific focus on revitalizing the
Homestake District of South Dakota.
www.dakotagoldcorp.com

EMX Royalty
EMX has a 20-year track record of smart deals. With more than 300 royalties and
investments, EMX looks forward to a bright future with diversification into gold,
copper, battery metals, strong partners like Franco Nevada, and rapidly increasing
cash flow.
www.emxroyalty.com

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Company Descriptions 24

Endeavour Mining
As a leading global gold producer and largest in West Africa, Endeavour is
committed to the principles of responsible mining and delivering sustainable value
to all stakeholders. Endeavour is listed on the LSE and TSE under the symbol EDV.
www.endeavourmining.com

Endeavour Silver
Endeavour Silver is a mid-tier precious metals mining that owns two underground,
silver-gold mines in Mexico, and has a compelling pipeline of exploration and
development projects to facilitate its goal to become a senior silver producer.
www.edrsilver.com

Flexgold
Flexgold is the smart way to invest in physical precious metals, as flexible and
simple as never before. With flexgold, SOLIT sets the gold standard for trust,
security and transparency.
www.flexgold.com

Hecla Mining Company

Hecla Mining Company (NYSE: HL) is the largest primary silver producer in the
United States and the sixth largest gold producer in Quebec. Hecla is also the third
largest US producer of both zinc and lead.
www.hecla-mining.com

Karora Resources
Karora is TSX-listed gold miner (TSX: KRR) with operations in the tier 1
jurisdiction of Western Australia. Karora has a proven management team and is
growing production to 170-195 koz by 2024.
www.karoraresources.com

Matterhorn Asset Management AG

The global authority in Wealth Preservation through precious metal acquisition
and storage. A world-renown team offers personal service to investors with direct
access to the world’s largest and safest private vaults.
www.goldswitzerland.com

Minera Alamos
Minera Alamos is a new gold producer going through the ramp up of its Santana
mine and fast tracking permitting for its second flagship mine: Cerro de Oro.
Specializing in low capex builds the Minera model remains insulated from
inflationary pressures.
www.mineraalamos.com

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Company Descriptions 25

Münze Österreich
Internationally renowned for its precious metal processing, Münze Österreich AG
produces Austria’s circulation coins, Vienna Philharmonic bullion coins in gold,
platinum and silver, and gold bars.
www.muenzeoesterreich.at

New Zealand Bullion Depository

Our mission is to provide the best in gold bullion storage, with unparalleled service
and discretion. Your gold is allocated, segregated and secured in our purpose-built
world class New Zealand facility, giving you secure peace of mind.
www.nzbd.com

philoro EDELMETALLE
philoro is one of the market leaders in Europe in the field of precious metals
trading and your reliable partner for investments in gold and silver, platinum and
palladium.
www.philoro.com

Reyna Gold
Reyna Gold is focused on district-scale exploration on the major gold belts in
Mexico, with a property portfolio of over 57,000 hectares, a world class exploration
team and proven management team.
www.reynagold.com

Sprott
Sprott is a global asset manager providing investors with access to leader in
precious metals and energy transition investments.
www.sprott.com

Tudor Gold
TUDOR GOLD Corp. is an Exploration company in the Golden Triangle region in
B.C., Canada, which is advancing the Treaty Creek project that hosts a mineral
resource of 23.4 Moz AuEQ (Indicated) plus 7.4 Moz AuEQ (Inferred).
www.tudor-gold.com

Victoria Gold
Victoria Gold (“VGCX”) is Leading Yukon’s New Gold Rush. As at 31Dec22 the
Eagle Gold mine Reserve is 2.6 m oz Au (124 m tonnes grading 0.65 g/t), and is
open at depth and along strike. Exploration priority targets include Raven and
Lynx.
www.vgcx.com

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Company Descriptions 26

Ximen Mining
Ximen Mining (TSX.V XIM) is focused on responsible development, sustainable
mining and exploration of its precious metals properties in southern BC, Canada,
as it advances its Kenville Gold mine.
www.ximenminingcorp.com

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 12 Get the full report at: ingoldwetrust.report

2023

This is the abridged version of the In Gold We Trust report 2023.

The full report comprises 24 chapters and can be downloaded free
of charge at ingoldwetrust.report.

Get the full 420-page

In Gold We Trust report at:
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 13 Get the full report at: ingoldwetrust.report

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Company Descriptions 27

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