MacroVoices #326 Ronnie Stoeferle: In Gold We Trust 2022

Episode Summary

Executive Summary: Macro Voices episode 326 centered on the market’s bear-market rally, the dollar’s consolidation, oil’s strong uptrend, and Ronnie Sterfola’s case that the world has entered stagflation 2.0—a regime favorable for gold and commodities, though gold has lagged due to a strong dollar and risk-on/risk-off flows. Both hosts argued inflation, Fed tightening, and recession risk are the key forces driving asset prices.

Main Topics: Stagflation 2.0 and Gold’s Macro Case (Priority: 5/5): Ronnie Sterfola argued the current macro regime fits a stagflationary setup: weak growth, elevated inflation, tightening policy, and structural shifts that should support gold over time. Federal Reserve Tightening and Recession Risk (Priority: 5/5): Both the interview and the market wrap emphasized that aggressive rate hikes and QT are likely to slow growth enough to force a policy reversal and possibly a recession. Gold’s Underperformance Despite Strong Fundamentals (Priority: 4/5): The discussion focused on why gold has not rallied as much as expected even with inflation, war, and deglobalization—pointing to the strong dollar, institutional underallocation, and market rotation. U.S. Dollar Pullback and Trend Outlook (Priority: 4/5): Eric and Patrick both framed the dollar as still in a broader uptrend, but currently consolidating after a major run; support near 99-100 was highlighted as critical. Crude Oil and Tight Energy Supply (Priority: 4/5): Oil was described as structurally strong due to low inventories, SPR drawdowns, and underinvestment, with summer demand expected to keep prices elevated. Commodity Super Cycle and ESG/Capex Constraints (Priority: 4/5): Ronnie argued commodities remain in a long bull cycle driven by underinvestment, green-energy demand, and capital-starved producers with strong free cash flow. Market Wrap: Short-Term Trade Setups (Priority: 3/5): Patrick’s chart deck interpreted the S&P 500 rally as a possible bear-market bounce, while copper and oil were presented as key confirmation charts for commodity strength.

Key Arguments: Gold remains strategically attractive because stagflation, deglobalization, and reserve-asset trust issues are increasing, even if the metal has not yet responded as strongly as expected. The Fed’s hawkish path is unlikely to end in a soft landing; historically, rate-hike cycles and QT often precede recessions, and current tightening plus weak growth make a downturn likely. Institutional investors are still underweight gold and commodities, largely because many still believe inflation is transitory and because portfolios have not yet fully adjusted to the new regime. The strong U.S. dollar and broad risk-off selling have restrained gold in USD terms, but gold has performed better in other currencies and may break out once policy expectations turn. Oil is in a structurally tight market because inventories were not rebuilt before summer, U.S. production is flat, and the SPR has been drawn down aggressively. The commodity super cycle still has room to run because supply-side capex has been depressed for years while electrification and EV demand add new structural demand. A recession would likely eventually force a Fed pivot, which would be a major catalyst for gold and potentially for a broader commodity reflation. The S&P 500 rally was viewed as a likely bear-market rally unless inflation fears subside and the Fed’s path meaningfully softens.

Data Points: Macro Voices episode: 326 - Episode identifier noted at the start of the show Recording date: June 2, 2022 - Episode recording date In Gold We Trust report edition: 16th annual - Ronnie Sterfola described the current report as the 16th edition In Gold We Trust report length: 400 pages - Ronnie noted the report has grown to roughly 400 pages Report downloads: 700,000 - Downloads for this year's In Gold We Trust report Team size: 20 people - Ronnie said 20 people are working on the report Gold performance in 2020: 25% in USD terms - Ronnie cited gold’s strong 2020 performance Average gold performance in 2020: 19.5% - Average across the currencies shown in the report DXY move in 2021: +8% - Ronnie said the U.S. dollar rose 8% last year Gold performance in JPY: +10.6% YTD - Ronnie cited 2022 performance for Japanese investors Gold performance in EUR: +8% YTD - Ronnie cited 2022 performance for euro investors Gold price high in March 2022: $2,070 - Ronnie referenced the March 8 near-all-time high U.S. Dollar Index: 95 to 102 - Ronnie described the dollar’s move higher early in the year Eurozone inflation: 8.1% - Ronnie cited current Eurozone inflation Eurozone core inflation: 4.4% - Ronnie cited Eurozone core inflation Germany inflation: 7.4% - Ronnie cited German inflation, highest since 1981 U.S. GDP Q1 2022: -1.4% - Ronnie referenced the first-quarter U.S. GDP decline Atlanta Fed Q2 estimate: 2% - Ronnie said Atlanta Fed growth estimates were too optimistic U.S. consumer sentiment: 58 - Ronnie said the University of Michigan sentiment index was near recessionary levels Fed balance sheet tightening attempts: 6 of 7 followed by recession - Ronnie cited historical QT outcomes Wage growth tracker: 6% - Ronnie referenced Atlanta Fed wage growth pressure Bloomberg Commodity Index YTD: +33% - Ronnie highlighted strong commodity performance U.S. production: 11.9 million barrels/day - Eric reported flat U.S. crude production Crude inventory draw: 5.1 million barrels - Commercial crude storage draw reported in the weekly inventory data Total crude draw including SPR: 10.5 million barrels - Eric added the SPR drawdown to the commercial draw Cushing build: 256,000 barrels - A small build in Cushing, Oklahoma Gasoline draw: 711,000 barrels - Weekly gasoline inventory change Distillates draw: 530,000 barrels - Weekly distillate inventory change WTI intraday level: $120/barrel - Eric noted a holiday-weekend spike in thin trading WTI chart level: $117 - July WTI contract was near this level during the discussion 10-year Treasury yield: 2.92% - Eric said yields were edging back up but still below 3% Gold support level: $1,830 - Eric said gold needed to stay above this level Gold moving average targets: $1,875 / $1,890-$1,900 - Eric referenced the 34-day, 55-day and 100-day moving averages Potential gold target: $2,200 by year-end - Ronnie’s short-term bullish target if a policy U-turn occurs S&P 500 level: around 4,200 - Eric referenced the market trading near this area during the rally

Pivotal Quotes: "I think the basis of this rally was the widespread perception that comments by various Fed officials meant that a pause was coming in the Fed's rate hiking cycle." — Eric Townsend: Eric explaining why the S&P 500 bounced and what could sustain the rally "From my point of view, this whole deglobalization and this block building that we are seeing now ... this should be an additional case for gold." — Ronnie Sterfola: Ronnie discussing sanctions, reserve confiscation risk, and the strategic case for gold "The great moderation is over." — Ronnie Sterfola: Ronnie’s core macro thesis on the end of the low-inflation, low-rate regime

Implications: Listeners should view gold and commodities as strategic inflation and regime-change hedges, but expect timing to depend on a Fed pivot and recession dynamics. Near term, dollar strength and hawkish policy can still pressure gold; longer term, stagflation favors real assets.