For decades, the global economy has been defined by disinflation and falling interest rates. But according to Ronald Peter Stöferle, partner at asset management firm Incrementum AG, that era is coming to an end. We are entering a new phase marked by rising inflation and higher interest rates — a shift that could redefine investment strategies and ignite a powerful bull run in precious metals.
Stöferle emphasizes that most investors and fund managers have never operated in a sustained high-inflation environment. As inflation accelerates, traditional assets like bonds may face massive outflows, while commodities — particularly gold and silver — stand to benefit significantly.
In a revealing conversation with The Market NZZ, Stöferle unpacks the structural changes driving this transformation and explains why gold, silver, and even Bitcoin should play key roles in a forward-looking, diversified portfolio.
Why Inflation Is Different This Time
The Market NZZ: For years, inflation warnings turned out to be false alarms. Why should we believe it’s real now?
Stöferle: After the 2008 financial crisis, central banks compensated for collapsing bank credit demand with aggressive monetary easing. This led to soaring asset prices — a form of inflation that didn’t show up in consumer price indexes. But today, the game has changed.
We’ve shifted from pure monetary stimulus to large-scale fiscal intervention. Governments are now directly injecting money into the economy through spending and loan guarantees — bypassing central banks. This has caused broad money supply (M3) to surge. In the U.S., M3 grew by 24% year-on-year — a level not seen in generations.
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Three key forces are at play:
- Monetary expansion is broader and more direct.
- Central banks now tolerate higher inflation, especially after years of undershooting targets.
- Soaring government debt creates political incentives to allow inflation — it’s the easiest way to erode real debt burdens.
History shows that high debt levels often lead to inflationary outcomes. And as former U.S. President Ronald Reagan once said: “Nothing is more permanent than a temporary government program.” These fiscal measures won’t disappear when the crisis ends.
The Velocity of Money Is Rebounding
The Market NZZ: Money supply has grown, but velocity has dropped. Doesn’t that offset inflation risks?
Stöferle: True — during lockdowns, people saved more and spent less, slowing money circulation. But as economies reopen and confidence returns, velocity will rebound. Expanded money supply + rising velocity = inflation pressure.
We’re already seeing early signs. By early next spring, base effects alone could push inflation noticeably higher.
And don’t underestimate the dollar’s role. For over a decade, a strong dollar suppressed global prices — a deflationary force. Now, the dollar is weakening. If this marks the start of a long-term downtrend, global inflation will accelerate.
Inflation-Sensitive Assets Are Sending Signals
What else suggests inflation is taking hold?
Look at asset prices:
- Inflation-linked bonds
- Precious metals (gold and silver)
- Commodities (energy, uranium, agriculture)
- Commodity-linked currencies (CAD, AUD)
These markets are already pricing in higher inflation. If the U.S. and Europe reach 4–5% annual inflation, it wouldn’t surprise me — though such levels won’t solve the debt problem sustainably.
When inflation spikes, financial markets will face tough questions:
- Will central banks raise rates aggressively?
- Will bond yields soar — or will central banks step in with yield curve control?
- Could $19 trillion in negative-yielding debt face massive redemptions?
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Capital may flee bonds and flow into inflation-resistant assets — reshaping portfolios across the board.
Stocks vs. Inflation: A Delicate Balance
The Market NZZ: Could equities benefit from bond outflows?
Stöferle: Moderately. Research shows stocks perform best when inflation is between 1% and 3%. But beyond 4%, uncertainty rises.
What happens if both bond and stock markets wobble? Will central banks buy equities to stabilize markets? It sounds extreme — but not impossible.
That’s why gold’s moment may have arrived.
Gold: The Ultimate Portfolio Hedge
The Market NZZ: So gold wins over stocks in an inflationary world?
Stöferle: Yes — especially because real interest rates are likely to stay negative. That’s gold’s most powerful driver.
Traditional 60/40 portfolios (60% stocks, 40% bonds) relied on bonds as a hedge. But after 40 years of falling rates, the bond bull market is likely over.
Gold can now serve as that hedge — not for short-term gains, but for long-term stability.
In 2020, gold rose 24% against the dollar, 14% against the euro, and 13% against the Swiss franc — proving its role as a reliable store of value during volatility.
What’s Next for Gold?
A recent consolidation followed a small rise in U.S. real rates (from -1.1% to -0.8%). But historically, January and February are strong months for gold.
With inflation expected to rise in spring, I’m bullish on both gold and silver in 2025.
Long-term, we forecast gold reaching $4,800 per ounce, driven by:
- Persistent inflation
- Tightening financial conditions
- Yield curve control efforts by central banks
- Soaring physical demand from Asia
In 1989, China and India accounted for just 10% of global gold demand. By 2019, that figure hit 56% — and Asia could become the largest demand region this year.
Downside risks? A sharp rise in real rates or meaningful debt reduction by sovereigns — but neither seems likely soon.
Silver: The Undervalued Powerhouse
The Market NZZ: Your thoughts on silver?
Stöferle: Silver is significantly undervalued relative to gold.
Last year, we called it “the neglected asset” — perfect for contrarian investors. Since then, silver has surged 60%.
Its small market size means even modest demand shifts can trigger large price moves. Silver will outperform gold in the next bull phase.
If gold rises as expected, silver could exceed $100 per ounce in the coming years. Now is the time to position.
Bitcoin: A Volatile Hedge
The Market NZZ: Bitcoin has outperformed both gold and silver. Shouldn’t investors favor it?
Stöferle: I like both gold and Bitcoin — but they’re different animals.
Bitcoin is highly volatile and requires hedging tools like options. Its market cap (~$400B) is tiny compared to gold’s ($10T+). Gold has 5,000 years of trust; Bitcoin has only 10.
Yet Bitcoin shares gold’s scarcity and resistance to debasement — making it another valid inflation hedge.
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For me, both belong in a well-balanced portfolio — not as replacements, but as complementary tools.
Frequently Asked Questions (FAQ)
Q: Is inflation really here to stay?
A: Structural factors — massive money supply growth, fiscal dominance, rising debt, and weakening dollar — suggest inflation will persist beyond temporary spikes.
Q: Why is gold better than bonds in an inflationary environment?
A: Bonds lose value when real yields turn negative or inflation rises. Gold thrives in such conditions, preserving purchasing power over time.
Q: Can silver really hit $100 per ounce?
A: Given its low base, strong industrial and investment demand, and smaller market size, $100 is plausible if gold enters a sustained bull market.
Q: Should I replace gold with Bitcoin?
A: No. Bitcoin is more volatile and unproven over long cycles. Both can coexist — use gold for stability, Bitcoin for asymmetric upside.
Q: What risks could derail the gold bull market?
A: A sharp rise in real interest rates or successful debt reduction by major economies could weaken gold. But current policies make these scenarios unlikely.
Q: How much of my portfolio should be in precious metals?
A: Many experts recommend 5–10% in gold and silver combined — enough to hedge risk without overexposure.
Final Thoughts
The era of falling rates and tame inflation is ending. A new chapter of rising prices, higher yields, and monetary uncertainty has begun.
In this environment, gold and silver are no longer just safe havens — they’re strategic assets. With negative real rates, expanding money supply, and growing demand from Asia, the fundamentals have never been stronger.
Whether you’re protecting wealth or seeking growth, now is the time to reconsider where precious metals — and selective digital assets — fit in your investment strategy.
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