„In Gold we Trust“!

Jim Rickards Discussing The Highlights of The In Gold We Trust Report 2017

Jim Rickards Ronald-Peter Stöferle Mark J. Valek

June 30, 2017 About The „In Gold we Trust“ Report

• The of gold-research: Extensive annual study of gold and gold-related capital market developments

• Reference work for everybody interested in gold and mining stocks

• International recognition – newspaper articles in more than 60 countries, more than 1.2 mn. readers already

• German and English versions, Available in a Compact and Extended version

• Published for the 11th time in 2017 • All information can be found at: www.ingoldwetrust.report

#igwt2017 2 Executive Summary

• High expectations of Trump's growth policy dampened the gold price increase in 2016 – Still up 8.5% in 2016 and 8.2% since Jan. 2017 • The further development of the normalization of monetary policy in the US is the litmus test for the US economy and it is decisive for how the gold price will develop • If the normalization of monetary policy doesn't succeed, gold will pick up momentum • Further US dollar weakness and higher commodity strength are likely to lead to higher inflation and stagflation • Exclusive Interview with Dr. Judy Shelton – Economic advisory to about a possible remonetisation of gold • 5 Reasons why the gold bull market will continue • Mining stocks continue to be highly interesting

#igwt2017 3 Table Of Contents

1. Introduction 2. Where Things Stand 3. White, Gray and Black Swans 4. Populism and its True Cause 5. The De-Dollarization: Good-bye Dollar, Hello Gold? 6. Excursus: An Exclusive Interview with Dr. Judy Shelton 7. The Disastrous Dynamics of Debt Based Money 8. The War Against Cash Enters the Next Round 9. In Bitcoin We Trust? 10.The Portfolio Characteristics of Gold 11.Mining Shares 12.Technical Analysis 13.Sustainable Wealth Accumulation in an Unsustainable Monetary System 14.Conclusion

#igwt2017 4 Monetary Surrealism: Combined Balance Sheet Of Major Central Banks Gold Price Since 2007

20000 2000

18000 1800

16000 1600

14000 1400

12000 ) 1200 10000

1000 (USD Gold 8000 800 6000

Central Central BankBalance Sheets (USD bn.) 600 4000

2000 400

0 200 2007 2009 2011 2013 2015 PBOC SNB BOJ ECB FED Gold

Source: Bloomberg, Incrementum AG

#igwt2017 5 Welcome To The „Everything Bubble“

Everything Bubble ? 550% Housing Bubble

DotCom Bubble

500% Personal Personal Income

450% Disposable

400%

350%

Financial Financial AssetsHouseholds of / 300% 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018

Source: Jesse Felder, Bloomberg, Incrementum AG

#igwt2017 6 Commodities vs. Stocks Lowest Relative Valuation Since 1999

10 Gulf Crisis 1990

9 GFC 2008 Oil Crisis 8 1973/1974

7

6

5 Median: 4.1

4

3

2

1 Dot.com Bubble 0 1971 1975 1979 1983 1988 1992 1996 2000 2004 2008 2013 2017

GSCI Commodity Index / S&P 500

Source: Bloomberg, Incrementum AG

#igwt2017 7 Bull Markets In Comparison

1970 1971 1972 1973 1974 1975 1976 1977 1978

1350

450

150

Gold(indexed) and1970s since 2000 2000 Bull Market 70s Bull Market

50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Source: St. Louis, Incrementum AG

#igwt2017 8 A Black Swan? Zero Analysts See Recession

50

45

40

35

30

25

20

15 Number of Analyst ofNumberAnalyst Forecasts

10

5

0 -1% 0% 1% 2% 3% 4% 5%

2017 2018 2019

Source: Bloomberg, Incrementum AG

#igwt2017 9 Recession 2018? Flattening Yield Curve Problematic For FED Hiking?

3%

2%

1%

0% 12/2014 03/2015 06/2015 09/2015 12/2015 03/2016 06/2016 09/2016 12/2016 03/2017 06/2017

10Y Treasury Yield Fed Fund Rate upper Limit

Source: Federal Reserve St. Louis, Incrementum AG

#igwt2017 10 Rate Hike Cycles And Following Recessions

20

13 18 12

16

14

11 12

14 10 10

8 15 2 5 16 3 6 4 1 9 8 4 7 6 17?

2

0 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014

US Recessions Effective Fed Fund Rate (pre 1955 Fed NY discount rate)

Source: Federal Reserve St. Louis, Incrementum AG

#igwt2017 11 Other Grey Swans: High Leverage

250%

210%

200%

150%

112%

M2/GDP 100% 92%

54% 50% 35% 29% 27% 16%

0% Mexico (1993) Indonesia South Korea Thailand Russia (1997) Turkey (2000) Argentina China (2017) (1996) (1996) (1996) (2001)

Source: Bloomberg, Incrementum AG

#igwt2017 12 Gray Swans And Their Possible Effect On Gold

Expected Influence on Expected Influence on Gray Swan Influence on USD Gold (in USD) inflation

Stagflation Depreciation positive inflationary

Credit crisis in China Appreciation positive uncertain

Political crisis in the US Depreciation positive uncertain

Geopolitical escalation Uncertain positive inflationary

Hyper deflation Appreciation negative deflationary

Inflationary boom Depreciation strongly positive inflationary

Monetary reset Depreciation strongly positive inflationary

#igwt2017 13 De-Dollarization: Good-Bye Dollar, Hello Gold?

Global Reserve Currencies Since 1400

Gold

USA

Britain

France

Netherlands

Spain

Portugal

1400 1500 1600 1700 1800 1900 2000 2100 2200

Source: Bloomberg, Incrementum AG

#igwt2017 14 De-Dollarization: Good-Bye Dollar, Hello Gold?

Russian Gold Reserves (Mio. troy oz)

60

50

40

30

Mio. Mio. Fine Troy Oz 20

10

0

Source: Bloomberg, Incrementum AG

#igwt2017 15 An Exclusive Interview With Dr. Judy Shelton

"If the United States would take this first step toward linking the dollar to gold, it would send a signal of America’s commitment to restoring the integrity of the dollar as a meaningful unit of account and reliable store of value.“

"An increasingly broader group of countries and successively larger set of gold-linked offerings should lead to greater monetary stability and effectively, fixed exchange rates among participating Source: www.atlasnetwork.org currencies”.

“I was recently at a conference in Washington and I presented a proposal for a gold-linked Treasury bond.“

“If the next Bretton Woods conference takes place at Mar-a-Lago, I am very happy.“

#igwt2017 16 Back To Gold? US Monetary Coverage Ratio Close To Alltime-Lows

Scenarios 120

100 4. Coverage Ratio = 100% Gold Price = $14,006

80

60

3. Coverage Ratio = 40% 40 Gold Price = $5,400

2. Coverage Ratio = 20% 20 Gold Price = $2,700 Nixon Shock

1. Coverage Ratio = 8.2% 0 Gold Price= $1,174 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014

Source: Bloomberg, Incrementum AG

#igwt2017 17 US Monetary Base Vs. US Gold Reserves At Market Prices (log scale)

10000

1000

100

10

1 1918 1928 1938 1948 1958 1968 1978 1988 1998 2008

US Gold Reserves @ Market Prices US Monetary Base

Source: Bloomberg, Incrementum AG

#igwt2017 18 In Bitcoin We Trust (too)?

Market Capitalization: Bitcoin, Silver, Gold (bn. USD)

8.000

7.000

6.000

5.000

4.000 bnUSD

3.000

2.000

1.000

0 Bitcoin Silver Gold

Source: Demelza Hays, Bloomberg, Incrementum AG

#igwt2017 19 In Bitcoin We Trust (too)?

Bitcoin‘s Stock to Flow Ratio

140

119 120

100

80

60 56

40

25

20 8 0 0 2009 2012 2016 2020 2024

Source: Demelza Hays, Bloomberg, Incrementum AG

#igwt2017 20 Scenarios For The Gold Price

Term is characterized by Growth Monetary Normalisation Gold price in USD

Scenario A: Real growth Successful; 700-1,000 Genuine Boom > 3% p.a. Real Interest Rates >1.5%

Scenario B: Growth & Inflation not completed 1,000-1,400 Muddling Through 1.5-3% p.a.

Scenario C: Growth & Inflation > not completed 1,400-2,300 Inflationary Boom 3% p.a.

Scenario D: Growth / Contraction Normalization paused or 1,800-5,000 Adverse Scenario <1.5% renewed easing

Source: Incrementum AG

#igwt2017 21 Many Thanks For Your Interest!

www.ingoldwetrust.report