Gold Videocast: Gold’s 2014 Half-Time Report

In the first edition of the new Gold Videocast, Peter delivers his verdict on the gold market for the first half of 2014, analyzes Janet Yellen’s performance so far as Fed Chair, and makes some contrarian forecasts for the rest of the year.

Follow Along with the Full Transcript:

Hi everybody, this is Peter Schiff, and welcome to my first Gold Videocast. This is replacing the Gold Letter that we were sending out, and now we’re going to do it in this new video format. We’re going to do it once a month, and if you’re just finding me on the Internet, you can go directly to the link and sign up to receive these free videocasts at Schiffgold.com. Just click here to sign up to receive an email announcement when the next videocast is ready.

Right now I want to talk about how gold performed for the first half of 2014 and give you my assessment for the second half of 2014. Gold, actually, is off to a pretty good start. I think as of the end of June, gold was up about 9.5% for the first half of the year. At the high point, I think it was up closer to 10.5% before a slight pull-back occurred. Of course, this stands in sharp contrast to what the outlook was on Wall Street. All the big banks were telling their clients to sell gold because they expected a big drop in 2014. In fact, they are sticking to their guns. Even though so far they are wrong, and the price of gold has confounded their forecast and risen, despite the fact that they expected it to decline, they are digging in their heels and they’re still saying that the decline is going to happen, it’s just now going to happen in the second half of 2014.

Meanwhile, the Dow Jones was only up about 2% or so, a little less, for the first half of the year. So for all the attention that the Dow is getting, especially now that it’s traded above 17,000 for the first time, gold has actually done a lot better than the Dow Jones, yet you wouldn’t know it by listening to the financial headlines. One of the reasons that gold was so weak in 2013 and one of the reasons that so many forecasters assumed that that weakness would continue in 2014 was because they bought into the false narrative of a genuine US economic recovery and the idea that the Fed was going to be able to withdraw all of the monetary stimulus that it used to create the recovery. They were going to normalize interest rates, yet none of this was going to upset the recovery that cheap money created.

This is a fantasy. None of this is true. Whatever the Fed created was artificial and temporary, and it dies with the end of the stimulus, which is why I don’t believe the Fed is going to bring the stimulus to an end. I think they’re going to have to increase its size as it becomes more obvious to the Fed, that far from recovering, the economy is relapsing back into recession. I think as 2014 continues to unfold, I believe that this narrative is going to evaporate and the price of gold is going to rise.

Now on a technical perspective, to me, the price of gold looks like it’s putting in a bottom and, in fact, it’s being supported by the mining stocks. And remember, it was the mining stocks that led the market down in 2013 and now they’re leading it up in 2014.

In fact, we’ve had some better-than-expected economic news recently. Most recently, the better-than-expected non-farm payrolls number. But gold was not able to go down. We’ve had all of this bad news from the perspective of the gold market, right? Supposed good news on the economy and a rising stock market, a Dow breaking out to new highs, yet the gold market has not declined and the price of gold stocks has continued to rise. If the market won’t go down on bad news, then it’s only got one direction to go and that’s up.

I think the sellers have been exhausted in the gold market and the buying continues. When we run out of sellers, again, there’s only one direction for the price of gold. And I think once all of the speculators that have been shorting gold discover that their premise is wrong – that we’re not going to get this vibrant recovery and that we’re not going to get less QE, we’re going to get more, that we’re not going to get rate hikes, but the Fed is going to keep interest rates at zero in order to prop up this phony bubble economy that they’ve inflated – you’re going to see a mad rush from all the short sellers who are going to be anxious to buy back their money-losing positions. But that’s going to be a lot more difficult because there’s not going to be a lot of gold around, because a lot of the gold that was liquidated in the second half of 2013 is not going to be available for sale in the second half of 2014. That gold was probably purchased by entities that never intend to sell it.

So I think were going to have a really short squeeze and we’re going to have a big rally, probably beginning here in the second half of 2014, but maybe gathering momentum as the year comes to a close. You know, even the government’s official measures, the CPI, as flawed as it is, as much as it understates the effect of inflation on prices, it’s still showing a year-over-year increase of 2.1%. That is now above the Fed’s supposed 2% target, yet Janet Yellen explains it away as being noise.

Well you know, things are going to get a lot more noisy in the months ahead as the world figures out that when it comes to inflation, [the Fed] is all bark and no bite. That will further undermine the value of the dollar and increase the appeal of gold as an inflation hedge, because if the Fed is going to ignore inflation and let it get worse, what do you do to preserve your purchasing power? How do you avoid the inflation tax? The best way to do that is to buy gold. And of course when I talk about gold, I’m talking about precious metals in general, including silver which has also done very well this year. I expect the price of silver to rise. Other precious metals, platinum, and commodities in general are all responding to the inflation that the Fed is creating to prop up this phony economy, all the while denying that inflation is a problem.

That’s it for now. Hopefully you enjoyed this first videocast and I look forward to doing many more in the months ahead.

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