Gold Videocast: Peter Schiff Answers Your FAQs (Video)

Peter Schiff answers some of the more challenging questions he has received from you, his loyal subscribers. Learn what he really thinks about gold manipulation, why Wall Street hates gold, who should buy silver instead of gold, and more!

Follow Along with the Full Transcript:

Question 1: “According to the financial media, the world has ‘fallen out of love with gold.’ Is this really true?”

To say that the world has fallen out of love with gold, presumes that it fell in love with gold in the first place, which it clearly did not. The vast majority of the world’s population never bought any gold. Yeah, the price of gold went up substantially from 2000 to 2012, but that was with just a small fraction of the world’s population participating in the rally. So I don’t think the world has fallen in love with gold. And so, if they haven’t fallen in love, they can’t fall out of love.

Now, I do believe the world is going to fall out of love with fiat currencies, because there has been a love-fest for decades for the dollar and other fiat currencies around the world. I think the world is falling out of love with these fiat currencies, whether it’s the euro, the Japanese yen, or the US dollar, and it’s only a matter of time before they fall in love with gold. And when they do, obviously the price is going to be much, much higher. I do think you’re going to see people around the world embracing gold in a way that they’ve never done before.

You know, you’ve got all these central bankers around the world committing now. They’re all in on inflation. You’ve got the Japanese, now the ECB. again cutting rates to basically zero, more QE coming. I think the Fed is about to embrace more QE. Everybody has thought, “Well, you know, the Fed is going to start to tighten. They’re going to take the punch-bowl away.” I’ve said all along, “That ain’t going to happen. It’s going to be the reverse that’s going to happen, and people really are going to fall out of love with paper. And then, once paper jilts you, you really have no place to go, but [to] the real thing which is gold.”

So my advice to my clients is don’t wait for everybody else to love gold, buy it first. Buy it when a lot of people hate gold because that’s really the story. It’s not really a love-hate relationship. It’s a hate relationship. Most investment professionals hate gold. That’s why it’s so cheap. They don’t any own any. But when they ultimately learn to love what they hate, they’re going to have to pay much higher prices, so make sure you have your gold before they do.

Question 2: “In your last Gold Videocast, Jim Rickards said that gold price manipulation is true. Why do you keep ignoring this issue”?

Sure, a lot of people talk about gold manipulation. Maybe it’s true, maybe it’s not. I mean, I guess I have no way of knowing. Even if gold is being manipulated, I don’t know how that changes my strategy. I want to buy gold. Whether it’s manipulated or not, I want to own it. If it is being manipulated and the manipulators are suppressing the price, then that actually is a benefit for me because it enables me to buy more at a price that’s lower than I otherwise could if it wasn’t being manipulated. More importantly for my clients, it gives me an opportunity to bring more of my clients on board. I can get more people to buy gold at these artificially depressed prices if the manipulation story is true.

If it is true, I know one thing. It can’t last. Maybe central banks or big investment banks or Wall Street banks, maybe they can succeed in temporarily suppressing the price of gold, but they can’t succeed long term. It’s just like any form of wage and price control. You can suppress prices for only so long until free market forces overwhelm the artificial constraints that some people are trying to put on the market.

So to the extent that there is manipulation, my clients who are buying gold now are going to benefit in two ways. One, they benefit from being able to buy gold cheaper than they otherwise could if there was no manipulation. Two, the gold that they bought is going to be that much more valuable once market forces overwhelm the efforts of governments or other speculators to manipulate the price down.

Question 3: “You keep warning about hyperinflation and a collapse of the US dollar, but it hasn’t happened! Has our modern banking system solved this problem?”

Yes, I’ve been warning about the possibility of hyper-inflation, and I will continue to warn about that possibility as long as that possibility exists. Of course, everything that the governments are doing, not only in United States, but around the world, are bringing that hyper-inflation possibility. They’re making it more and more probable. But of course, you have to warn about things in advance in order for anybody to prepare for it.

Look, how long did I warn about the problems in the housing market before the bubble burst? I warned for years. And for years, people said, “Well, look Peter, you’ve been warning about this bubble and the prices keep going up. When are you going to admit that you’re wrong?” I said, “Never, I’m not wrong. I don’t care how long it takes, I know I’m right.” And ultimately, I was proven right, and I think the same thing is going to come with my inflation forecast. I’m not wrong, and I don’t think anything that the government has done or the banks have done have found a way to solve the problem. So hey, we’re not going to print all this money and not have inflation. I know that the printing of money is, by definition, inflation. Now, why is it not showing up in consumer prices? It is showing up.The government just doesn’t recognize it because of the way that they calculate the numbers. They’ve rigged the deck.

You know, I just read this article the other day. They called it “shrinkflation.” They said, “This is what’s happening when companies are reducing the size of their products,” and they’re saying, “So we’re getting shrinkflation instead of actual inflation.” But shrinkflation is inflation, or rather shrinkflation is every much a result of inflation as actual increases in prices, because if a company reduces the quantity, then that’s a price hike, all right? I mean, if they put 10% fewer sheets of toilet paper in a roll, then I’ve got to buy 10% more rolls during the course of a year, assuming I use the same amount of toilet paper. So I still have to spend more money to buy toilet paper. So it’s still a rise in the price even thought the price hasn’t increased. The packaging size has shrunk [and] now I have to buy more of those shrunken packages. So we have it and it’s not just shrinkflation. There’s all sorts of ways that CPI indexes do not [correctly] measure the rate of inflation.

Also, when it comes to America, we’ve got the fact that so much of our inflation has been exported to our trading partners based on the unique status of the US dollar and the world’s willingness to absorb our inflation. They’re taking the bullet for us. So we have the inflation, and it’s only going to get worse. It’s going to get worse and worse until ultimately it could become hyper-inflation if we don’t take drastic measures to turn the tides. There’s no guarantee that we will, but either way, you have to prepare for massive inflation.

Question 4: “You always recommend gold as the best way to protect one’s wealth, but I can’t afford it. Is silver a good alternative?”

I would recommend that you first start buying silver. That might be an easier way for you to go about it by getting into the silver coins. Of course, silver coins are better to the extent that you need to use them for barter in the future. You have a coin that can be exchanged for more lower-priced goods. Of course, when you’re only talking about $5000 or $10,000 worth of silver, it’s not that hard to store because it doesn’t take up that much room.

When people start investing hundreds of thousands of dollars, that’s when storing physical silver becomes more of a problem, and it makes a lot more sense from that respect to have the majority of your holdings in gold.

I do believe that there is more upside, percentage upside, in silver than gold. So if you only have a little, why not try to own the metal that might give you the most bang for the buck. But ultimately I think my client should have a diversified portfolio that would include exposure to both of those metals. But yes, for some people, it makes sense to get started with silver.

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