Gold Will Go Ballistic When Markets Realize the Fed Has No Exit Strategy (Audio)
Chris Waltzek of GoldSeek Radio interviewed Peter Schiff last week. They discussed the future of the US dollar and the price of gold.
What’s really holding gold back is not just the strong dollar, but the idea that the Fed is going to be raising interest rates. It’s the fear of higher rates that is also hurting the case for gold. When people realize that we’re not going to get higher rates, that we’re going to get QE4, that the dollar is going to tank… Gold is going to go ballistic. I think the next gold rally is going to be the most spectacular rally we’ve ever witnessed…”
Highlights from Peter’s interview:
“This economy is headed to recession fast, and it’s because the Fed got the economy screwed up with all this QE and zero-percent interest rates. Of course, we’re going to get more of the same. I think the odds are zero that we’re going to get a rate hike this year. I think we’re going to get QE4, maybe by the end of the year, but certainly by next year…
“Americans have lousy jobs. Some of them have part-time jobs and they used to have full-time jobs. They’re not getting the wages that they need. Meanwhile, the cost of living is going up. Thanks to Obamacare, healthcare is a lot more expensive. Plus, you’ve got rising food costs; you’ve got rents going up dramatically. Homeownership now is at almost a 30-year low, so lots of Americans have been renting and rents have been skyrocketing. So people have been squeezed from every angle…
“What’s really holding gold back is not just the strong dollar, but the idea that the Fed is going to be raising interest rates. It’s the fear of higher rates that is also hurting the case for gold. When people realize that we’re not going to get higher rates, that we’re going to get QE4, that the dollar is going to tank, and more importantly, when people realize that there is no exit strategy and there never has been. It’s impossible. It’s QE-infinity; it’s zero percent forever. Gold is going to go ballistic. I think the next gold rally is going to be the most spectacular rally we’ve ever witnessed…
“People have been living a fantasy where the US economy is recovering and the Fed is going to raise rates. But none of that is true. You have everybody believing it, and they bet lots of other people’s money on that scenario. When they find out that they’re wrong, and they have to unwind these bad bets – that’s going to send [gold] ballistic. The fact that we’ve had to wait several years means there’s that much pent-up demand. There are that many more people who have shorted the metals who are going to have to buy them back. Meanwhile, a lot of the big buyers have taken a lot of the supply off the markets. A lot of foreign central banks have been gobbling up what investors were selling. When the investors want to buy it back, it’s not going to be available, so there’s going to be a huge squeeze coming on. It’s going to be hard to get the physical metal, and the only way they’re going to flush out some sellers is to offer them much, much higher prices…
“Is it possible that the Fed can do a trivial rate hike? 10 basis points, 15, 25 basis points? One and done? It’s possible, but I think that would be a very big risk, because I think that would accelerate the collapse of the economy. Once the Fed raises rates even a little bit, then the markets are going to start factoring in additional rate hikes…
“I think we are on the verge of a significant movement in the markets, mainly in the foreign-exchange markets. I don’t know how it will play out exactly in the equity and bond markets. Eventually, the bond market has to crack when the dollar cracks. But there could be a delayed reaction as the central banks keep buying bonds. But in order to buy bonds, they need to accelerate the decline of the dollar, because they have to print dollars to buy the bonds. But the more dollars they print to protect the bond market, the less those dollars are worth…
“The love affair with the dollar is going to end first. That’s where you have this universal bullishness. Everybody has been so dollar bullish. Everybody has been on that trade. I think it is going to be the biggest money-losing trade…
“The dollar has only really been rallying since the beginning of last year. Just because it may have got to its highest level in a number of years, it hasn’t been rallying all of those years. The dollar rally really started around March, early 2014. It was a very strong rally. One of the strongest ever. But it’s also going to be one of the biggest collapses ever… “
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