Gold Stands the Test of Time

Peter Schiff spoke with Jay Martin backstage at the Cambridge Gold Summit. During the discussion, Peter and Jay took a step back from the immediate market volatility and news of the day to look at the big picture. Gold was a topic of discussion and Peter emphasized that the yellow metal has stood the test of time when it comes to preserving wealth.

Jay and Peter started the discussion by talking about the presidential election. Peter said on the margin, the person in the White House might make a difference, but ultimately we’re going to go over a cliff no matter who is driving the bus.

The difference might be how much time is it before we get there or do we step on the accelerator and go off the cliff sooner? Or do we keep a steady pace and go off a little bit later?”

Peter said the big problem is the intrusion of government regulation, taxation and spending into the economy. Those will only accelerate with Biden in the White House.

We can certainly expect more regulation. Much of the deregulation that occurred during the Trump years was done via executive order. It will be easy for Biden to reverse those and implement new regulations with his own EO pen. Peter said we could also see an increase in the minimum wage with Biden in the White House.

Then there are tax increases. Peter said he sees some take hikes coming down the pike even if the Republicans maintain control of the Senate, but it won’t be nearly enough to cover the massive increase in spending. That means more Fed money printing.

Most of the money is going to be printed. It’ll be borrowed and then printed by the Fed because there aren’t enough legitimate sources of revenue to fund the borrowing. So, the Fed will just monetize all the debt, which means even more inflation and a weaker dollar than we’ve already experienced.”

So, how can you preserve purchasing power over the next five or so years even as we see massive inflation?

Buy gold.

Is there a chance gold five years from now could be below $1,900, which is about where it is now? Of course, there’s always that risk? But I think the odds are much higher that it will be worth considerably more. Now, could it go down? It’s possible. But I weigh that against the odds of other fiat currencies losing purchasing power, meaning if I buried a US dollar or a Canadian dollar in the ground today and I dug it up in five years and I went to buy stuff, how much would it buy relative to what it bought when I buried it? I think gold buried in the ground today will buy a lot more when you dig it up in five years than will your dollars.”

So, from the perspective of just trying to preserve what you have, you could just buy yourself some gold and gold has a pretty good track record of doing that. Of course, the shorter the time period, the less certainty you have.

So, a five-year period – it’s possible gold could go down during five years. But the next five years – I think that’s very unlikely given what’s going to be happening with money printing and interest rates.”

Why exactly does gold hold its value?

It doesn’t decay or lose any of its properties over time. Other assets can’t make that claim. So, over time, they’re going to be less valuable. They’re going to decay. They’re going to wear out.”

From an economic standpoint, gold is relatively stable so it measures the value of the paper money that’s being created.

The more money that’s being printed, well, the more money you need to buy an ounce of gold because the gold supply grows very slowly over time – maybe 1% per year, if that. So, if the money supply is growing by 10% or 20% per year, well, the price of gold must go up because all gold is doing is measuring the value of the fiat currencies that the central banks are creating. So, it’s not that the price of gold is going anywhere. It’s staying the same. It’s that the value of the money is going down and the rise in gold price is just letting you know how much value your money has lost.”

Jay asked Peter what he would do if he had $100,000 that he could afford to lose over the next five years – what would he speculate on? The answer was still gold — gold stocks. Peter said if the price of gold doubles in five years – a conservative estimate in his mind – you could see a five-fold increase in gold mining stocks.