Gold’s Bottom May Already Be In (Audio)

Chris Waltzek interviewed Peter Schiff on GoldSeek Radio a couple weeks ago and released the interview this past weekend. In the interview, Peter predicted the Dow Jones Industrial Average could be down 10% from its high before September. This morning, the Dow is down almost 10% on the year – more than 12% from its high.

Most of their interview was a review of the gold market, from the problems with paper speculators to China’s official gold holdings.

Highlights from interview:

“If the stock market keeps falling, they [the Federal Reserve] don’t want a bear market in stocks. How are they going to stop the stock market from falling. The Dow Jones is now down about 6.5% from its highs. I think if they don’t do anything, if they continue to posture as if there is going to be a rate hike, the Dow could be down 10% over the next week or two. 10% from its high, so another 3.5%. If the Fed doesn’t do anything, the Dow could be down 20%. It could be down 20% before September. Are they going to allow a bear market? A bear market is a pretty good forecaster of a recession.

“In fact, most of the economy data we have is so bad that we’ve never experienced it outside of a recession. The economy is the weakest it has been in the entire 6 years of the recovery. How is the Fed going to kick it while it’s down by raising rates? …

“Gold is sold off because everybody thinks rates are going up. When they realize that’s not happening, gold has a lot of lost ground to recover. And even if the Fed – and this is why I don’t think they’re going to raise rates – if the Fed raises rates 25 basis points or 50 basis points, and then the market tanks, or we go into recession, what are they going to do? Are they going to lower rates back down to zero? You’re not going to get much bang for that buck, because that’s not a big rate cut. They’re going to have to launch QE4. But they’re going to look pretty foolish if they raise rates, then have to bring them back down to zero. I think they look less foolish if they leave them at zero the whole time. Because raising rates and then cutting them is an admission that it was wrong to raise them. Why would they want to risk looking like they made a mistake? …

“We went through an entire recovery without raising rates. If you just looked at the data – if you didn’t know what year it was or what interest rates were – if you just looked at the data and they presented the data like an on Econ exam in a typical US university. The data was there, then the question was, ‘What was the appropriate monetary policy?’ The answer would be: ‘Reduce interest rates.’ Based on all the things that are happening, the Keynesian play would be to reduce interest rates. But they’re already at zero! How can you reduce them? And they’re pretending they’re about to raise them…

“The bottom [for gold] might already be in. People waiting for that absolute low – ‘Oh, I want to buy under $1,000’ – They may never get that opportunity. If you look at where gold is right now, gold has risen rather sharply. The low on gold was about $1080… Right now we’re at $1124. So we’ve already rallied almost $50 off that low. I say if we get back above $1200, you can forget about buying gold below $1000…

“Most companies can’t even mine properly at $1200, so how are you going to hedge it? Maybe if gold goes to $2000 or $2500, some people might hedge. But there are many companies that can’t even mine gold properly at $1400 or $1500. When they were hedging gold back in the 1990s, they could still make a profit with $300 gold. They didn’t want to run the risk that it went down to $200, because they were profitable at $300. But most companies today aren’t even profitable at $1200. That shows you how much inflation there has been… Gold prices would have to be much, much higher before anybody would even think of hedging. Hedging could bankrupt a gold company…

“You’ve got hedge funds for the first time ever net-short gold. They’re stuck at the lows. This could be the biggest short squeeze ever. The problem is, when the shorts have to buy the gold, where are they going to get it? That’s going to be the key. There’s not a lot of gold for sale. Certainly in the physical world. What I’d like to see is some of the people who really want physical to get into the futures market, buy some contracts, and then take delivery. Because that will be a game changer if some of these paper owners actually decide they want real gold, because the people who have sold the gold don’t have it and can’t buy it…

“I’m sure the Chinese have a lot more gold. We’re going to find out how much gold they have when they announce that their currency is backed by gold…”