Peter Schiff: As a Hedge, I Favor Gold
Gold has been surging since a US airstrike killed a prominent Iranian general. After Iran retaliated with missile strikes on US bases in Iraq, gold briefly pushed about $1,600 per ounce — an eight-year high.
Peter Schiff appeared on RT Boom Bust along with Bubba Horwitz on Monday to talk about the current geopolitical situation and its potential impact on the economy. He said tensions in the Middle East are increasing the risk premium, but there is a more fundamental reason gold is going up — Federal Reserve monetary policy. He also noted that the risks to the US aren’t so much military as economic. The US depends on foreigners buying dollars. Peter emphasized that gold is the best hedge in the current climate.
First off, both gold and oil were moving up before the recent Iranian incident. So, I think those trends are simply continuing. I think there is a higher risk premium being built into both gold and oil for a good reason. And I think that risk premium is going to be there for at least the remainder of the Trump presidency, if not longer. But what I think is really driving, particularly gold, but oil to a lesser extent, is the Fed. It’s monetary policy. It’s inflation. It’s the return to QE and the rate cuts. And that policy is going to continue. So, I think both crude and gold are going to continue to rally. But as a hedge, I would favor gold over black gold.”
Bubba Horwitz talked up bitcoin, noting that it’s hard to carry gold out of a country, but you can take cryptocurrency anywhere. He said he thinks bitcoin will go up with the current situation in Iran as well as gold and oil.
Peter said bitcoin isn’t digital gold at all.
Certainly, people that are trying to market bitcoin and getting other people to buy it if they have a lot of bitcoin to sell, they want to market it as if it were digital gold. But it’s not. Look, yes, bitcoin did rally on the coattails of the gold rally, just like it did not too long ago when the yuan broke through seven. I remember both gold and bitcoin rallied. But bitcoin quickly surrendered all of its gains, yet gold held on to its gains and continued to move higher. Look, gold is being bought as a hedge by investors. Bitcoin is being bought as a speculation. The speculation is that other people might buy it as a hedge, but nobody is. It is not a defensive asset. It’s not a safe haven. Bitcoin is probably the most risky asset you could buy. And you don’t hedge yourself by buying something that has more risk than what you’re hedging. You have to go to something with lower risk and that’s gold.”
Peter’s comments led to an animated exchange with Bubba before the host steered the conversation toward the global implications of the escalating tensions between the US and Iran.
Peter said the biggest problem facing the US is that it is more dependent than ever on foreigners to finance the deficits.
We need foreigners in the dollar and this threatens that. I mean, again, America is flexing muscles that it really doesn’t have — threatening sanctions against other nations. And I think there could be a repercussion that would really hit us where it counts and that’s in the wallet. Because if we get a move out of the dollar — you know, we’re not really seeing a flight into the US Treasury market. We didn’t see a move up in the dollar as a safe haven. It was just gold. And I think if the dollar really starts to fall, I think that’s going to accelerate the move up in both gold and oil, but create a bigger problem for the US economy as consumer prices and rise into the next recession. And if we end up in some type of war, an actual war in the Middle East on top of a recession, well that’s going to exacerbate all of the problems.
All of the focus on the Middle East has shifted the spotlight away from the trade war with China. The “phase one” trade deal hasn’t been signed and Peter pointed out that the Trump administration has not delivered a substantive trade deal at all.
I said this from day one. Phase one is not a deal. It’s really a surrender. It’s a copout. It’s the way for Trump to kind of save face going into the next election by pretending he actually accomplished something when he accomplished nothing. I mean, the whole Trump presidency is really pretending things have happened when all we’ve done is continued the bubble Trump inherited from Obama. It’s bigger than ever, and I think the bust is going to be much bigger than ever. And again, that’s another reason people should be loaded up on gold.”