Peter Schiff: Bad Monetary and Fiscal Policy Is Bullish for Gold

Is now the time to get into gold? Peter Schiff appeared on Fox Business last week to talk about it with Charles Payne.

Peter said the current bull run in gold started about four years ago when the Federal Reserve started raising interest rates in 2015. Over the past four years, the price of physical gold has risen by about 50% and gold stocks have doubled that. In fact, the return on gold stocks has been about 50% better than the S&P500 as a whole over that time.

Charles noted that a lot of people piled into gold in the wake of the 2008 financial crisis but then gradually turned away from the metal, figuring that with the crisis past, they didn’t really need gold anymore.

That’s the mistake that a lot of investors make. They jump to that conclusion. Because gold’s bull market really started around 2001 when it was under $300. Then by 2011, it was almost $1,900. So, that’s a very big run. And what really spiked that kind of blow-up up to $1,900 was the Fed doing quantitative easing and 0% interest rates. And a lot of people were worried about that. And they should have been worried about it. And so, they were buying gold. But then all of a sudden, they stopped worrying because the Fed convinced everybody that they could normalize interest rates, that they could shrink their balance sheet. And then, anticipating a return to normal monetary policy, we had this big bear market. But I knew the entire time that the Fed was wrong — that it could never do what it claimed.”

Peter reminded Charles that he was on Fox Business two days before the last rate hike in December 2018 and predicted that it would be the last rate hike of the cycle.

I said the next move would be a cut and that then they would return to quantitative easing. Both of those predictions have come true. That’s what’s been powering stocks. But bad monetary policy, bad fiscal policy is much better for gold than it is for stocks.”

Charles noted that most people don’t really understand Fed monetary policy and how it impacts the economy. For the average investor, you buy gold when times are bad. Times don’t seem bad right now. What is the public missing and why should you have gold in your portfolio?

The public is missing the same thing professional investors are missing. They still don’t understand the significance of the Fed’s shift, why they did that, and what it really portends for gold and the economy.”

Charles asked if the central bankers at the Federal Reserve are panicking right now.

Well, they should be. I mean, look, what they’ve done, they lit a fire that’s going to burn out of control. We never had a real recovery from the Great Recession. We just had a bigger bubble.”

So, how far is gold going to go?

Well, look, gold has gone up 50% during the past four years while the dollar has gone up. The bear market of the dollar is coming. So, if gold can do this well when the dollar is rising, imagine what it’s going to do when the dollar starts falling. I think the dollar’s going through the floor which means the price of gold is going through the roof.”