Peter Schiff: Gold Is Going to Go Way Up, Not Down (Video)
Harry Dent is a long-time gold bear. He used to say gold would fall to $250. He’s revised that prediction up a bit, but still calls for a steep decline in the price of the yellow metal – perhaps to as low as $700.
Peter Schiff took on this notion during a recent interview on RT’s Boom Bust and explained why he thinks Harry is wrong.
The bottom line is Dent has too much faith in the US dollar.
There’s a lot of things that Harry says that I agree with, but his price target on gold is not one of them. I think he has too much confidence in the US dollar and doesn’t understand the nature of fiat money, and the fact that if all the things that Harry believes are going to happen happen – that is very bearish for the dollar, because the Federal Reserve is going to print a lot of money. He’s looking for massive deflation, but I don’t think the Fed is going to allow that to happen. They have the ability to stop that by printing money, and that’s exactly what they are going to do.”
This dovetails with Peter’s discussion about inflation on his podcast last week. He argued that inflation is inherently good for gold.
After all, the main reason to buy gold is an inflation hedge. If you think there’s going to be more inflation, you buy gold. But perversely, the way the markets work now, you sell gold if you think there’s going to be more inflation. In fact, you buy the currency of the country that is experiencing more inflation, which is kind of counter-intuitive because inflation by definition is the currency losing value. So, if the currency is losing its purchasing power, why would you want to buy more of it?”
During the RT interview, Peter touched on another reason he’s bearish on the dollar – the proposed Trump tax cuts.
These tax cuts are very bearish for the dollar and they are bullish for gold. Because all that’s happening is the government will be replacing tax revenue with debt. See, we’re not cutting the size of government. Government’s going to keep getting bigger, and bigger, and bigger. But what we’re going to do is pay for that bigger government by issuing more debt, and that means more money printing; it means more inflation. And ultimately, that’s a lot more expensive. It’s more expensive to pay for government by borrowing than by taxing. And so this is going to be a big negative for the dollar, because we’re debasing the dollar in order to cut taxes. So ultimately, this is going to be a buy the rumor sell the fact. If we get these tax cuts, the dollar is going down, no up. And gold is going to go way up, not down.”
RT Boom Bust host Lindsay France asked Peter if he thought a rate hike in December would strengthen the dollar.
Not really. I mean, the Fed has been raising rates since December of 2015, and the dollar is lower today than it was then. Gold is higher now than it was then. So, it was the anticipation of rate hikes that helped the dollar. By the time they actually started hiking rates, the dollar was going the other way. And I think the same thing is going to happen this time. I think the dollar has caught a bit on the anticipation of another hike, but I think if we get one they’re going to sell the fact. And the dollar downtrend I think is firmly in place. I think you had tremendous dollar bullishness when the year began. The trade was very crowded and very wrong. And I think this is the beginning, or this is the first year, of what is going to be a major, major dollar bear market that is going to take the dollar to all-time record lows, and in the process send gold to new all-time record highs.”
It sounds like this might be a good time to buy gold.
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