Peter Schiff: I Think This Is Going to Be the Perfect Storm for Gold
When the New York Times published an op-ed from a White House insider claiming there are people inside the Trump administration actively working to undermine the president, the markets shrugged it off. In fact, as Peter Schiff said in a recent interview on thestreet.com, the markets are shrugging pretty much everything off.
Everything is bullish as far as investors are concerned. They believe the US economy is in great shape. According to President Trump, it’s in the best shape ever. This is the greatest boom in the history of the United States. And so that fantasy continues to dominate the narrative and markets are shrugging off all the bad news.”
Despite the optimism, Peter said the economy is headed for the “greatest bust ever.” And that’s the perfect storm for gold.
As far as the Fed goes, Peter said he doesn’t think the central bank really has any kind of strategy.
I think it’s really just ‘kick the can down the road’ and to try to speak softly even though they don’t even really carry a stick.”
Peter reiterated a point he made in a recent podcast – the Fed seems more dovish. He said if you listen to Jerome Powell and the other Fed presidents, it seems like we may be close to the end of the hiking cycle. The Fed is not going to aggressively address inflation. It’s going to “keep its powder dry until it sees the whites of its eyes.”
In other words, they want to let the inflation genie out of the bottle, and then they’re convinced they can easily put it back in, which I think is impossible. But I think the real reason the Fed doesn’t want to be more aggressive with the rate hikes is they know they can’t. I mean, the economy can barely stand the rate hikes that have already been delivered, even though interest rates are just 2%.”
The economy is basically running on fumes from the tax cuts right now. It will eventually roll over into recession. But Peter said he doesn’t think that will dampen inflation. He sees stagflation on the horizon. The Federal Reserve will end up cutting rates and launching another round of quantitative easing. Ultimately, the dollar is just going to implode.
Of course, this will be good for gold. Peter said every day we’re closer to the breakout in gold, even though right now everybody is negative on the yellow metal. He pointed out that for the first time since 2001 hedge funds are net-short gold. At that point, the price was under $300 per ounce. You can look back and see the kind of spectacular gain gold had over the next 10 years.
I think we’re setting the stage for as big a run, if not bigger, than the one we had last time. Because I think the next time, the dollar is not going to stop falling.”
In a sense, the Great Recession saved the dollar. Foreign central banks helped bail out the dollar in 2010 and 2011 by debasing their own currencies.
I don’t think they’re going to make that mistake again. When the dollar starts to fall as a result of QE4, I don’t think it’s going to have any friends. I think countries around the world are going to be relieved the dollar’s falling and that their own currencies are rising, and that that takes the pressure off their own bond markets and their own stock markets. So, I think the dollar is going to fall into a vacuum. I think the only buyer is going to be the Federal Reserve, but that just means that we have to deal with all the inflation that we’re creating. We can’t export it to our trading partners, so I think this is going to be the perfect storm for gold.”
Peter said the sentiment on gold is horrible right now. But once the economy turns, the dollar starts to break down, and this false narrative of the American growth economy falls apart – “As this reality rears its head, gold prices are going to start to rise.”
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