Peter Schiff’s 2016 Outlook for Gold Fundamentals (Video)
On Kitco News yesterday, Peter Schiff put the past three years of falling gold prices in perspective. He emphasized that gold’s recent performance should be considered in the larger picture of a gold bull market that began in 1999. It has simply been investor assumptions and speculation about an improving economy that allowed gold’s correction to drag on this long. When investors realize in the coming year that the Federal Reserve is going to have to stimulate the economy again, then gold will begin the most dramatic up-leg of this long-term bull market. Click here to view Peter’s 5-year gold price forecast.
Rather than delivering the rate hikes that everybody expects, I think we’re going to get rate cuts and another round of quantitative easing that will be even bigger than the prior three. I think gold is set up for another spectacular rally. I think it’s going to see new highs. I think the biggest leg of this gold bull market – which really began in 1999 with gold below $300 – I think the next leg is going to be the biggest leg…”
Highlights from the interview:
“I think [gold] is set off quite well [in the new year]. We’ve had a lot of negativity on the price of gold. People were expecting it to drop a lot more than it actually did decline last year. This year is beginning with a lot of negativity as well, although the price action so far early in the year looks quite encouraging. But I do believe that what was driving gold lower for the last several years – and I think it’s been down 3 years in a row – was the false belief that what the Fed had engineered was a legitimate economic recovery in the United States and that higher interest rates would be supportive of the dollar and detrimental to the price of gold. All of this is wrong. All the Fed has done is inflate a gigantic bubble, which may have already popped. I think rather than delivering the rate hikes that everybody expects, I think we’re going to get rate cuts and another round of quantitative easing that will be even bigger than the prior three. I think gold is set up for another spectacular rally. I think it’s going to see new highs. I think the biggest leg of this gold bull market – which really began in 1999 with gold below $300 – I think the next leg is going to be the biggest leg…
“I think it’s an inevitability that we’re going to see it [QE4]. I think it’s likely that it will start in 2016. But somehow, if we make it through 2016 without another round of quantitative easing, then we’ll certainly get it in 2017. But I still think 2016 is more favored, because it is an election year. You know, earlier today the Atlanta Fed reduced their forecasts for the fourth quarter GDP in the US to just 0.7%. I have a feeling it could be negative by the time we get the print in a couple of weeks. If we have a negative fourth quarter, there’s also a good chance we have a negative first quarter, which puts the US officially back in recession. What is the Fed going to do in a recession, especially in an election year? They’re going to pull out all the monetary stops. They’re certainly going to do more QE. I think we could see more pickup in the unemployment rate in 2016 as we start hemorrhaging some of the jobs that should never have been created in the first place in the last couple years…
“I think the critics have to put everything in perspective. I’ve been recommending gold as a way to hedge yourself against monetary policy mistakes since the late 1990s. Gold rose from under $300 an ounce to close to $2,000. It has had a multi-year correction, as everybody has falsely anticipated a successful conclusion to the Fed’s monetary experiment. I think these bets are wrong. They’re the same types of bets that people were making when they were buying subprime mortgages or when they were buying the dot-com stocks. But the price of gold has gone down, because most people who were trading the metal don’t perceive reality yet. They soon will, just like they did in the prior bubbles. I think when the fundamentals or reality finally rears its ugly head, I think the price of gold is going to rise very rapidly. I think there’s a lot of people who are short the metal, and I think they’re going to be surprised by the magnitude and how swift the losses actually materialize. I think people need to make sure they’re positioned properly long in this market, before all that turns around…
“Obviously, [gold] is a buy. It’s below $1100. I think it’s a great buying opportunity. Sure, I said that a year ago. You never know where the bottom’s going to be. There’s certainly a lot of evidence out there that we’re close enough to the bottom that it doesn’t make any sense to hold off for lower prices, because I think that the upside potential in gold dwarfs the downside risk. I think that potential could be realized very rapidly. I think it’s going to be very hard for people who aren’t positioned to chase the market once it runs away. I think it’s much better to be prepared in advance. Yes, sometimes it’s difficult, because you’re buying and you’re not getting that immediate validation, because the market is headed lower and everybody thinks it is going to keep going lower. I think what you have to do is understand the real fundamentals and buy before everybody agrees with you. By the time everybody else understands that they need to be buying gold, believe me – the prices are going to be a lot higher. Then my critics, who were all over me for $5000 gold, they’re probably going to jump on the bandwagon when gold is a lot closer to that number.”
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