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Peter Schiff: Buffett Boost Lifts Gold Back Above $2,000

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Gold rallied back above $2,000 on Tuesday (Aug. 18) driven in part by Warren Buffett’s sudden interest in the yellow metal.

Peter Schiff talked about gold’s rally and the weakness of the dollar on his podcast and focused on the lack of financial media coverage of Buffett’s purchase of Barrick Gold. Of course, they mentioned it, but they didn’t really delve into the significant questions raised by Berkshire Hathaway’s move into gold mining stocks. In effect, Buffett sold banks and bought Barrick Gold.

He basically reduced his bets on banks and made a brand new bet on gold, which is, in effect, a bet against the US, against the dollar, pro-gold.”

The latest 13F filing by Berkshire Hathaway came out after the market closed last week. Gold rallied when Asian markets opened Monday morning and moved back above $2,000 an ounce. Gold push as high as about $2,016 before selling mid-morning drove the price back below the $2,000 level. But there were enough investors interested in buying the dip and gold rallied again, closing the day just above $2,000.

Gold’s move up wasn’t just about Buffet. As Peter said last week, the fundamentals are still bullish for gold. The federal government continues to borrow and spend and the Federal Reserve continues to print money out of thin air in order to monetize all of the debt.

In fact, the dollar got hammered on Tuesday, helping boost gold. The dollar index closed at 92.29 and came close to dripping below 92 during the day. This is the weakest the dollar has been since May 2008. Peter said the dollar is the most overcrowded currency on the planet.

It’s the reserve currency. Everybody owns dollars. They own way more dollars than they need. And they own lots of dollar-denominated bonds. And so everybody is going to be rushing to get out of the dollar. So, this is just the beginning of what is going to be a tidal wave of dollar selling.”

In a tweet, Peter said the dollar was in the midst of a “slow bleed.” But he thinks that when the dollar index cracks its January 2018 low and you see an 87 handle, a whole new wound will open up.

And I think you’re going to start to see the blood really gushing out at a more rapid pace. But the real key is going to be when we take out the March 2008 low, which was just above 70ish on the dollar index. So, you see dollar index sub-70, you see like a 69 handle on the dollar index, I think that’s when the dollar is about to bleed out. That’s when it’s going to die. That’s when we’re going to have the real come to Jesus, potential hyperinflation, or the Fed is going to have to do the unthinkable. That’s coming. That could happen as soon as next year. This crisis is rapidly approaching.”

Peter said when this happens, the number of people affected and the loss of wealth experienced will be without precedent, and people need to be prepared for that.

Buffett appears to be doing just that. His move into Barrick Gold is a big bet against the dollar.

Peter went on in the podcast to discuss the lack of financial media coverage of Buffet’s move. After all, Buffett buying gold stocks isn’t like Peter buying gold stocks.

Warren Buffett has never been advocating that anybody buy a gold stock. In fact, when he’s been asked about gold, he’s kind of dismissed it as a non-producing asset, and he’s always been saying, ‘Look, if you’re worried about inflation, just buy equities, buy businesses.’ … That’s probably true when the inflation is manageable, when it’s small, maybe a few percent a year. But when you’re about to have massive inflation, a much higher degree of inflation, that’s what I think causes Warren Buffett to decide that now it’s time to hedge the old-fashioned way. I can’t just buy businesses, especially when they’re overpriced. I’ve got to buy gold businesses. I’ve got to get into physical gold.”

And he is, in effect, buying gold. By buying into a mining company, Buffett is buying into the gold reserves it has buried in the ground.

As Peter pointed out, Buffett likes to sell people things they want and need. He sells Coca Cola. He sells shaving cream.

He knows that one product people are going to need is gold. They’re going to buy gold bars, they’re going to buy gold coins, because they’re going to need to protect their purchasing power from the inflation tax.”

And yet the financial media showed very little curiosity about what Buffett’s sudden interest in gold really means.

So what questions should they be asking? Peter goes on to break it down.

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