Peter Schiff: Gold Is on the Launchpad

Gold has alternately rallied and tanked over the last week based primarily on how investors view the inflation fight. When they think the Fed is about to win, they buy gold. When they think the fight may have to continue, they sell.

In a recent podcast, Peter explained that investors are right to buy gold based on inflation. But they’re completely backward in their reasoning.

After the CPI came in cooler than expected, gold rallied to a 52-week high. But then we saw a big selloff when the retail sales numbers for March came in weaker than expected. The projection was for retail sales to fall by 0.4%, but they ended up dropping by 1%.

We also got some manufacturing numbers that were weaker than expected.

You would have thought that is bullish for gold because that gets traders thinking about ‘Oh, the Fed can’t hike as much,’ or they’re going to cut more — the economy is weaker. But instead of rallying on that news, gold tanked.”

In fact, gold fell below $2,000 an ounce on Friday, although it rallied late in the session to close above that level.

I think that anything below $2,000 now is to buy. I think this is the low end of this trading range. I just don’t expect us to stay in this range very long. We’re in it now, but I think we’re going to break out, and we’re going to keep moving higher. Because the fundamental news, the technical news is just too bullish for gold.”

Peter noted that gold continues to rally when we get indications that price inflation is cooling. That’s exactly what happened last week when the CPI data came out. But Peter noted the data doesn’t actually indicate the Fed is winning the inflation fight. Core CPI was up by 0.4%. That annualized to nearly 5%.

So, how anybody can look at these numbers and conclude that the Fed is anywhere near winning its inflation battle — look how much the Fed has already raised rates and that’s all they’ve achieved.”

And Peter said he thinks these inflation numbers are “kind of the bottom.” He pointed out that oil prices are pushing upward and the dollar is showing significant weakness.

To me, those are more forward-looking indicators. … These forward-looking indicators of inflation would tell you that inflation is going to be a lot stronger in the future. So, looking at these CPI numbers and thinking that it’s going down doesn’t make any sense. But what also doesn’t make any sense is the fact that gold rallied again on the idea that there’s not as much inflation as we thought, so the Fed is not going to have to hike as much or they can cut sooner.”

He said that investors are right to buy gold on the inflation news.

But they’re wrong in their thinking that inflation is going away. It’s not going away. Inflation is going to get worse. But that’s actually more bullish for gold than what they think, which is that inflation is going to go down. And the ironic part about it is to the extent that the inflation numbers get better, and that means the Fed can be easier on its monetary policy, or the markets believe that, that immediately sinks the dollar causing commodity prices to rise. So, the idea that inflation is coming down automatically means inflation is going up.”

Peter went on to point out that Warren Buffet recently said inflation isn’t going away and that he accurately explained politicians don’t have any incentive to cut spending or take the other difficult steps necessary to slay inflation. Just look at the budget deficit for the first six months of fiscal 2023. Meanwhile, there isn’t even talk about reining in government spending.

No one is going to cut spending. No one is raising taxes. So, how are they going to pay for these deficits? Exactly the way Warren Buffet said they will — by creating inflation. So, it’s here to stay. It’s going to go up, and that means gold is going ballistic. The gold price is on a launch pad right now, ready to go to the moon. When it takes off, it’s hard to say, but you’ve just got to get on board this rocket.”

In this podcast, Peter also talks about some startling admissions by Janet Yellen and the Fed.