Peter Schiff: Gold Is the No-Brainer Investment
Why is the mainstream financial media mostly ignoring gold? Peter Schiff talked about it in a recent podcast. He said the investment pundits are missing the boat on a “no-brainer” investment.
The stock market has continued its pattern of wild swings this week. The Dow Jones was up 456 points on Wednesday after a better than 600-point drop on Tuesday. But Peter pointed out that one market sector has done consistently well of late – gold stocks. In fact, GDX has doubled over the last month. Granted, gold stocks have doubled from a relatively low price. But regardless, you would think there would be some coverage of this in the mainstream financial press.
Peter said if you’re an investor, gold should be the most obvious, no-brainer investment out there given what’s going on.
Clearly, everything that is happening right now in the economy, with central banks, is extremely bullish for gold. There is no question about it.”
This is Bank of America. This isn’t Peter Schiff. This isn’t some crazed gold-bug. This is Bank of America. They’re coming out and saying gold is going to go to $3,000 in 18 months. It’s at $1,750 now. That is a big move. You would think somebody would be thinking, ‘Holy crap! Maybe we should buy some gold stocks.”
How can the mainstream financial networks completely ignore the one sector that is really on fire?
In fact, it hasn’t even started to burn compared to what it’s going to do. If you look at the charts for both gold and gold mining stocks, they are just breaking out. I mean, it looks to me like a moonshot can happen any day. Talk about a coiled spring. You have that in these gold stocks.”
Meanwhile, the mainstream financial media talking heads are still focused on the stocks that did well when the bubble was inflating.
Why don’t they try to figure out some of the new names that are going to succeed given this new reality of endless money printing, QE infinity, zero percent interest rates, multi-trillion-dollar budget deficits, fiscal irresponsibility on the part of both parties, multi-trillion-dollar deficits as far as the eye can see, no opposition, both sides of the political aisle wanting helicopter money — how can you not see how bullish this is for gold, and how you cannot be loading up. Talk about backing up the truck and loading up on these stocks. Yet they don’t even discuss it.”
A lot of people seem to want to dismiss what’s going on in the gold market because people like Peter have been bullish for a long time. They claim the bulls have been wrong about gold. But it’s hard to say they were “wrong” when gold is already around $1,750 (at the time of the podcast). When Peter first started recommending gold, it was at $300. Granted, the yellow metal hasn’t hit $5,000, a number Peter threw out several years ago. People like to point to that and say he was wrong.
So, why didn’t gold get to $5,000?
Peter said the reason he thought it would go that high in the wake of the 2008 crisis was because the Federal Reserve didn’t have any exit strategy from the extraordinary monetary policy it launched. He didn’t think the Fed would be able to normalize interest rates or shrink its balance sheet. We now know that Peter was right about that. In 2011, Ben Bernanke was able to convince everybody that the monetary policy was a success and that the central bank would be able to unwind it. At that point, gold collapsed. The price fell from a high of $1,900 all the way to about $1,050 by 2015.
All because people believed the Fed’s lies. Now, was I wrong for knowing the Fed was lying? Because I said the Fed could never normalize interest rates or shrink their balance sheet. I was right about that. But I was wrong about other people realizing it sooner than they did. It was the people who believed that the Fed could shrink its balance sheet and normalize interest rates – they were the ones that were wrong. But because they outnumbered me, the price of gold went down initially instead of going up.”
Even after the Fed abandoned its feeble attempt to normalize rates, ended quantitative tightening, cut rates three times in 2019, and restarted QE before coronavirus, the markets still didn’t get it.
Well now, with the coronavirus, with the Fed at zero, and with the balance sheet exploding, now, people are going to finally get it. Because it’s impossible — nobody can be so dumb as to not get it now. Now, I think it’s going to take a little bit more movement in the market, but the world is going to figure out what I figured out from the beginning, and what I assumed people would figure out a lot sooner. And that is that the Fed is going to print money indefinitely, that rates can never be normalized, and the balance sheet can never shrink. It’s going to grow in perpetuity. And so now gold is going to resume the rally that was interrupted by the false belief that the Fed could do that.”
Peter said he thinks that means now gold is going to get to $5,000 and likely even higher.
Another factor Peter said people are ignoring is inflation. He recently debated Jeff Small on The Income Generation about the issue.
Bottom line – given everything that’s going on, soon even the village idiot will be buying gold.
Peter also talked about the next round of fiscal stimulus coming down the pike in this podcast.