Peter Schiff: Gold Up and Down! What’s Next?

Gold blew through $2,100 and set a record high Sunday night. Then it rapidly sold off on Monday. But gold still held above $2,000. In his podcast, Peter Schiff put the big rally and subsequent selloff into perspective, talked about what’s next, and discussed how investors can best position themselves for subsequent moves.

Gold surged to a new record high of $2,135 early Sunday morning. Peter called the move “very significant.”

Gold is an important monetary metal and the fact that it traded at its highest US dollar price in the history of the country is a significant thing that happened that a lot of people are dismissing.”

Then on Monday, there was a sharp selloff. Gold dipped around $100, falling to around $2,020.

Obviously, there was some profit-taking. Some speculators that had correctly anticipated a gold rally, well, they took advantage of that rally and they sold. I mean, that’s what traders do. They make a bet and then they cash in. And so when you get a gap up in the night, that’s generally what a trader is going to do. They’re going to take their winnings and book the gains.”

Peter said he thought some short sellers decided to take a shot that gold was overbought short term.

Some people think the sudden selloff was due to “manipulation.” Peter addressed that possibility.

I’m not subscribing to the theory that there is an organized plot to manipulate the price of gold. But I certainly recognize that it’s within everybody’s interest to suppress the price of gold. Certainly, it’s in the government’s interest. It’s in Wall Street’s interest.”

Peter turned to an analogy. Imagine there was a plot to kill all the miners in a coal mine. The miners have a canary to warn them of gas. Anybody trying to execute the plot would probably try to figure out how to keep the canary alive. Peter said gold is the economic canary in the monetary coal mine.

If gold really goes up, that’s a warning sign. ‘Hey! There’s a problem here in fiat land. Maybe we ought to do something because gold just spiked way up.’ So certainly, maybe Wall Street banks … or maybe the ‘Plunge Protection Team’ — the government has this plunge protection team that if the market is getting clobbered they go in there and they buy stocks. We know they exist. Well, maybe they have a surge prevention team when it comes to gold. They see a big spike up. Gold is at new highs. ‘We’ve got to do something!’ We’ve got to sell some gold futures to suppress the price of gold just the way we buy stock futures to prop up their value.”

Peter compared it to quantitative easing, designed to prop up the price of Treasuries. That’s what brings interest rates down.

They manipulated the Treasury market by intervening and buying bonds. And so, they can certainly be doing the same thing with respect to suppressing the gold price. I don’t think it’s an organized conspiracy. But I think the government has an interest in not seeing the price of gold skyrocket.”

Wall Street would also rather not have gold rallying and exposing the problem with its paper assets.

I get that they’re going to see this and try to sell into it. But it’s not going to be able to stop the overall move. Can it slow it down? Sure. It slowed it down on Sunday night because there was selling that came into the market.”

Peter said it’s significant that despite the big selloff, gold held above $2,000.

Two thousand was the resistance. It has now become the support. And the market has moved to a new high that eclipsed all the previous highs. That is a very bullish indication.”

Peter said any move below $2,000 is now a buy.

I think a lot of the buyers, the big long-term accumulators of gold, who have been buying all the way up, have raised their bids and now they’re buying at $2,000 or maybe slightly above, or if they get lucky, slightly below.”

He said he thinks we have exhausted the supply of sellers below $2,000.

We now have a new range that likely will be around $2,000 that will define support, or slightly below, and the new short-term resistance would be the high from Sunday night, which is about $2,135.”

The question is how much longer will that high contain the market?

Peter said, “Probably not much longer,” and speculated this may be a short-term resistance.

I think the market is going to take it out and move substantially higher. I would not be concerned gold sold off after making a new all-time record high. The important thing is that gold made a new all-time record high, which is something I had been forecasting. And after it sold off, it’s still above $2,000. And of course, that selloff took a lot of selling out of the market. We’ve already had a decent correction and we’re still above $2,000.”

Peter said the pullback is another “gift opportunity.”

Someday there’s not going to be enough sellers. There’s not going to be the shorts there. It’s going to take off. But the fact that it didn’t, the fact that it pulled back, well, that just gives you another opportunity to buy it, to see the strength that underlies this market, and use the fact that we’ve now pulled back to where I think is support … these are opportunities. Don’t let financial news try to focus on the decline while missing the forest for the trees.”