Peter Schiff: Hot CPI Sends Gold Higher

On Wednesday evening, Peter took to his podcast to cover the week’s big economic headline: inflation is still running hot. In this episode he covers this week’s alarming CPI figures and the political fallout they caused. These metrics highlight just how unprepared Powell and the Fed are for coming stagflation.

To kick off the podcast, Peter reminds us of his long-held warnings about rising inflation and the Fed’s mismanagement:

I don’t often say, I told you so, but sometimes I just got to say, I told you so. I have been warning on this podcast for over a year that inflation was going to get worse, that the Fed aborted the hiking campaign prematurely, that the Fed never got rates into restrictive territory, that despite the claim that they were fighting inflation, they continued to stoke the fire, and that the fact that we pulled back from 9% to 2.5% or whatever we got down to, that was just a cycle, a temporary pullback that we had formed a base, and that we were headed higher, and that we were not going to get to 2%.

Peter comments on Jerome Powell’s congressional testimony from earlier this week, critiquing his lack of accountability and unwillingness to address critical issues head on:

Every time they ask him about a particular policy … he says, ‘I can’t answer that. I can’t talk about politics. I don’t want to comment on the wisdom.’ This is exactly what he said. ‘I don’t want to comment on the wisdom of what you guys do.’ I just want you guys to do whatever you want and I’ll deal with it. What the hell? I mean, so he’s saying that even if I think you’re about to do something really stupid that’s going to be harmful to the economy, I’m just going to bite my tongue and let you do it.

He is equally scathing when discussing what he believes should be the correct response to surging inflation:

The Fed should be hiking rates. They should have hiked rates today, intra-meeting. They should be like, ‘… We totally got inflation wrong. We really screwed up with these rate cuts. We need to take all 100 basis points back. In fact, we need to go up 100. We need 200 basis points right now. We need to quickly go to where we should be before this really gets out of hand.’ But of course, they’re not going to do that.

Peter casts doubt on the conventional wisdom regarding inflation management, especially when it comes to the gold market:

But what the traders don’t realize, and this applies even more so to the gold market, is that that’s not what it means. Higher inflation doesn’t mean the Fed is going to fight harder to win. It means the Fed has already lost. They have surrendered. Inflation is going to keep going up, and the Fed is not going to do anything about it. It’s not that they’re not cutting. It’s that they’re not hiking. The Fed should be hiking rates.

He also explains the counterintuitive market reaction to the CPI news, noting the disconnect between algorithmic responses and common sense:

But actually, before I get to gold, the dollar, because the dollar, again, had the typical knee-jerk reaction. When this number came out, the dollar immediately spiked. Why? Because that’s how the algorithms are programmed to react to inflation news. If it’s worse than expected, you buy dollars. The opposite of what common sense would tell you to do, you find out that your dollars are losing value faster than you thought, that is not a sign to go out and buy more of them.

Finally, Peter issues a prediction for the next time inflation comes in hot:

Months ago, a CPI report like this would have sent gold down for the count that day. It would have gone down 40 or 50 bucks or 60 bucks, and it wouldn’t have recovered. It would have closed near the lows. The markets are waking up to this reality that bad news on inflation is actually good news for gold. Eventually, we’re going to have huge rallies. Gold is going to be up 50, $100 when we get bad inflation news, because it just confirms why you need to own gold, because inflation is running out of control, and the Fed is not doing anything about it.

Make sure you also check out Peter’s X Space from Monday night, where he covers events from earlier in the week and from last weekend.