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Peter Schiff and Jim Rickards: $15,000 Gold?

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Gold pushed above its all-time record price last week. Where does it go from here? Peter Schiff and Jim Rickards appeared on Kitco News to talk about gold’s trajectory and the possibility of $15,000 gold in the future.

Peter opened up the interview saying he’s surprised it took gold this long to break its record.

A lot has happened in the last decade. We’ve certainly printed a lot of money.”

Peter said the Federal Reserve has moved into a policy from which it can never extricate itself.

When we went to zero, when we did QE, people initially thought it was temporary and we could normalize rates and shrink its balance sheet. And I said from the beginning that was impossible, and I think the markets are now beginning to realize that I was right about that. And when they contemplate a future of endless money printing and zero percent interest rates forever and multi-trillion dollar deficits funded by the Fed’s printing press, it’s starting to sink in, and they’re getting rid of their dollars and they’re buying gold.”

Rickards brought up something commodity trader Jim Rogers told him several years ago. Gold is going to the moon, but nothing goes to the moon without a 50% correction along the way. Between gold’s high in 2011 and its low in 2015, it fell about 50%.

OK, that’s your 50% retracement. Now, that’s the bottom. Now it’s going up and the sky’s the limit.”

Peter said we’ve now formed a very solid base between $1,200 and $1,500.

Now I think we’ve broken out of that range. I think we’ve taken out the highs. I think it’s another leg of the bull market. I don’t think there’re going to be any significant pullbacks from here. I mean, there’ll be pullbacks, but I don’t think they’re going to be very significant. I think if you’re waiting for a big drop to buy gold, you’re going to wait a long time.”

Rickards agreed, saying the retracement is over.

Peter said waiting to buy gold in hope of a higher price is foolish.

The world is going to be full of people who are waiting to buy gold and who are broke because they didn’t just bite the bullet and buy it.”

Host David Lin said he spoke to an economist who said given the Fed’s balance sheet expansion, he forecasts a $4,000 gold price. Lin asked if this was possible. Peter said the only reason that gold stopped at $1,900 after the Great Recession was because people were convinced the Fed could unwind the policy.

Had the market not believed that. then gold would have kept rising.”

The gold bull market in the 1970s ended because Fed Chair Paul Volker was willing to let interest rates rise. Peter asked what will stop it this time?

They can’t let rates go up because we’re too broke to afford it. They’re not going to be able to bluff that they’re going to raise rates in the future because no one’s going to believe that. They’re not going to be able to pretend they can shrink the balance sheet because if they couldn’t shrink it when it was four-and-a-half trillion, how are they going to shrink it when it’s $10 trillion or $20 trillion? Who knows where it’s going? So, I don’t really see how there’s any way that they can stop the dollar from collapsing.”

Peter said ultimately the world is going to sever its relationship with the dollar. It will go off the dollar standard and back on the gold standard.

And I think this is going to be a more precipitous drop in the dollar’s value than it was in the 70s, so we could see something equally impressive in the price of gold.”

Rickards was willing to put a number on it. He projected $15,000 gold by 2025. He extrapolated some data to make his point. And he showed that given the M1 money supply in dollars, euros, pounds, yen and yuan – if you divide it by the official amount of gold, you get about $15,000 per ounce.

If you’re going to have a gold standard or even use gold as a reference point for money, if you need to restore confidence in the dollar, the implied non-deflationary price is $15,000 an ounce.”

Peter said it’s really a moving target because they are still printing money.

Between now and then, there’s going to be a lot of money that’s going to be printed, so who knows where the price of gold has to end up by the time we finish all the money printing?”

Peter said another way to look at it is the price of gold in relation to the Dow Jones. Twice in the prior century during significant bear market lows, the Dow traded down to a single ounce of gold. So, if you look at where the Dow is now at 26,000 and figure where would the price of gold have to be to equal the Dow at the current price, it would be $26,000.

But maybe if we get a big bear market, those two could meet around 15,000.”

Jim emphasized that he’s not exaggerating. He thinks $15,000 is actually conservative. It could be much higher.

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