Gold has risen to six-year highs in recent weeks as the Federal Reserve has pivoted back toward an easy-money monetary policy. Markets widely anticipate a Federal Reserve interest rate cut this week and the economy appears to be slowing.
Peter Schiff recently appeared on RT Boom Bust to explain why he believes this is the beginning of a much bigger long-term rise in the price of gold. And it’s not just because the Fed is cutting rates.
In fact, they are going to cut rates next week and this is going to be the first step on the road back to zero. And the Fed is also going to return to quantitative easing. But we just found out that Donald Trump is cutting a deal with a Democrats to basically throw out any progress Republicans made back in 2011, thanks to efforts of the Tea Party, to at least try to rein in the increase in government spending. So, they’re throwing caution to the wind. We are going to see deficits going through the roof over the next several years, and that’s even without the recession, which I believe is coming and which is going to make them much, much worse.”
Consider that in the midst of what is supposed to be a strong economy, we’re already seeing record-setting deficits. As Peter pointed out, bigger deficits mean more money-printing and that means more inflation.
All of this is very bullish for gold... If you understood what all of this means, you would be buying gold as fast as you can.”
The host asked Peter where he sees the price going in the near future. He said he doesn’t see much resistance in the price of gold until you get up around $1,800 or $1,900 – the vicinity of the 2011 highs. Peter pointed out that gold came off that peak just as Congress was taking some steps to rein in deficit spending.
Well, now that we’ve eliminated those steps, it makes sense that gold would break out.”
Peter said given the conditions, he doesn’t think we will even see a whole lot of resistance at $1,900 and that he thinks the price of gold will shoot past those 2011 highs.
Peter was also asked about Fed board nominee Judy Shelton’s support for the gold standard while simultaneously calling for a rate cut. He called it hypocritical.
If anybody actually believes in a gold standard, then they believe that the market, not the Fed, should be setting rates. And if the Fed were to allow the market to set rates, rates would be much higher. The only reason rates are as low as they are is because the market is anticipating how the Fed is going to react in the next recession, which is quite imminent. So, I think it’s wrong.
If Judy Shelton really wants to return to a gold standard, then she wants higher interest rates, because higher interest rates is what we would get if we went back on a gold standard.”
Peter said that would be a good thing because that’s what the economy needs.
We don’t have enough savings. We don’t have enough capital investment. We have too much borrowing on all levels. And that’s because the Fed has held interest rates artificially low. So, if the Fed can no longer do that, then rates are going to rise, at least in the short run.”
Peter said that in the long run, we would get lower interest rates because we would have sounder money, less inflation and higher savings.
But the government has been able to manipulate interest rates artificially lower to boost the GDP, to prop up the stock market and other asset bubbles. But all of that is going to blow up and interest rates are going to go sky-high.”