If you’ve been waiting to buy gold and silver the wait is over.
In his most recent Gold Videocast, Peter Schiff looks at how the price of silver has just surged to a high it hasn’t seen since January of last year. In the aftermath of Brexit, Peter takes this as a good sign that the prices of both gold and silver are about to really break out and begin moving up in significant bursts. Now that gold is holding steady above $1,300 an ounce, investors who have been waiting on the sidelines to buy should consider acting soon – before sellers start hoarding their metals as the prices move up.
Peter’s forecast is based less on the United Kingdom leaving the European Union, and more on what is going to happen in America. Peter reiterated what he said in his recent appearance on CNBC’s Trading Nations: the Brexit basically gave Janet Yellen a get out of jail free card:
I believe the Federal Reserve is going to use the turmoil in the markets that followed that vote as the excuse it’s been waiting for not only not to raise rates, but to cut rates and to launch QE4. In fact, that is the main reason, I believe, that the markets have recovered somewhat from their Brexit related losses. Because if you look at the financial markets, they are now pricing in for the first time a higher probability that the next move by the Federal Reserve will be to cut rates, not to raise them.”
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It’s not just about Fed policy. The underlying economic conditions are weak. Peter pointed out that the so-called recovery is worse than most recessions. That puts us in a very precarious position when the next recession hits. This bodes well for gold and silver, but Peter said you shouldn’t wait:
There isn’t a lot of time left for people to buy gold and silver while there are still people foolish enough to sell it.”
Follow along with the complete transcript
Well, last week on Thursday night when it became obvious that the British were going to vote to leave the European Union, the price of gold spiked higher, trading over $100 an ounce higher than the prior day close. We got above $1,350. Now, we didn’t hold all of those gains but we still held above $1,300, which had proved to be some substantial resistance over the past several months.
Current Prices on popular forms of Silver Bullion
The price of gold today is trading at about $1,320 an ounce. More significantly today the price of silver finally followed the price of gold, breaking out to its highest close since January of last year. We’re now above $18 an ounce at $18.27, up about $0.50 an ounce today. We now have confirmation from both metals that the markets are prepared to move a lot higher, the most recent catalyst being the market turmoil that followed the British vote to leave the European Union.
But what’s really behind the metals rise is not what’s happening in Europe, but I believe what’s going to be happening here in the United States because I believe the Federal Reserve is going to use the turmoil in the markets that followed that vote as the excuse that it’s been waiting for not only not to raise rates but to cut rates and to launch QE4.
In fact, that is the main reason, I believe, that the markets have recovered somewhat from their Brexit-related losses because if you look at the financial markets, they are now pricing in for the first time a higher probability that the next move by the Federal Reserve will be to cut rates, not to raise them.
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Now remember, I’ve been saying this the whole time. Ever since the Federal Reserve raised rates in December, I was saying the likelihood was that the next move would be a cut and not another increase. But of course, everybody else was looking for three or four increases in this year and now as we’ve been getting more and more negative economic data and the Fed has been backpedaling, people have been pushing back into the future when they believe we’ll get the next rate hike. But now that we’ve had all this weakness in the markets, particularly in the banking stocks — not only the European banks, which have been decimated, but the banks here in the United States — the markets are now finally coming to terms with this reality, although they still don’t understand the real implications because they still believe that the Federal Reserve was going to raise interest rates but now that this thing has happened, something out of left field, they’re not going to do what they had planned on doing. My position was that they never planned on following through with the rate hikes. That was just talked. They had to pretend that the economy was strong enough to withstand higher rates but then not actually raise rates and prove the reverse. I said what they needed was a face-saving excuse to be able to turn on the spigots again without having to acknowledge the real reason for doing so. Now they can pretend that the economy was sound but now we just have these external events that we have to deal with, and now they can go back to QE or cut rates without having to acknowledge that it’s the weakness in the US economy that is really the driving force behind their decision.
Meantime, the price of gold and silver have risen even against a backdrop of a strong dollar, or at least a dollar that is less weak than other fiat currencies, and this is because the turmoil in the aftermath of the vote caused this flight supposedly to quality, which included the US dollar. But this is really not a flight to safety or a flight to quality because the strongest fiat currency is the Japanese yen and it’s hard to argue that Japan is a bastion of safety. What’s really going on, what’s really behind the rally in the yen and the dollar is the unwinding of carry trades. You had a lot of speculators that were betting on stronger markets and funding those bets by selling the yen or selling the dollar, and then when the surprise vote came out, they had to quickly reverse those trades and that’s where the buying came from.
But this really is a gift horse because this rally of the dollar is not sustainable because what just happened in Britain and, more importantly, the reaction that we’re going to get from Washington is very dollar bearish. The idea that the Fed is no longer about the hike rates, the fact that these hikes are now off the table — sure, they were never really on the table but most people didn’t realize that — but now they’re starting to figure it out.
But more importantly, as we continue to get more weak economic data that continues to surprise all the bulls who are expecting strong data, it’s not gonna be long before the talk of rate hikes is really replaced first by the talk of
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rate cuts and then by actual cuts. And, of course, since there’s not a lot of room for the Fed to cut rates because it never really raised them, the real monetary stimulus is gonna come from an enormous round of quantitative easing.
And, you know, this recovery — if it ever was a recovery — I believe has already ended. And because the recovery itself was so weak, because the average person is in worse financial shape now than he was when the recovery began — in fact, this is the first recovery ever to be worse than the recession — we are in a very precarious position now as we enter the next recession, which I believe will be far worse than the Great Recession that everybody credits the Fed for getting us out of. Well, they’ve gotten us into something much worse than that and I believe now that you have the breakout in the price of gold and silver, we’ve already had the breakout in the mining stocks, I think more and more people are gonna connect these rather obvious dots and they’re gonna start buying.
And remember, the only reason that the price of gold and silver went down so much in the last few years was because everybody bought into this recovery nonsense. They actually believed that this crazy monetary policy worked, that it was a success and that the Fed could actually do what it was pretending, that it could actually normalize interest rates and shrink its balance sheet. And based on that fantasy, there was not only a lot of selling in gold and silver but a lot of shorting. All that is coming to an end. I think the shorts are going to cave, the sellers are gonna be out of this market, more and more buyers are going to come in as they realize that none of that is reality, that everything they believed is wrong, that quantitative easing didn’t work, it failed, and because it failed, we’re gonna do it again. We’re going back to zero. We may even go to negative. And I think that we’re gonna regain all of that lost ground in a relatively short period of time and then gold and silver are both going to go on to make new highs.
And if you remember, the high for gold was close to $1,900. It’s still around $1,320. Silver, which I said just got over $18, that got as high as $50. But if you go back to the point in time where gold and silver were making those highs, a lot of money has been printed since then not only in the United States but all around the world, and the US economy is in far worse shape. In fact, many other countries, the reason that there was such a violent reaction in the financial markets to Brexit wasn’t because Brexit is so terrible. It just shows you how precarious the global financial system is. It’s all perched upon these props of cheap money and central banking. It’s all based on hype and hope and confidence. And when something shakes the confidence, you see the immediate result. The central bankers are gonna do everything they can to keep this bubble from deflating, and that means more money printing not
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only here but around the world, and all the naysayers, all the people who have been saying that, oh, the guys like Peter Schiff are wrong, the Fed was right, Bernanke was right, he was the hero, Paul Krugman was right, there is no inflation, all the people that had these premature victory laps are gonna have a lot of egg on their face.
But in the meantime, there isn’t a lot of time left for people to buy gold and silver while there are still people foolish enough to sell it. Because I think the supply of sellers is gonna rapidly run dry as more and more people come to the obvious conclusion they should have come to years ago but they didn’t. But all of a sudden, people are gonna have that a-ha moment, they’re gonna have that epiphany, and it’s gonna be a race. But before that happens, if you haven’t fully allocated your gold and silver positions, I would encourage you to do so now. And if you haven’t bought any, if you’ve been waiting, you know, the wait is over. And I wouldn’t be waiting for lower prices because I doubt we’re gonna see them. The prices are low enough. Just buy them. Maybe they’re higher than they were. Don’t think, “Oh, I missed out because we’ve had this big run in the last few months.” Prices are still very cheap not only relative to where they’ve been in the past, but they’re very cheap relative to where I think they’re gonna be in the future.
“If you’ve been waiting, the wait is over. And I wouldn’t be waiting for lower prices because I doubt we’re going to see them. The prices are low enough. Just buy them.”
Reprinted from SchiffGold.com.
