Gold hit record highs in a number of currencies on Monday as trade war worries, geopolitical uncertainty and expectations of a slowing economy drove investors to seek safe haven.
During a recent interview on Fox Business, Peter Schiff said the trade is to get out of the dollar and look at gold. As if to prove him right, gold shot up about 1.5% Monday in dollar terms, hitting a six-year high. The yellow metal pushed to $1,469,60 before some profit-taking stalled the rally.
Silver also made a strong showing, rising 1.3% to $16.42 per ounce.
But it was in other currencies that gold really shone. The price hit all-time records in a number of currencies including the British pound, the Indian rupee and the Japanese yen.
Record Gold Prices
- British pound – £1,209.55
- Indian rupee – Rs 103,837.75
- Canadian dollar – CAD $1,938
- Australian dollar – AUD $2,180
- Japanese yen – ¥155,550
- South African rand – ZAR R21,929
The price of gold also saw big jumps in several other currencies. The yellow metal was up 3.5% in China at CNY ¥10,360. Gold rallied about 1.18% in euros.
More trade war tension was a big driver in the gold rally.
The Fed cut interest rates for the first time in more than a decade last Wednesday, gold sold off initially in a “buy the rumor, sell the fact” scenario and because Jerome Powell indicated that this was not the beginning of a sustained rate-cutting cycle. Peter Schiff said Powell was right when he said this wasn’t the beginning of a long easing cycle. That’s because it won’t take long to get to zero.
Pres. Trump expressed disappointment in the modest 25-basis point cut. The very next day, the president tanked the stock market and injected some juice into the gold market announcing a 10% tariff on the remaining $300 billion of goods and products coming from China into the United States beginning Sept. 1. Trump also rattled off a litany of complaints about Chinese performance in the trade negotiations. With that news, the markets decided that Powell-talk notwithstanding, we’re going to get more rate cuts. The Dow dropped 280 points that day and gold soared more than 2%, pushing up to about $1,446.
The Chinese have threatened to retaliate against additional tariff and the Chinese yen plunged to its lowest level since 2008, sparking allegations of currency manipulation. This was a big factor in gold’s most recent leg up.
A cynical person might suggest that Trump intentionally timed the tariff announcement to put pressure on the Fed to continue cutting rates. Peter made this point during his Fox Business interview.
This was basically Trump’s insurance policy to make sure the Fed keeps cutting. But, you know, I don’t think he needed the insurance.”
The recent surge in gold prices isn’t an isolated event. The yellow metal has been rallying for months. The yellow metal is up 17% since last December when plunging stock markets drove the Fed to initiate the “Powell Pause.”
The trade war isn’t the only factor pushing gold higher. For instance, Brexit uncertainty is driving the yellow metal up in the United Kingdom. The gold price in British pounds has skyrocketed 25% since May.
Generally weak economic data is also driving investor worry. Despite assurances from Powell and US government officials that the American economy is strong, the data tells a different story. Even as Powell was assuring us the domestic economy is fine, and the Fed’s worries are all global, we got more gloomy economic numbers. Data showed the ISM manufacturing index dropped to 51.2% in July. That’s the lowest level since mid-2016. Construction spending also declined by 1.3% in June. Meanwhile, jobless claims climbed modestly by 8,000 to 215,000 at the end of July.
Philips Futures analyst Benjamin Lu told CNBC he thinks all of the uncertainty will lead to more Fed rate cuts.
All this volatility, growth fears, persistent weakness in economic data will be good enough for a risk-off environment.”
Peter Schiff has been saying we are going back to zero all along, and the Fed is going to have to launch more QE. He reiterated this point in his Fox Business appearance.
He’s trying to pretend it’s because of concerns about the overseas economy. It is really the US economy that is driving the Fed. That’s why this is just the first step on the road back to zero. And you know, it was a mistake when the Fed went back to zero the last time; it’s going to be an even bigger mistake when they do it next time. And they’re also going to go back to quantitative easing. You know, they announced yesterday the end of quantitative tightening, but the next step is to go back to QE, and QE 4 is going to be bigger than QE 1, 2 and 3 combined.”
This is exactly why Peter is saying to buy gold now.
The trade – get out of the dollar and look at gold … People are totally on the wrong side of this trade right now. People don’t own gold and silver. They’re too long the dollar. They have no idea just how much inflation the Federal Reserve is going to be unleashing. And it’s not going to be good for stock prices. The inflation is going to be in the supermarket, not in the stock market.”
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