Gold has been on a three-day skid, but as Fox Business anchor Liz Claman put it, “So what? It’s been a breakout summer for bullion.”
Over the last three months, gold is up about 12% and has hit six-and-a-half year highs in recent weeks.
Peter Schiff joined Claman, along with, Frank Holmes and Imaru Cassanova on The Claman Countdown to talk about the yellow metal.
Holmes started out the segment saying that recession fears are driving central bank easy monetary policy and that’s good for gold.
Each month we’re seeing more and more governments offering you a negative real rate of return on your money and that automatically makes gold much more attractive. And I don’t think it’s ending yet.”
Cassanova said gold has come back in favor after being range-bound for nearly six years.
In June, it broke out… The driver there was the Fed. What is the Fed signaling when they are shifting, when they are going from tightening to cutting? They’re saying we too are worried about the US economy. And investors responded to that — to the higher risk of a recession in the US.”
Claman noted China has added about 100 tons of gold to its reserves over the last nine months. She asked Peter if China’s stockpiling of gold plays into the picture. He said he expects China to keep adding gold, along with other central banks because they recognize the weakness of the US dollar.
The dollar is actually very weak. People have been looking at the dollar versus other fiat currencies. But if you look at the dollar’s decline against gold, that really tells you that we have a weak dollar, not a strong dollar, and I think it’s going to get a lot weaker. And I think foreign central banks are starting to position for the dollar losing its reserve currency status. And it’s going to lose that status not to another currency, but to real money, to gold. And that’s why central banks are buying. They’re going to keep buying, and individuals should be buying as well.”
Holmes pointed out that even if the trade war ends, there are still a lot of negatives in the economy and it will take a while for it to turn. Meanwhile, central banks are cutting rates in an expanding economy.
Cassanova said she sees a lot of risks in the financial system that should elevate gold to higher levels.
We’re talking setting new all-time highs.”
Peter said we’re going into recession regardless of what happens with the trade talks.
The Fed is taking rates down to zero, so that’s what’s going to happen.”
Peter pointed out that gold was under $300 in 2001. It moved up to $1,900 in 2011 when people were rightly concerned about the monetary mistakes that the Fed was making.
Well, then people believed the Fed, that everything was going to work out, that they could unwind their balance sheet and normalize interest rates, and gold pulled back to just over $1,000. It’s now risen 50% off those lows because people are just starting to figure out that none of these problems were solved. In fact, the Fed has screwed up to a greater degree than even I imagined back in 2011. They’ve done a lot of damage to the economy and the gold price is headed a lot higher. The initial reaction was correct. The QE and zero percent interest rates were a big mistake and the only winner there is going to be the people who bought gold and silver.”