Peter Schiff Debunks the “Gold Is Set to Crash” Narrative
The comments below are an edited and abridged synopsis of an article by SchiffGold.com
The mainstream is a fickle place. On the one hand, Bank of America has raised its 18-month price projection for gold to $3,000. On the other hand, some say that gold could crash later in the year.
Gold is up over 13% on the year, but it has seen some price pressure over the last couple of days as various government agencies have started to move toward reopening the economy.
An article published by CCN offers three reasons gold could crash in the coming months—none of them particularly compelling: A coronavirus vaccine; a quick economic recovery; or deflation and a soaring dollar
The first two reasons both embrace the mainstream story that the economy was great before the pandemic and that it will return to normal as soon as business is opened up again, but the economy wasn’t normal before the pandemic.
And the third reason—deflation. The Fed is increasing the money supply (inflationary). That doesn’t mean it will result in rising consumer prices, but it certainly doesn’t say ‘deflation.’ Schiff says that, with this monetary policy, hyperinflation has gone from the worst-case scenario to the most likely scenario.
The article focuses on the plunge in oil prices. But this is purely a function of supply, demand and overproduction. It does not imply a broader drop in consumer prices.
It will take months for the effects of all this Fed money-printing to work its way through the economy. In a nutshell, deflation is not a concern, and the dollar isn’t likely to soar. In fact, people will likely start dumping dollars. And when that happens, what will they buy? Gold.
What else are they going to do? What are they going to use as an asset? They’re not going to swap dollars for euros, or dollars for yen. They’re going to buy gold.
The environment is bullish for the yellow metal. After all, the Fed can’t print gold.