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Peter Schiff: Don’t Hold Breath For Fed To Taper

Peter Schiff: Don’t Hold Breath For Fed To Taper


Peter Schiff, president and chief global strategist of Euro Pacific Capital, is most definitely not in the camp that believes the U.S. economy is steadily, if slowly, recovering from the market crash five years after the collapse of Lehman Brothers in September 2008. To the contrary, he thinks a far deeper crisis is on its way.

Schiff, who will be a panelist at IndexUniverse’s “Inside Commodities” conference in New York on Sept. 23, told IU Managing Editor Olly Ludwig gold is likely to head to $5,000 or higher. He also cautions investors to be prepared for the Federal Reserve not to begin unwinding quantitative easing soon and to brace for the day when the central bank will have to brusquely tighten credit exactly at the time the wheels are really coming off. Do you view the debt ceiling as a potential new crisis, and how do you see it playing out?

Schiff: I don’t see the debt ceiling as the crisis, that’s part of the solution. The crisis is the debt, and the crisis is that we’re going to raise the debt ceiling. We’re going to keep raising the ceiling so we’re going to keep piling more debt on top of the debt that we have.

And, eventually, the crisis comes not because we don’t raise the debt ceiling, but because lenders don’t raise the lending ceiling because they recognize that we’re broke. They won’t want to throw good money after bad, they don’t want to keep lending money to a country that can’t pay back what has already been loaned to it.

That’s when we have a real crisis—interest rates go up; the dollar collapses. The debt ceiling is just politics. We’d be better off if the debt ceiling couldn’t be raised, because then we’d actually have to deal with the problem instead of kicking the can down the road. Let’s talk about gold. It’s been moving downward for most of this year. There have been a lot of redemptions in GLD, but $1,180 an ounce seems to have been a bottom recently. Is the current rebound sustainable?

Schiff: There’s a strong probability that we have in fact made a bottom, and whether we’re going to retest that bottom before going higher is anybody’s guess. But I think we’re going a lot higher. I think we’re going to take out the high of $1,800 or $1,900 set back in 2011. We might not do that in calendar year 2013, but I think we got a good shot of doing it in 2014, and actually adding quite a bit of distance above $1,900 to the upside.

The fundamentals are as strong as ever for gold. A lot of the players that exited the market in the summer of 2013 are going to be getting back in at higher prices. And a lot of the shorts are going to be in a lot of trouble, because they’re going to find it very difficult to buy back these positions that they’ve sold, because a lot of the gold that was sold by speculators on the way down was bought up by long-term holders.

People who bought gold at $1,300 aren’t going to turn around and sell it at $1,500 or $1,600—they’re just not. But meanwhile, the shorts are going to need to buy, and I don’t know where they’re going to get the physical. So I think we’re going to see a huge short squeeze in addition to the regular rally we’re going to get from new longs entering the market. It could be a huge rally for gold.



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