The price of gold dropped below the $2,000 level this week, in its worst single-day rout in seven years. That’s typical for a bull market, where the biggest daily moves tend to be down, says veteran stockbroker Peter Schiff.
“The market is trying to instill fear in the weaker hands, so you get these spectacular one-day moves in the opposite direction of the primary trend to shake people out, to get the weaker players out of the market so you can clear away the excess baggage and then continue the trend,” he said, noting that people shouldn’t lose sight of the fundamentals, and they’re still bullish for gold.
Given the actions of the US Federal Reserve, with its unprecedented money printing, the government’s borrowing and resulting deficits, as well as the macroeconomic dynamics currently in play, we have “the most bullish fundamentals for gold in history,” Schiff said.
According to him, inflation is the driving factor for both the rising price of precious metals and falling bond yields. “And it’s going to continue to drive the price of gold higher, despite the reaction we got in the market today to the PPI number.”
Some people attribute the rise of gold and silver to the coronavirus pandemic and are of the view that gold will crash once a vaccine or an effective treatment is developed, but Schiff dismissed that as “a bunch of nonsense.”
“Gold and silver are not up because of Covid. Now, Covid is part of the reason, but it’s not the actual cause. You see, what happened is governments, and, in particular, central banks, they’ve responded to Covid by printing a lot of money. Governments are running big deficits and central banks are printing the money to monetize those deficits, especially the Federal Reserve. And so, it’s the money printing. It’s the inflation that central banks are creating in order to monetize government debt that is a response to Covid that’s helping to drive the gold price higher.”
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