This week Peter returned from vacation and was just in time for a surge in the price of gold. He discusses factors contributing to record gold prices, similarities between today and the 1970s, and data pointing to future inflation in America.
Peter begins this episode by pointing out that gold's recent rise hasn't received much coverage from the mainstream financial press:
“$30 on Sunday evening, it’s very rare to see this kind of movement. But what is even rarer is that there has been no news. It's not like anything happened. Nobody dropped the bomb anywhere, right? It just increased. And that was on top of the nearly $40 rally gold saw Friday ahead of the holiday weekend. … Very rare to have this kind of approach. But it is also very rare for the gold rally to generate a complete lack of attention.
Media silence on gold serves broader financial interests in America, which benefit from a weak economy and dollar:
“Another reason CNBC and other financial analysts don't want to talk about gold is the message gold sends. …Gold is not just a commodity. It's a commodity, but it's a special commodity. …Gold is special because of its monetary properties and the monetary role gold plays. If anything can be considered the canary in the coal mine, it’s gold. …What does gold tell people, if they are smart enough to listen? What gold screams is that what the Fed is considering is a mistake, that cutting interest rates as soon as these cuts begin is bad policy. »
Even the highly respected Fed Chairman Alan Greenspan has recognized the signaling power of the gold price, but Jerome Powell and the current Fed ignore the signs of a weak economy:
“The Fed says it depends on data. Well why are they ignoring all this data that says everything they say about inflation is nonsense? Powell keeps repeating: “Yes, we are convinced that inflation will come down to 2%. ” For what? Why should he do this? What gives him this confidence? Just because he raised interest rates to 5.25%? Big deal! It’s not a high interest rate, especially when we have a big inflation problem.”
Any student of history can recognize the political parallels between the inflation of the 1970s and today:
“We had the Vietnam War, which was expensive. We have waged the war on poverty, which has also been costly. It is interesting to note that we lost both of these wars. … Poverty won, but we spent a lot of money in these two wars. Then we also had the space race. …So the government was recording these big deficits. …Where did the government get all the money to pay for all this? Well, he borrowed it, didn't he? They ran deficits and printed a lot of money. And of course the consequence was inflation and rising prices.”
Peter sees the weakening dollar as the main recent driver of the gold price. If the dollar depreciates against other foreign currencies, gold could take off:
“I still believe we will soon see the dollar crack against other fiat currencies. And when that happens, you'll see a much more dramatic rise in the price of gold. If you think about what has already happened, we have seen this sharp rise in gold prices without the dollar being weak relative to other fiat currencies. Imagine how much stronger gold would be if the dollar also fell against the euro or the Australian dollar, the Canadian dollar, emerging market currencies and the yen.
Apparently, foreign central banks can see what Powell can't, and they're stockpiling gold because of it:
“Foreign central banks realize we don't care (about inflation). They're holding all these dollars and seeing that we're about to create more. We're going to cut rates when it's increasingly clear that they're ignoring the fact that inflation is going to move in the opposite direction. They claim they want a 2% cut. All the evidence shows that the trend is upward and their answer is “we will cut rates”. This is why foreign central banks want to withdraw.”
With its price at record highs and foreign central banks clamoring for the yellow metal, gold is gaining strength as a hedge against terrible monetary policy. If Peter is correct about future price action, now is a great time for investors to increase their holdings of precious metals.
Call 1-888-GOLD-160 and speak with a precious metals specialist today!