All roads lead to Rome. Whether the Federal Reserve decides to raise or lower interest rates, gold prices will benefit.
That was the theme raised by Peter Schiff, a Libertarian financial analyst, stockbroker, and one-time Senate candidate, during an interview broadcast on Fox News on Friday.
“Gold is really in a perfect position,” said Schiff, head of Euro Pacific Capital. “It’s already rallied $150 approximately since the day after the Fed hiked rates, but right now you’ve got two possibilities.”
The first possibility is that “if the Fed continues to pretend that it’s getting ready to raise rates again or actually raises rates, the stock market is going to keep falling and gold is going to benefit from the flight to safety bid that has been driving it recently,” he said.
The second possibility, Schiff notes, is that “if the Fed tries to save the stock market and calls off the rate hikes, or cuts right back to zero, which I think they are going to do now, gold really takes off.”
Gold settled at $1,239.40 an ounce on Friday, logging its best weekly gain since December 12, 2008, rising 7.1%.
The yellow metal is up 14% this year, compared to a 13% drop for the NASDAQ Composite and a nine-percent slide for the S&P 500.
Elaborating on his theme, Peter Schiff said the entire case of selling gold for the past few years has been predicated on the Fed normalizing interest rates.
“If they [the Fed] admit they can’t do that, if we’re back at zero again, if people realize that we’re trapped in this monetary roach motel forever, it is QE Infinity, then, there is nothing to ever restrain the price of gold and it’s going to take off,” Schiff told his host.
Federal Reserve Chair Janet Yellen indicated last week that the central bank will be reluctant to hike interest rates next month if global economic troubles and the slide in markets don’t let up.
“As long as the Fed is going to keep on bluffing, the [stock] markets are going to keep on falling,” Schiff said. “We’re in a bear market. It’s going to continue until the Fed capitulates and tells the truth.”