This week Peter returned from vacation, and he was just in time for a surge in the price of gold. He discusses the factors contributing to gold’s record prices, the similarities between today and the 1970s, and data pointing to future inflation in America.
Peter starts this episode by noting how gold’s recent rise hasn’t received much coverage from the mainstream financial press:
“$30 on a Sunday night— that’s very rare to see that kind of move. But what’s even more rare is that there was no news. It’s not like something happened. Nobody dropped the bomb anywhere, right? It just went up. And that was on top of the near $40 rise that gold had on Friday before the holiday weekend. … Very rare to have that kind of move. But also very rare was the complete lack of attention that the gold rally has been getting.”
The media’s silence on gold serves larger financial interests in America that benefit from a weak economy and dollar:
“Another reason that CNBC and other financial analysts don’t want to talk about gold is because of the message that gold is sending. … Gold is not just some commodity. It is a commodity, but it’s a special commodity. … Gold is special because of the monetary properties and the monetary role that gold plays. If anything can be said to be the canary in the coal mine, it’s gold.
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What is gold telling people, if they’re smart enough to listen? What gold is screaming is that what the Fed is contemplating is a mistake, that cutting interest rates whenever these cuts begin is the wrong policy.”
Even widely respected Fed Chairman Alan Greenspan has acknowledged the signaling power of gold’s price, but Jerome Powell and the current Fed are ignoring the signs of a weak economy:
“The Fed says they’re data dependent. Well, why are they ignoring all of this data that says everything they’re saying about inflation is BS? Powell keeps saying, ‘yes, we’re confident we think inflation is going to go back down to 2%.’ Why? Why should it do that? What gives him this confidence? Just because he’s raised interest rates up to 5.25%? Big deal! That’s not a high rate of interest, especially when you have a big inflation problem.”
Any student of history can recognize the political parallels between the inflation of the 1970s and now:
“We had the Vietnam War, which was expensive. We had the war on poverty, which was also expensive. Interestingly, we’ve lost both of those wars. … Poverty won, but we spent a lot of money on both of those wars. Then we also had the space race. … So the government was running these big deficits. … Where did the government get all the money to pay for all this stuff? Well, it borrowed it, right? They ran deficits, and they printed a lot of money. And so naturally, the consequence was inflation, rising prices.”
Peter sees a weakening dollar as the main recent driver behind gold’s price. If the dollar depreciates against other foreign currencies, gold could take off:
“I still believe that soon we’re going to see the dollar crack against other fiat currencies. And when that happens, you’re going to see a much more spectacular rise in the price of gold. If you think about what’s already happened, we’ve seen this big jump in gold prices without a weak dollar relative to other fiat currencies. Imagine how much stronger gold would be if the dollar were also falling in relation to the euro or the Australian dollar, Canadian dollar, emerging market currencies, the yen.”
Apparently foreign central banks can see what Powell can’t, and they’re stockpiling gold because of it:
“Foreign central banks realize that we don’t care [about inflation]. They’re holding all these dollars, and they see that we’re about to create more of them. We’re going to cut rates in the face of mounting evidence that they’re ignoring that inflation is going to be moving in the opposite direction. They claim that they want it down at 2%. All the evidence shows that it’s headed higher and their response is ‘we’re going to cut rates.’ And so foreign central banks want to get out.“
With its price at record highs and foreign central banks clamoring for the yellow metal, gold is strengthening as a hedge against terrible monetary policy. If Peter is right about future price action, now is the perfect time for investors to add to their precious metal holdings.
