Via SchiffGold.com,
The gold market took a one-two punch on Tuesday as Trump made some
concessions in the trade war and inflation numbers came in a bit higher
than expected. Peter Schiff talked about it in his latest podcast,
saying gold traders still don’t understand the gold rally.
Stock markets surged as gold and silver dropped after US trade
representatives said they would delay some of the additional tariffs
recently announced by President Trump. The Dow closed 372 points higher
(before collapsing back 800 points lower yesterday). Meanwhile, the
price of gold dropped below $1,500 briefly before rallying back above
that key number.
Gold actually began selling off before the trade war news when the
Consumer Price Index number came in hotter than expected. Peter said he
knew that would happen.
That is the way the lemmings trade, because
according to the conventional wisdom, if inflation is higher, then the
Fed will be less likely to cut rates. After all, they’re cutting rates
because inflation is too low and if inflation comes in hotter, well,
then there’s less of a reason for the Fed to cut rates. So
paradoxically, higher inflation is seen as being bad for gold. And the
reason I’m saying paradoxically is because gold is an inflation hedge.
Normally, the more inflation the more you want to buy gold.”
There is no way the Fed is going to fight inflation. I don’t care how high it is … One of these days the traders have to realize that these numbers don’t matter. I mean, maybe they matter to the public who has to live with a rising cost of living. But they don’t matter to the Fed. The
Fed is going to take rates back to zero no matter what these numbers
are, because the economy is going into recession even as inflation
rises.”
As far as the trade war announcement goes, Peter said it just shows
that Trump was bluffing when he announced more tariffs. He said he
thinks it makes the president look very weak.
This trade war is lost. The only question is when do we surrender and how do we admit defeat. Again, I don’t think we’re going to get any kind of deal.”
Meanwhile, the mainstream is starting to talk about a looming
recession. They are also calling for the Fed to cut rates and go back to
QE. Peter said they still don’t get it. They don’t understand that this
time around is not going to be like QE1, QE2, and QE3 where everybody
made money.
I understood from the beginning that the Fed’s plan could not
succeed, that they could never normalize rates, that they would have to
go back to zero, that they could never shrink their balance sheet, that
they would have to call it off and do more QE, because I understood the problem back then, and I still understand the problem now, and I understand the consequences.”
Peter noted that New Zealand’s central bank recently cut its interest
rate by 50 basis points, basically in an effort to preemptively keep
inflation from dropping below its target level. He pointed out that
nobody wants a strong currency.
Everybody is weakening their currency to create more
inflation. Well, what’s going to happen? The world is going to drown in
an ocean of inflation and gold is going ballistic.”
The people who are selling gold don’t get it. Gold is not
going up because of the tariffs. Gold is going up because of what the
reserve bank in New Zealand did and because that’s what all the central
banks are doing …
Every central bank has bought into this nonsense that we must have
inflation and that interest rates need to be negative. Inflation needs
to be high enough to have real negative rates all over the globe. That’s
where we are heading. So, if that is the case, people have no place to hide except gold and that is why they’re buying.”
Peter said ultimately we are going to have a global currency crisis –
a US dollar crisis – because it is at the epicenter of the global fiat
monetary system.
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