Peter Schiff to Newsmax TV: Rising Inflation Will Drive Up Gold Price

Monday, 07 Apr 2014 05:58 PM

By Dan Weil

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Gold may have hit a six-week low last week, but Peter Schiff, CEO of Euro Pacific Capital, thinks it will rebound with a vengeance as inflation reappears.

"Central banks around the world, particularly the U.S., are going to continue to create more and more inflation," Schiff told "America's Forum" on Newsmax TV.

"In fact, now the central bankers don't even pretend they're fighting inflation. They are fighting to create inflation. They're telling us that inflation is a good thing, that the absence of inflation is a problem that the Fed has to solve."

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That environment is great for gold, Schiff said. "If we have interest rates at zero and you have the central banks guaranteeing that if you hold on to the paper they're printing that you will lose money, that is a great environment for gold," he said.

"Gold's going to find more and more support as long as the central banks are printing."

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The recent weakness in the stock market will ultimately boost gold, because it will cause the Fed to pause the tapering of its quantitative easing (QE), "in anticipation of a reversal of course and a whole new round of QE," Schiff said.

"One of the things that took the wind out of gold sales was the false belief that the Fed was going to end this QE program," he said. "I never believed that. They're going to ramp it up to an even higher level."

As for stocks, they're starting to slide because the market is overvalued and because of the tapering, Schiff said. "Quantitative easing is responsible for the sky-high stock prices. And as the Fed tapers, the market is going to come down until the Fed cries uncle," he said.

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The central bank began its tapering because of the 'wealth effect' it thought higher stock prices and higher real estate created for consumer spending, Schiff said. "Well, if the wealth effect goes into reverse, which it will do if the Fed keeps tapering, then the recovery vanishes, and the Fed has to come back."

The Fed has "manipulated the market with cheap money," Schiff said.

The government is portraying the economy as stronger than it really is, Schiff said. "There's a vested interest among a lot of special interests on Wall Street and in government to perpetuate this myth," he said.

"The Fed has always had these robust economic forecasts of a U.S. recovery that never pans out. This time, isn't going to be any different."

Blame is currently being placed on the weather for weak economic statistics, Schiff said. "Well, as the spring progresses and the economic data continue to deteriorate, they're not going to be able to pretend it's the weather anymore," he said.

"When you throw in weakening stock prices, a weakness in the real estate market, the Fed is going to be forced to admit that the recovery that they're hoping to achieve is still eluding us. They're going to say that we need more stimulus. Of course, that's the last thing we need."

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