Peter Schiff, CEO of Euro Pacific Capital, isn’t backing off his bullishness toward gold, despite the fact that it has dropped 6 percent so far this year.
Spot gold hit a seven-month low of $1,554.49 an ounce Thursday amid speculation the Federal Reserve would cut back on its quantitative easing (QE) this year and amid rumors that a commodity hedge fund was forced to liquidate its holdings. The precious metal stood at $1,576.40 early Friday.
Schiff, who has argued for months that gold will soar to $5,000, says the current downdraft is merely a correction. “I never said it wouldn’t be a bumpy road,” he tells CNBC, adding, “A lot of people don’t understand the fundamentals behind the gold market.” Gold has endured many corrections during its 13-year rally.
If anything, the Fed will expand QE, not shrink it, he says. “The only thing maintaining an illusion of [economic] recovery is QE,” Schiff states. “If the Fed were to stop, we’d be right back in recession.”
The Fed should stop, because its easing is gravely damaging the economy, Schiff says.
“But the Fed just wants to ease the short-term pain. … They can’t exit, and this is very good for gold.”
Of course, the Fed isn’t the only central bank easing. “It’s a currency war, and the only real winner in a currency war is gold,” Schiff says.
“I think there are more reasons than ever to buy gold.”
Some other market participants think gold is a good buy too, at least for the short term.
“I am a buyer on dips right now,” Comex gold options trader Jonathan Jossen tells Reuters. “The sell-off was overdone, as we lost almost $100 from just last week.”