Over the past week, gold prices have been rallying excessively, with Tuesday’s single-day drop the largest in nearly seven years. However, according to Peter Schiff, such movement is common in a bull market, and only serves to wean out the weaker investors.
According to the veteran stockbroker, the gold market is initiating fear towards the weaker investors, which in turn creates the exorbitant single-day movements in the opposite direction of the general trend. With respect to economic fundamentals, when there is unparalleled money printing by the US Federal Reserve, coupled with significant rising deficits and government borrowing, the fundamentals for gold become nothing but bullish.
Schiff also notes that inflation plays a crucial role in the ever-increasing price of precious metals and the decrease in bond yields. Despite the recent market hiccup earlier in the week, gold prices will still continue on an increasing trend. Although many analysts point to the current coronavirus pandemic as being the driving factor behind the rise in gold and silver, boasting that once a vaccine becomes available prices will once again fall, Schiff contrarily discredits such speculation.
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The senior economist postulates that gold and silver are in fact not increasing relative to the pandemic, but rather directly responding to the actions of governments. Although COVID has played a compelling role in the rally of precious metals, the countermeasures of central banks printing copious amounts of money and governments running excessive deficits is the primary contribution to the bullish gold market. With central banks creating inflation as a means of monetizing government debt, investors flock to precious metals markets in order to gain stability in the never-ending chaos that are financial markets today.
Information for this briefing was found via RT News. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
