Peter Schiff's Outlook for the Gold Market


". . .once the dollar really resumes its decline, you're going to see gold really shine again not only in terms of the dollar."

Key excerpts from the interview follow:

TWST: These are somewhat trying times. What has this meant so far for the gold market and where do we go from here?

Mr. Schiff: Gold has actually held up very well compared to other asset classes. If you look at the price of gold relative to its peak, it's only off about 25%, whereas if you look at stock markets around the world, most are off 50% or more, certainly if you price them in U.S. dollars. If you look at how gold has held up relative to industrial metals, relative to energy, relative to agriculture, gold has done extremely well. I think the fact that it has gone down in dollars has caused a lot of people to assume that gold is not performing in this correction whereas, in fact, it has. Also if you look at gold in terms of other currencies, recently you've seen all-time record highs in the price of gold in South African rand, in Australian dollars, in Canadian dollars. So gold has actually had a very strong, stealth move when viewed from the prism of something other than the U.S. dollar.

TWST: Why does everybody key in on the U.S. dollar side of the equation?

Mr. Schiff: Because gold was priced in dollars, it's traded in dollars and so we all look at it as the dollar price, and the fact that gold has not made a new high in dollars during this economic crisis has led some to believe that maybe it's lost its luster, it's not a safe haven. But this rise of the dollar is very suspicious to me; I don't think it's justified. But it's been the unlikely beneficiary of all the problems. You've got the problem centered in the U.S. economy; the epicenter of the financial crisis is in America. The reason that the world is in trouble is mainly because of bad loans made to Americans and it's our economy that I think is a complete facade, a house of cards that has now collapsed, so this dollar rally actually makes no sense.

I think once the dollar really resumes its decline, you're going to see gold really shine again not only in terms of the dollar. It will continue to do well against other currencies, but it will do particularly well against the dollar.

TWST: Isn't gold normally the "safe haven" that investors seek?

Mr. Schiff: I think it's a safe haven. A lot of people are seeking safety right now in the U.S. dollar, but that makes no sense to me. That's like jumping out of the frying pan into the fire.

TWST: Silver and platinum have come down much more than gold. Is that because of supply/demand or just because of what's going on in the market?

Mr. Schiff: I think there are more industrial uses for those metals, so this whole idea that the global economy is going to collapse is hurting those metals relative to gold. I think gold is more of a pure monetary metal. . .a safe haven metal and so, because of that function, it is holding on to its value. There are a number of individuals around the world who understand the difference between gold and fiat money, and I think a lot of people are worried and want to protect their wealth. There is a minority of investors who see through the smokescreen and are not buying U.S. Treasuries, they are buying gold. At some point, the people who are doing that are going to be the ones who are going to be vindicated as gold prices ultimately make new highs, and I still think that we could hit $2,000 an ounce next year in the price of gold.

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