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Gold prices are poised for a “spectacular” and prolonged rally as the recession deepens and investors finally become disillusioned with the U.S. dollar.
So says renowned Wall Street financial forecaster and economist Peter Schiff, who loudly warned of the October 2008 stock market crash and accompanying recession as far back as 2006.
Since the global economic meltdown, the president of the Connecticut-based investment firm Euro Pacific Capital has struck a chord with rattled investors who have lost faith in America’s bedrock financial institutions. Hence, his well-received television media blitz in recent months has focused on extolling the virtues of owning gold bullion or gold equities, as well as urging Americans to get out of U.S. denominated investment assets.
In a recent on-camera interview with BNW Business News Wire, Schiff suggests that the looming prospect of a hyper-inflationary environment in the U.S. will severely debase the greenback over the next few years. And the global investment community will realize that gold represents the ultimate “store of value” as a safe haven replacement for a discredited U.S. dollar.
Hence, gold bullion and gold-related investments, such as gold equities, will prove to be the best way to shield one’s money from the ravages of a protracted and severe inflationary environment, Schiff says.
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“If you really want to grow your wealth, you should own gold in the mining sector,” he adds, while also suggesting that gold equities (companies that are already in production) offer the greatest leverage to rising gold prices.
“With gold stocks, there’s obviously a lot of leverage to higher gold prices. As millions or billions of people discover gold as a store of value and as a way to escape inflation, there’s going to be tremendous demand and somebody’s going to have to supply that demand. It’s obviously going to have to be mined,” he says. “So the companies that have gold and mine it are going to see profit margins explode.”
This extraordinary scenario will be accentuated by two key developments, Schiff says. One of them concerns the fact that burgeoning demand for gold will continue to outstrip annual global output. In fact, world gold production has been steadily declining since it peaked in 2001 in spite of a nearly U.S. $600 rise in gold’s price since then.
“Mines are not as productive as they used to be. Supply is very constrained. So if we get a big increase in demand, there are really no significant new gold deposits that are going to come on-stream any time soon. So the companies that are already producing are simply going to be able to get a lot more money for the ounces that they pull out of the ground,” he adds.
The other key consideration is an inevitable return to the ‘Gold Standard’ as a way for the world’s central banks to attach a meaningful valuation to each of their country’s currencies, Schiff says.
“The only solution to the economic problems that we have today is a return to sound money… The world is ultimately going to have to move away from the ‘Dollar Standard’ and back their currencies with something real. I think gold is the best thing to use. Gold has been money for 5,000 years,” he adds.
