Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, has long been a major presence in the precious metals industry. Our firm had the chance to sit down with Peter to discuss silver, gold, and his new fund that debuted earlier this year.
Commodity HQ (cHQ): Investors and analysts pay a lot of attention to gold, but silver is often overshadowed. Why should investors pay attention to silver right now?
Peter Schiff (PS): They should be paying attention to both gold and silver. They are both precious metals, and I think they are both going to benefit from the continuous inflation that is being created. This comes primarily from the Federal Reserve, but also from central banks around the world that kind of battle each other in a currency war that is really a race to the bottom to see which country can depreciate their currency the fastest. That is a great environment for alternatives to fiat currencies. Gold and silver have been real money for thousands of years, and I think they will be primary beneficiaries of the current round of quantitative easing.
cHQ: Adjusted for inflation, silver is still well below its historical highs. Do you think that is significant for today’s market, or is that an unfair comparison?
PS: It is pretty significant if you want to look at where silver has been in the past to try to figure out what is a realistic target for where it will be again; there is already a precedent for silver reaching that height. Granted, there were some extraordinary circumstances, particularly surrounding the Hunt brothers and their attempts to corner the silver market that caused silver to spike at that time. I’m sure that events will unfold as to create another opportunity for silver to revisit those inflation-adjusted highs.
cHQ: Speaking of the Hunt brothers, recent years have seen a lot of accusations about manipulation in the silver market. Is this something that will hurt silver long term or just bumps in the road?
PS: Bumps in the road. Most of the manipulation is basically the longs accusing bullion banks or other major Wall Street institutions of somehow conspiring to suppress the price of silver, maybe even involving the Federal Reserve or other central banks. I have no idea if any of that is true. To an extent, there is probably a certain amount of Wall Street aversion to metals because they believe in the paper economy and almost look at gold and silver as barbaric relics. They certainly would have a biased and self-serving interest to slight the metals, and want to sell them when they rise.
I certainly think the central bankers would prefer not to see silver and gold go up because it really is a thumbs down to their monetary policy, calling into question what they are doing. So there are certainly a lot of reasons for the Federal Reserve and Wall Street to want the price of gold and silver to go down. Whether or not they have been able to coordinate efforts to suppress it is another question. I have not seen any overwhelming evidence that suggests that is the case. It is hard to believe that a conspiracy of this nature could be kept quiet without more credible information being leaked.
Even if they were trying to suppress the price of gold and silver, how well does it work? Remember that silver prices started off below $5 an ounce and gold started well below $300. Despite the big drops from highs, we are much closer to the highs than the lows. We have had a bull market, and it is ongoing. Even if there was some type of conspiracy of efforts on the part of the mainstream to cause this last decline, and I’m not saying that it did, I think it will be short-lived and we will see new highs.
Despite any efforts by Wall Street or the government to suppress these prices, if that were the case, the market will ultimately win as it always does. As a result, I believe gold and silver are heading to new highs — not only nominal highs, but I believe new highs adjusted for government measures of inflation.
cHQ: Silver is unique in that it is both an industrial and precious metal. Do you think that mix can actually work against the commodity and that it may eventually trend towards one or the other?
PS: I think it will maintain that mix unless the price gets so high that for monetary reasons some of the industrial uses end up fulfilled by other metals. A lot of it has to do with price. Silver is desirable for industrial uses, but at a certain point it may no longer be; there may be a substitute that may make more sense. In some cases where there are no substitutes available then it will just be used at a higher price. I do not believe that it is an either/or situation.
Certainly it can be used for both, take gold for example. Gold is used in industry as well, just not as much as silver. Gold is used in a number of cellphones, albeit a tiny amount, as well as dentistry and also gold is used as jewelry. While jewelry is not money, people still adorn themselves with gold, and they will continue to do that even if gold is $5,000 an ounce.