In the wake of coordinated action taken by central banks around the world, famed broker Peter Schiff of Euro-Pacific Capital says this action is like a big ‘bell’ ringing for investors to buy gold, silver and bullion in general.
Specifically, the U.S. Federal Reserve and other central banks in Europe and Asia reduced (…yet again) the cost of banks to borrow U.S. dollars. Lowering the rate (…or cost) of this effectively increases the quantity of dollars in circulation.
As we’ve discussed before, increasing the money supply is in fact inflation. The effects, once they trickle down, are higher prices for necessary staples like food and energy. The other effect of course is higher prices (…in dollars) for gold, silver and let’s not forget platinum
This move was taken due to the ongoing sovereign debt troubles in the Eurozone countries – many think it’s the start of a bailout of these heavily indebted countries. Schiff though points out that these actions are in fact a bailout for insolvent financial institutions that bought the government issued debt. This bailout is being accomplished through inflation, or an increase in the money supply.
In recent days, S&P has downgraded credit ratings for several major banks, including Bank of America and others.
With rates already at historic lows, Schiff points out that further easing shows how fragile to world financial system really is. Lowering the rates is merely an attempt to keep the ‘house of cards’ as he puts it from imploding. According to Schiff though, the house of cards is destined to fall apart at some point anyway.
In response to this coordinated action, stock markets and gold prices shot much higher. For gold and precious metals, Schiff expects this to continue as once more investors, especially large ones, begin realizing what’s going on.
Another comment in Schiff’s video (see below) pointed out how platinum is currently trading at quite a discount in comparison to gold. Schiff says he doesn’t expect this discount to last very long so right now could be a good buying opportunity for platinum as well.
Other factors besides inflationary activities on the part of the Fed and other central banks are expected to drive metals prices higher in the years ahead. For example, gold still accounts for a relatively low percentage of total global assets – only 1.5% in fact.
Jewelry demand, especially in China, India and the Middle East, will boost gold as well.
With tight supplies of all forms of bullion, it’s expected the bull market will continue trudging its way upward – albeit it won’t be a linear shot up.
However, with gold and silver still trading below their inflation adjusted highs from 1980, it’s safe to say there’s still time to buy and profit from owning bullion.
Peter Schiff has been spot on for years in his analysis of the economy. We place high confidence in his outlook(s) since he was one of the first investment brokers and economic watchers to say housing prices would implode…a couple of years later (…in 2008), they did.
One point from his video we would disagree on and that’s where you buy your bullion. Although Schiff’s company, Euro-Pac Metals, does a superb job, we at Provident Metals also provide cost-effective options for investing in gold and silver.
He’s right though – beware of any scammers. If you’re interested from strictly an investment perspective, do NOT buy numismatics, collectors or proof sets. Only buy gold bullion coins (…and silver and platinum too!!)
