Another day, another fresh high for a metal that seemingly every market watcher has an opinion on. The question for current and possibly new investors in gold (GLD) is whether the surge in gold is just a short term bump due to geopolitical instability, or another leg up for the precious metal.
“I think it’s just getting started,” says Peter Schiff, CEO of Euro Pacific Capital and one of the biggest gold bulls out there. “Everybody was bearish on gold at the end of 2013, it ended the year right near the lows, and it’s gone straight up ever since January 1st.”
In Schiff’s mind, gold’s crushing 2013 for Schiff is surprisingly part of the ongoing bull market for the metal. Schiff saw the shakeout as a lot of “weak longs,” or investors of gold that didn’t have conviction, getting out of the trade when the metal headed lower. “You still have a lot of shorts in market, I think a lot of the selling is coming from people selling gold that they don’t even own.” When these shorts have to ‘cover,’ or close their position, Schiff predicts they’ll “find out how much more expensive it’s going to cost to buy that gold back, [and] you’re going to have a tremendous rally.”
Schiff is honestly surprised to still sees gold doubters out there. “I think it’s amazing that people are still so negative on [gold’s] rally. Right now people are saying gold is going up because of the situation in Crimea. I think it’s got nothing to do with Crimea. Gold is not going up any faster since the Russians moved into Crimea than before.”
“The real reason gold is going up is because of inflation,” something Schiff has been pounding the table on for many years, but government data has not suggested is rising fast, yet. In fact, Schiff sees further Fed action as finally pushing the inflation factor top of mind among investors.
“The fed has no way out of QE, the U.S. economy is slipping into back into recession,” he notes, “more people are starting to realize that, and accept the fact that the Fed is going to ramp up QE, not continue to taper; all of that is very bullish for gold.”
In terms of where gold’s headed, Schiff sees $1,420 – 1,430/oz. as a short-term target for the metal, and if it clears that hurdle, $1,500 could be next.
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