Gold tumbled more than 4% and sliver slid over 6% Wednesday, a selloff some attributed to Ben Bernanke's Congressional testimony.
The selling did begin in earnest with the release of Bernanke's prepared testimony, which didn't specifically address prospects for another round of quantitative easing.
Still, it was unlikely Bernanke was going to announce QE3 before Congress and precious metals had rallied sharply prior to his appearance, notes Peter Schiff, president of Euro Pacific Capital.
"Nothing he said was negative for precious metals; I think it was profit taking," says Schiff, who notes silver was up 14% in the prior two weeks.
As is seemingly always the case, Schiff remains extremely bullish on precious metals and extremely critical of the Fed.
"They're doing QE3 whether they state it or not," he declares. "If the Fed admits it's printing all this money, then the dollar is going to fall even faster [and] oil will rise even faster. The Fed wants to create inflation, it just doesn't want to be forthright about it."
It's hard to argue with Schiff on this point. While Bernanke expressed some concern about rising gas prices, he said the job market remains "far from normal" and reiterated the Fed's pledge to maintain a "highly accommodative stance for monetary policy."
While that stance --- featuring zero interest rates and two rounds of QE, so far — has been bullish for financial assets, including precious metals, Schiff says low interest rates are the cause of the economy's ills, not the solution.
"The economy is doing lousy," he says, dismissing Wednesday's upward revision of fourth-quarter GDP and declaring inflation as closer to 10% vs. 1%. "The economy is contracting, that's one of the reasons there's no jobs."
As has been the case for years, Schiff says the Fed's easy money policies are artificially propping up the stock market, the banking system and housing, as well as allowing Congress to avoid seriously dealing with the nation's long-term deficit. "The reason Congress is not addressing the deficit is because the Fed gives them an easy way out" by buying Treasuries and lowering the cost of deficit spending.
"If Fed does raise interest rates, which it should, the very short-term consequences will be horrific for an economy addicted to cheap money," he says. "We're going to have to swallow some bitter-tasting medicine in the form of higher interest rates if you're going to clear out the mess [and] allow the economy to restructure in a way that can have meaningful economic growth. The Fed is preventing from all that from happening."
Schiff admits that "bitter medicine" will include weakness in his beloved precious metals, which have dramatically benefited from the Fed's easy money. "They just won't come down as much as stock prices," he says.