Longtime gold bug and controversial money manager Peter Schiff, CEO of Euro Pacific Capital, says the stars are aligned for a gold rally.
One of the biggest investment stories in 2011, gold ended the year up 10% - a sharp contrast compared to how U.S. stocks closed in 2011 - but a big drop-off from gold's September high of $1,920.30 an ounce. Gold had one of its worst fourth quarters in decades, losing 10% in the month of December alone.
Schiff says he's "more optimistic about gold" this year than he's ever been and says all the shorts and newly turned gold bears will miss the imminent rally. Moreover, gold mining stocks (such as Newmont Mining and Barrick Gold Corp.) will finally play catch-up to gold, he says, meaning big returns for investors who have stayed with these stocks as they significantly lagged the precious metal.
Even though U.S. Treasuries were the top-performing asset class in 2011, Schiff is quick to repudiate them, telling The Daily Ticker's Henry Blodget in the attached clip that a good year in 2011 does not portend the same results this year. The benchmark 10-year Treasury note gained 17% last year, the largest increase since 2008, despite the fact that Standard & Poor's downgraded U.S. debt and political gridlock in Washington prevented any meaningful debt reduction policies.
"People who are using Treasuries as a safe haven are making a grave mistake if they don't get rid of their treasuries soon," he says.
Schiff says the Treasury market has been artificially propped up by central banks around the globe who have made trillions of dollars in purchases since the financial crisis in 2008. U.S. Treasuries may appear to be the best protection against inflation and volatility for investors, but gold has greatly surpassed Treasuries over the past decade, Schiff adds.
Finally, Schiff maintains his bullish stance on U.S. stocks but admits that markets "won't gain a lot of value" this year. He prefers foreign stocks that are tied to commodities, raw materials and the economic recovery in emerging markets. Stocks with heavy exposure to oil will do particularly well, he says, because oil will stay above $100 a barrel.