Gold, Gold Stocks and Inflation

The price of gold is falling, this is the new low for the price of gold this year. Gold stocks are continuing to hold up very well in the face of the decline in the price of gold. Gold stocks are not making a new low for the year at least not yet and though they are down today they are not down nearly as much as you would assume with a 10-12 dollar drop in the price of gold. 

I still think that traders have this wrong. They're still looking at the the trade war as somehow being dollar positive. It's dollar negative. That is impacting gold. 

They are dismissing the increasing inflation numbers that we're getting as transitory because they think the Fed is gonna hike rates more to fight the inflation which is going to be good for the US Dollar and bad for Gold. 

The reality is they're not gonna fight the inflation they're gonna surrender. Inflation is going to win because if they fight inflation they cause the worst financial crisis since 2008 and they don't want to do that.

The Economy Is Going To Fall Into a Severe Recession

Peter Schiff: "I think the economy is going to fall into a severe recession."

Markets: Interest Rates, Federal Reserve

The Federal Reserve is raising interest rates and the higher rates are going to be problematic even more so now than they were back then because we have a lot more debt. But I don't think they will succeed in raising rates as high as they did before. I think the tipping point is going to come much lower if it hasn't already come.

I do think that they're gonna abort these interest rate hikes much sooner than people think. Potentially they could use the trade war and it's unexpected negative effect on the economy as the excuse to do what they were gonna do anyway, which is  to call the whole cycle off and start cutting interest rates again and going back to quantitative easing. That's where we're headed.

The Perfect Excuse For The Federal Reserve

What's gonna happen as a result of the tariffs in the trade war and again this is a perfect excuse for the Federal Reserve I mean this is like a gift from heaven because now when the Federal Reserve has to cut interest rates, the Federal Reserve has to do QE 4. 

They can just blame it all on the tariffs on the trade war they could say everything was great, we were going to normalize interest rates, we were going to shrink our balance sheet but Trump went and started a trade war and it unexpectedly sent us into recession. So now we've got to cut interest rates again and do QE 4. 

They were gonna do that anyway whether or not we had the trade war, whether or not we had any of these tariffs but now this gives them a perfect excuse to blame something on which they had no control.

Gold: The Last Safe Haven Standing

Even though gold has made a move down with the breakout in the dollar – or the move up in the dollar – I think that’s the last safe haven standing. I mean, once you run out of safe havens, where are your going to go? That’s where people are heading because nobody is looking there now. People don’t even think they need a safe haven. In fact, I don’t even know if money is moving based on a search for a safe haven. It’s just going where the momentum is.

Most Banks Would Fail A Stagflation Stress Test

Peter Schiff explains in this podcast why most US banks would fail a stress test in a stagflation scenario.