Financial analyst Peter Schiff is warning to “enjoy the calm before the storm.” Schiff, who predicted the 2008 recession says that inflation and interest rates are about to go up much more than expected.
In his most recent podcast, Schiff basically said to enjoy things now, because the storm will eventually hit. With the United States missile strike in Syria, rumblings of a trade war and agenerally weak dollar, gold briefly flirted with $1,365 last week. But the anticipation of Federal Reserve rate hikes continues to create strong headwinds against the yellow metal. Many people now think the Fed will nudge interest rates up again in June, leaving six months to get in the much-anticipated third hike of the year, and possibly even get in a fourth.
The Fed is not going to be able to deliver the rate hikes the Fed is expecting, and again, it’s the expectation of more rate hikes that is what is keeping the lid on the price of gold. But it’s only a matter of time before the market blows the lid off and the price of gold goes up. –Peter Schiff
Peter said gold is basically trading sideways right now, in advance of a breakout. Meanwhile, the dollar is doing the same thing in the other direction. The greenback is weak but not breaking down. On the other hand, it isn’t recovering any of its losses. Peter thinks it’s treading water right now before it heads lower again, according to Seeking Alpha.
Of course, the economic growth was supposed to help “pay for” the tax cuts and the massive amounts of deficit spending. If the economic growth doesn’t materialize, the deficits will be even bigger and they are already going sky-high. On top of that, rising interest rates are going to increase the annual payments on the debt.
So, these deficits are blowing through the roof and this is going to be the driving force in moving the dollar substantially lower and moving gold substantially higher.
We are in the perfect storm, I think, of massive explosion in deficits, not just the budget deficit but the trade deficit, these tariffs or a trade war is only going to compound the problem. We’ve got the economy weakening. We’ve got the dollar teetering on the brink of collapse. We’ve got gold about to break out and the bond market is in the same thing.
Right now, everything seems pretty calm on the horizon, but we are in the calm before the storm.
The three major markets – bonds, gold, and the dollar – are all moving sideways, getting ready to continue their most recent moves, which for gold is up, for the dollar is down, and for bonds are down, which means interest rates are up – and it’s one, two, three strikes and you’re out.