Saturday, October 19, 2013

Why is Gold Surging?

Goldman Sachs got it completely wrong, says Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital. A budget deal doesn't make gold a "slam dunk sell", as Goldman's head of commodities trading Jeffrey Currie said it would on October 7. Instead, says Schiff, gold is a "screaming buy".

Gold may be up 3% Thursday on a debt deal between Congress and the President. But, Peter Schiff says the yellow metal has more room on the upside to go because of the deal, not in spite of it.

Deficit spending far outweighs the benefits to the overall economy, according to Schiff in his latest note. "US GDP is measured at roughly $15 trillion per year," writes Schiff. "Two percent growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth."

So, what does that mean for gold?

Appearing in a no-holds-barred interview on Talking Numbers, Schiff makes his case for why he thinks the recent debt ceiling deal should be bullish for bullion.

"When Goldman came out with that bogus call [saying gold will head down after a deal], I criticized it immediately because the crisis for gold was not that they would raise the debt ceiling, but that they would not," says Schiff to Talking Numbers. "What is bullish for gold is raising the debt ceiling because that means we get more government, we get more debt, [and] we get more inflation. That's bullish for gold."

In other words, Schiff is saying that without leaders aggressively taking on the government's debt, gold is headed higher. "In fact, this is probably the beginning of a much bigger rally," says Schiff.

Schiff believes the Fed won't taper its $85 billion per month bond buying program (known as "quantitative easing" or "QE") which has rallied bonds, lowered yields, and added dollars into the financial system. In fact, Schiff believes that the first thing Janet Yellen will do as Fed Chair is to actually increase the amount of bond-buying...

- Source: Yahoo Finance, read the full article here: