Here’s why the Gold Price Goes Higher, according to Peter Schiff

In his latest interview with King World News, Euro Pacific Capital CEO said the U.S. economy is dropping quickly, gold will go much higher as a result of his bleak outlook, and the U.S. Treasury market is not a permanent safe haven for investors seeking shelter from market volatility brought on by sovereign bailouts, which, he added, will move across the Atlantic to the United States.

“We are going to fall off the edge of a cliff; it’s just a different cliff than most people are looking for,” Schiff told King World News’ Eric King.  “I don’t think the stock markets are going to fall off the edge of a dollar cliff, or nominal cliff, but the US economy is going over the cliff.”

Schiff, the author of several financial books on the subject of investment strategies investors should take to preserve wealth during the ongoing global financial crisis, suggested one of the ways American investors can protect themselves from the crisis slated to come in the United States is to hold gold bullion.

Though the gold price can be volatile due to fund managers, governments and  institutions liquidating gold to cover losses in other assets during the protracted crisis, gold, in the end, will remain as the ultimate safe haven as a store of wealth.

“Anything could happen in the short-run, but in the long-run, gold goes a lot higher,” Schiff explained.  “Everything that is happening right now that is pushing the price of gold down, is actually bullish for the price of gold.  That is why long-term the gold price will be higher.”

Just as famed commodities trader Jim Rogers of Rogers Holdings and Swiss money manager Marc Faber, publisher of the Gloom Boom Doom Report, Schiff’s betting on the Fed and U.S. Treasury to team up for providing further ‘stimulus’ to the U.S. economy in an effort to stave off a crisis in the U.S. dollar a little longer.  That plan, he said, is the primary driver of the gold price—currency debasement to offset stagnant, or lower, GDP.

“We have this completely phony economy going, this bubble economy, it is still going to deflate and that hasn’t happened yet,” said Schiff.  “The world is trying to keep the air in it, but ultimately the air will escape.”

In fact, the air has been escaping for quite some time, according to Jeffrey Gundlach of Los Angeles-based DoubleLine Capital.

Arguably the most respected bond fund manager, though lesser-known than PIMCO’s Bill Gross, the Wall Street Journal reported that Gundlach told approximately 100 financiers and reporters at a gathering at the New York Yacht Club, Thursday, “We’re in a recession right now.”

Co-founder & COO of Economic Cycle Research Institute (ECRI), Lakshman Achuthan, agrees.  Earlier today, the leading business cycle research firm posted to its Web site,, “Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.” (emphasis added).

Schiff expects the aborted recovery back to lower economic output in the U.S. spells doom for the U.S. dollar.  Up till now, investors fleeing the euro into dollars will ultimately play out to have been the wrong move, according to Schiff.

“The dollar has been rallying, but I don’t think it should be,” he said.  “The dollar is a risky asset.  People are trying to hide out in dollars, in Treasuries, which are just future dollars, but I think that’s ultimately the riskiest place to move.  These people who are buying dollars are making a mistake.  People bought dollars in 2008, early 2009 and if they held them, they obviously lost a lot of money.”

“When we see an eventual precipitous decline in the dollar, you will see consumer prices rising and interest rates rising.”

At that time, the gold price in U.S. dollars will soar.

Eric Sprott: “Silver is the investment of this decade”

As the rising price of silver takes center stage within the financial community, an ever increasingly large number of investors wonder if now is the right time to make a move into this performing asset – or, better stated, to seek haven from a virtually hopeless slide in the value of the U.S. dollar (hand-in-hand with competing currencies) and make a real return on risk capital.

As long-time student of monetary history, founder of one of Canada’s largest independently owned securities firms Sprott Securities, and founder of Sprott Asset Management (with $9 billion under management), Eric Sprott told MineWeb’s Geoff Candy on April 5 that he expects the silver price to “treble that of gold over the next three to five years.”

And Sprott anticipates gold’s move higher is far from over, offering a short-term target for the yellow metal of another nearly 35% rise from present levels of approximately $1,470.

“I think gold will continue to move on here,” he told King World News a day earlier on April 4. “We’ve certainly opined before that it will go north of $2,000 and the wind is at our back because the printing is increasing at a very fast pace here.”

Sprott suggested that if investors like the fundamentals of gold’s potential allure as a moving vehicle away from a more profound currency storm yet to come, they’ll like the potential of silver’s added octane more.

“The fundamentals for the two metals are entirely different,” he told MineWeb.  “There is huge industrial demand for silver; there’s not much industrial demand for gold.” After factoring out industrial usage of silver, “ there are 10 times more gold available for investment in dollars every year, than there is [for] silver.”

Sprott added, “So if the guy is just as happy to own silver as gold, the fundamentals are going to diverge markedly here, and that’s essentially what we believe – that silver’s performance would treble that of gold over the next three to five years.”

On the demand side of the curve, the recently released World Silver Survey 2011, issued by the Washington-based Silver Institute, revealed that investment demand for the kissing cousin to gold rose sharply by 40% last year to 279.3 million ounces, up 169% from 2009.

Supply will struggle while demand is anticipated to soar, creating a set up for a perfect storm for higher future prices, argued Sprott.

Therefore, he, along with another credible source in the precious metals space, Goldmoney’s James Turk, expects silver to continue climbing to a target price of  $50 per Troy ounce, sometime this year.  Both men cite an ancient-held price ratio between the two monetary metals of 16:1 as a guide to their prediction for the silver price.

That ratio has been an accepted rule-of-thumb for pricing the two metals against each other for thousands of years, jibing closely with contemporary geological and production statistics which show earth deposits of 16-times more silver than of gold in Mother Earth.

As of today, the gold price-to-silver price ratio stands at 36.5.

“I’ve always thought that silver would move quickly to $50, and it would move to $50 this year – I thought it would get to $50 before year end,” Sprott said. “If you ask me in the three to five year time frame, obviously I think it’s going to go north of $100 simply because we’ll get that 16:1 ratio.” Gold, he said, is going a lot higher.

“Silver is the investment of this decade as gold was the investment of the last decade.  So we’re sitting back waiting for things to evolve here,” Sprott concluded.