Fear Is Back!

Fear Is Back! from Schiff Gold

Halloween is tomorrow. Fittingly, fear is back.

Gold appears to be on track for its first monthly gain in seven and safe-haven buying has helped drive the yellow metal higher. As a Goldman Sachs note put it, “fear has made a comeback and gold is benefitting.

According to a recent Bloomberg article, Goldman analysts said bullion’s recent advance “happened on the back of the market sell-off and spike in volatility.”

In our view, it represents a rebound in fear-related demand for gold with ETFs beginning to build after several months of declines.”

Early this month, Peter Schiff said the recession is obviously coming. Apparently, the mainstream is starting to realize this as well. And it’s getting a little jittery. According to a model tracked by JPMorgan Chase & Co., the US now has a 50-50 chance of sliding into recession within the next 24 months. According to Goldman, the spike in market worries about the possibility of a recession serves as the primary reason behind the surge in gold investment demand.

Going forward, we expect market ‘fear’ of a US recession to strengthen. Recession worries and gold investment may increase further after US growth begins to slow down.”

Geopolitical issues including the US-China trade war, tensions with Saudi Arabia over the murdered Saudi journalist, Italy’s defiance over shaping its budget to meet European Union rules and ongoing issues with Brexit are all causing some jitters that have been good for gold.

Goldman called gold’s fundamentals “solid” and projects the price will rebound to above $1,300 per ounce within the next 12 months. It also sees “upside risks” as economic growth begins to slow.

So, mainstream investors are starting to get a little scared.

The fear is warranted.

In a recent podcast, Peter Schiff noted that Q3 GDP was primarily driven by consumption. That raises an important question.

How much longer can that consumption go on when wealth is evaporating, when interest rates and prices are going up?”

Americans have indeed been buying stuff, but they’ve been buying a lot of it on credit. As we’ve reported US consumer debt is approaching $4 trillion. When you include mortgages in the equation, Americans are some $15 trillion in debt. US consumers owe more than $1 trillion on credit balances cards alone. It seems unlikely Americans can keep up the spending pace when they’re already trillions in the red and the cost of servicing all that debt is going up.

We’ve also talked extensively about the fact that government debt retards economic growth.

As Peter said recently, we’ve had a sale on gold for a long time, but it’s about to come to an end. He explained that gold could hit $5,000 in the not-too-distant future as the next crisis unfolds. In other words, now is the time to buy.

If you’ve been thinking about buying more gold or more silver, stop thinking and start buying. If you don’t own any gold or silver, what are you waiting for? You’ve got to buy it because the prices are going to start to go up a lot faster. And once it really goes, it’s going to leave a lot of people behind.”

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.