Fed Has Overdone Rate Hikes; Economic Bubble To Burst And Gold To Rally - Peter Schiff
(Kitco News) - The economy is just starting to deflate from a bubble, which could swing in gold’s favor, this according to Peter Schiff, CEO of Euro Pacific Capital.
“It’s just the air coming out of the bubble, that’s the volatility. First, the bubble was inflating and everything was going up and now that the bubble is deflating, everything is coming down,” Schiff told Kitco News.
Stock markets took a nosedive in Q4 2018, with the S&P 500 falling as much as 17% from its peak in September through to mid-December.
On his macroeconomic outlook, Schiff said that despite a more dovish tone from the Federal Reserve, a slower pace of rate hikes will not be enough to keep the growth momentum in the economy.
“I think that the rate hikes that have already taken place are too much for the overleveraged U.S. economy to bear, so I think the Fed ultimately is going to go back to zero. I think it’s not just about slowing down the shrinking of the balance sheet, I think they’re going to blow it back up even bigger with QE4,” he said.
The U.S. central bank raised rates by 25 basis points in December but projected only two more rate hikes in 2019, with the long-run Fed funds rate lowered from 3 percent in September to 2.8 percent in December.
On gold, Schiff said that the yellow metal is still his preferred safe haven asset in 2019.
“I don’t think the dollar looks to be a safe haven, and I think long-term, U.S. treasuries are even riskier than just owning the dollar itself, so I think gold is really going to shine in 2019,” he said.
The U.S. dollar has trended lower since the start of the new year, with the DXY down 1.3% since January 2nd.