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Coronavirus to pop bubble greater than 2008; gold prices have "nowhere to go but up"

Kitco News

(Kitco News) - A recession of a magnitude larger than the 2008 financial crisis is about to be triggered by the coronavirus, with problems rooted in excess levels of debt, this according to Peter Schiff, CEO of Euro Pacific Capital.

Following a market downturn, an excess supply of capital is likely to flood the markets and drive up inflation, both of which would be bullish for gold, he said.

"I think that people have got this wrong, everybody is looking at this event as deflationary, but it is actually the opposite. You're going to have a reduction of production, so less supply of goods, and the world is going to be flooded with money," Schiff told Kitco News. "As if this will make a difference, it's just going to make a bad situation worse."

Schiff said that the underlying problems in our economy are now worse than what they were in 2008.

"The 2008 financial crisis was started by a drop in real estate prices, this one is started by the coronavirus. What's causing the crisis is not the pins, it's the bubble; it's the debt. It's because of all the debt we had a crisis in 2008, and because we have even more debt now, this is going to usher in an even bigger financial crisis," he said.

The bear market has already started, Schiff added, saying that a recession may start this quarter and that economic data may be revised.

"It's the financials that are really getting killed, and the reason they're getting killed is they're holding all the bad paper. They have made all the loans that are not going to get repaid, so this is just like 2008, only it's not just the banks that are going to need a bailout, it's the hotels, its' the airlines, it's companies like Boeing, it's the cruise lines," he said.

Gold prices have met resistance during the recent stock market selloff, but Schiff said that gold will still retain its safe haven asset.

"Gold is going to be the only safe haven left standing," Schiff said, adding that gold has historically fallen alongside equities in the opening phases of a bear market.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.