Monday, September 26, 2011

Peter Schiff: State of the Gold Market

Following the recent Gold and Silver sell-offs, Peter has written an update to his subscribers:


This past week has been a rout for precious metals. From last Monday to today, gold has dropped 10.9% and silver dropped 30.4% (per the London fix). For gold, from $1794 to $1598, and for silver, from $40.46 to $28.16.

The metals have been on a tear for the past few years. Because of this, investors and speculators that do not understand the fundamentals appear to have joined the bull run, and then quickly departed at the first sign of trouble. Good riddance to them, I say. While sharp declines do test the mettle of some value investors, I believe this leaner market presents a great buying opportunity.

The situation in Europe continues to deteriorate daily. Greece is in default and larger EU members look sure to follow. Meanwhile, gridlock is the password in Washington. QE III is coming, and with it, the dollar is headed for another big decline in purchasing power. The Swiss National Bank just instituted a peg to curb inflows of global investors seeking a safe haven – costing franc holders 25% of their position in the course of a week.

To me, this situation screams, "buy gold!" But, unfortunately, herd-like investors are being corralled into the US dollar. However, as with any move that defies reason and economic law, this will not last.

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