Benzinga - Peter Schiff, chief economist and global strategist at Euro Pacific Capital, believes assets used to hedge against inflation like gold are set to breakout soon while dollar and Bitcoin (CRYPTO: BTC) are on the verge of a breakdown.
What Happened: "I think risk assets will soon breakdown hard, led lower by #Bitcoin. #Inflation hedges are about to breakout, lead higher by precious metals miners. As I titled my last podcast, #gold stocks are the new tech #stocks. Either prepare for this new reality or suffer the consequences," he said in a tweet.
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Indeed, spot gold has risen from the lows of $1,622 levels seen in October 2022 to trade close to the $2,000 per ounce levels in recent days. It was last seen trading at $1,980 per ounce during Asian trading.
The SPDR Gold Trust (NYSE:GLD) and the iShares Gold Trust (NYSE:IAU) have gained over 7% in last one month.
Schiff is of the view that investors have been far too complacent and said they have no appreciation of the magnitude of the problem created by the Federal Reserve. "We could be days away from a major breakdown in the U.S. dollar and breakout in #gold. Perhaps this will finally be the wake-up call investors need," he said in his tweet.
Inflation Problem: The recent production cut announcement by OPEC+ has become the latest headache for the central bank as it tries to rein-in inflation while simultaneously attempting to resolve the banking crisis. According to the CME FedWatch Tool, the market is considering close to 55% probability of a 25 basis points rate hike in the next FOMC meet.
Schiff expects long term interest rates to rise at a time when inflation strengthens and economy weakens and says that falling dollar and rising oil and gold prices are bad signs.
"Surging #oil prices is bad news for tech #stocks as it highlights that the #inflation problem will only get worse. The trend of lower YoY #CPI numbers is over. Future increases will be trending higher from here. That limits the #Fed’s ability to cut rates, even as QE accelerates," he tweeted.
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