$15,000 gold price? Jim Rickards and Peter Schiff give forecasts (Part 1/3)

it's a historic week for gold as the yellow metal has breached all-time highs past his 2011 highs setting new records joining me today are two very special guests both who have been very bullish on the yellow metal for quite a while and both whose predictions have come true joining me today is jim rickards best-selling author and peter schiff ceo of europe pacific capital gentlemen it's an honor to have both of you together at the same time welcome thank you uh let's start with you peter you've called for gold to hit much higher levels for quite a while uh tell me about what your initial reaction was when you first saw that 1900 1920 level this week well you know i'm surprised it's actually taken this long to get here because the last time we were in this area it was 2011 and a lot has happened in the last decade almost we've certainly printed a lot of money and i think the world should now be able to figure out what should have been obvious back then but wasn't for whatever reason and that's that the fed has uh moved into a policy from which it could never uh extricate itself you know when we went to zero when we did qe people initially thought it was temporary and that the fed could normalize rates and shrink its balance sheet and i said from the beginning that that was impossible and i think the markets are now beginning to realize that i was right about that and when they when they contemplate a future of endless money printing and zero percent interest rates forever in multi-trillion dollar uh deficits funded by the fed's printing press uh it's starting to sink in and they're getting rid of their dollars and they're buying gold jim you as well you've called for uh new highs for gold uh tell us about how the current price level fits with your macroeconomic thesis well uh yes it's a big increase in uh particularly a pretty short period of time peter's right has been a long long haul from 2011 but the thing i would point out is that um there are bull markets and bear markets and uh in basically any tradable instrument or commodity or uh i consider gold to be a form of money but what we're really talking about when we say you know gold is up what we're talking about the dollar price of gold and i view it as a cross exchange rate people talk about the dollar you know the euro dollar exchange rate the euro is now 1.17 well there's a dollar gold exchange rate and that's the dollar price of gold uh so there's just alternative forms of money where people get to express a liquidity preference or a credit preference if you will if you're concerned about the if you're losing confidence in the dollar but the first great bull market was um 1971 to 1980. uh lasted nine years and gold went up 2 200 um the second great bull market was from 1999 to 2011. gold went up but just a little under 700 percent uh but um in between you had a bear market from 1980 to 1999 it's a long one uh you know almost 20 years gold dropped from 800 to 250 at the bottom in 1999 and we had a second bear market starting in 2011. i had a very interesting conversation with uh jim rogers um you know jim is one of the great commodity traders uh money managers of all times and um we were down in uh dominican republic at the casa de compound this is around 2014 but you know the the bear market started in 2011 but it really fell off a cliff in 2013. so i said jim you know what what do you think of gold what are you doing he goes well i own it of course and he said i'm not selling but i'm not buying right here and he says something that just hit me right between the eyes and stay with me and of course he's right he said gold's going to the moon but nothing goes to the moon without a 50 correction along the way and if you look at the high in 2011 1900 you know approximately and where was the bottom of the of the bear market it was one thousand fifty dollars on december 16 2015. nobody knows the bottom at the time but if you look at that drop down and you you use 250 dollars as your base because you know you need a base um so you had uh basically a uh the run from 250 to 1900 uh was one thousand seven hundred fifty dollars go down fifty percent from there it's eight hundred and twenty five dollars nineteen hundred minus eight twenty five is ten seventy five and the bottom was ten fifty so so jim totally stuck the landing like at 10.50 like okay there's your 50 retracement now that's the bottom now it's going up and the sky's the limit peter do you agree can we be seeing a 50 retracement before prices rally more a 50 retracement of what of the what movie you talking to i think we've already seen uh the big retracement of that uh original bull market that jim talked about where gold went from under 300 uh to just over 1900. i think we've we've now formed a very solid base really between about 1200 and 1500 which is where gold was trading for most of those years since it peaked uh and now i think we've broken out of that range i think we've taken out the highs i think it's another leg of the bull market i don't think there's going to be any significant pullbacks from here i mean there'll be pullbacks but i don't think they're going to be very significant i think if you're waiting for a big drop to buy gold you're going to wait a long time and when you finally get it i think it's going to drop from a much higher price uh than than it is if you just bought it right now yeah i agree with that when i when i was when i was talking about retracement we we had it the retracement's over i'm not forecasting retracement quite the opposite i think it goes a lot higher from here my point was that we had the retracement between 2011 2015 that's done now it's just onward and upward yeah you know the thing about jimmy rogers though i ran into him at many uh conferences and you know he was waiting for a retest i mean jim was waiting for gold to go to a thousand and then he was gonna buy more i kept saying jim you know i it doesn't make sense it's not it's too risky to wait for a thousand because it may never come and of course it never came uh and then there are a lot of people who are waiting you know for 1200 when it was at 1500 i mean you know there's the world is going to be full of people who are waiting to buy gold and who are broke because they didn't just bite the bullet and buy it so i've spoken to an economist recently who told me that if you look at the last time that the fed expanded its balance sheet on a significant level uh during the last recession what we saw was gold rising in tandem along with the expansion of the fed balance sheet in fact during the years 2009 to 2011 that three year period gold rose 200 percent and so if we apply the same growth metric to today's situation where we also have the fed expanding its balance sheet what we're gonna see is a four thousand dollar gold price target could this happen peter let's start with you remember too the only reason that gold stopped rising at 1900 was because the world was convinced that the fed could unwind the policy that it could normalize rates that it could shrink its balance sheet uh had the market not believe that then gold would have kept rising you know the reason the way where they were able to stop the price of gold from going up in 1980 that prior bull market was because paul volcker did the right thing and let the market set interest rates and rates went up to 20 percent and that broke the back of that gold bull market well what's going to stop gold this time they can't let rates go up because we're too broke to afford it they're not going to be able to bluff that they're going to raise rates in the future because no one's going to believe that they're not going to be able to pretend they can shrink the balance sheet because if they couldn't shrink it when it was four and a half trillion how are they going to shrink it when it's 10 trillion or 20 trillion who knows where it's going uh so i don't really see how there's any way that they can stop uh the dollar from collapsing in fact in in 1971 that's when we went off the gold standard and the dollar got marked down sharply in the decade ahead it lost about two thirds of its value against the euro i mean not the euro the deutsche mark the swiss franc the japanese yen and it did even worse against gold but i think now it's not just the dollar severing its ties to gold it's going to be the world severing its ties to the dollar the world is going to go off the dollar standard and back on the gold standard and i think that this is going to be a more precipitous drop in the dollar's value than it was in the 70s and so we could see something equally as impressive in the price of gold uh we're going to talk about the dollar in just a minute but uh jim let's go back to the first question here do you uh where do you think gold is headed from here are we overheated do you have uh do you see more room to climb well we're not overheated at all i've got goal that uh i would put a fifteen thousand dollars an ounce before 2025 but as i point out if you're going to fifteen thousand dollars an ounce you gotta get to three thousand five thousand seven thousand first so there's plenty of room to run plenty of room for profits but you know when i say things like that david i want to be clear there's a lot of analysis behind it i don't just pull a big number out of the air and you know for publicity because i could care less but um if you just took the average and there's a couple ways to think about it just take the average of the two prior bull markets i mentioned so 71 to 80 nine years 2200 percent 99 to 2011 a 12-year bull market um about 700 just take the average you don't have to go to the higher of the two or extrapolate just take the average of those two bull markets you would say okay although the next bull market's going to be a little over 10 years and it's going to go up um it's going to work 1500 percent so uh so using that as your base just take the average of the two sorry 10 years from 2015 that put you out to 2025 and it you know 1400 percent put you at 15 000 an ounce off a 1050 base so that's just that's just history but there are other ways to think about it now going to peter's point um you know i don't know if there'll be a gold standard or not but i do know that gold will move the price of gold will move in the direction of where it would need to be if you're going to have a gold standard and uh and i talked to paul volcker about this and and he agreed you um if you just took the money supply so just take m1 which is you know pretty widely accepted definition of money supply take it for the us the ecb uk bank of japan people's bank of china there are other entities you could include but that's that's about that's over 75 of global gdp right there uh divide that number by the official goal which is about 34 000 metric tons a little bit less you come to fifteen thousand dollars an ounce so uh if you're if you're going to either have a gold standard or even use gold as a reference point for money uh if you if you need to restore confidence in the dollar the implied non-deflationary price is fifteen thousand dollars now so what i find interesting is that if you use the just the history of the last two bull markets and average them or if you use you know a rigorous calculation what's the what's implied non-deflationary price interestingly they come out in the same place i don't think they have to they're two different methods but they both point to fifteen thousand dollars an hour sometime over the next three or four years that's right it's a moving target because between now and then there's a lot of money that's going to be printed so you know who knows where where the price of gold has to end up by the time we finish all the money printing that is correct it is a moving target the numbers i gave you were based on current levels but peter's exactly right you keep printing money you need a higher price to if you want to reference gold and not cause deflation which they don't you're going to need a progressively higher price of gold one thing people forget david is that um you know they tend to look at the dollar price in absolute dollars so it went up a hundred dollars an ounce or you know i expect before long it'll go up a thousand dollars an ounce a week but each dollar increase is a smaller percentage increase so people look at the dollar it's real money it's nice to make the money but you know if you go from uh 14 dollars an ounce to fifteen thousand dollars an ounce that's only a seven percent increase i mean that's you can do that in a week so so my point is it's still a thousand dollars an hour it's good for the holders but the the percentage increase gets smaller and smaller as the absolute dollar amount gets larger and larger so 15 000 sounds like a big number from today's perspective but as you go to 10 11 12 it gets to be a progressively smaller percentage increase and therefore more likely you really you need to see it logarithmically to see it on a more um you know a less hyperbolic curve so log logarithmically is the right way to think about it but in dollar terms the percentage increase gets to be pretty small of those levels yeah well you know another way to look at it jim is just look at the price of gold in relation to the dow jones because you have historical reference points where twice in the prior century at significant bear mod market lows the dow traded down to a single ounce of gold 1932 the dow jones was roughly equal to an ounce of gold and in 1980 the dow was roughly equal to an ounce of gold uh so if you look at where the dow is now around 26 000 and figure well where would the price of gold have to be to be equal to the dow well at the current price 26 000 uh but maybe if we get a big bear market those two could meet around 15 000 uh and so you'd have uh the dow jones at 15 000 which is significantly below uh the current level and you'd have gold much higher but of course if they create massive inflation to prevent that stock market bubble from deflating it's possible that a price the an ounce of gold and the dow could meet at 50 000. it does you know the key is that they're the same price at some point not necessarily what that price is but that they're the same that that's right and uh you know david when i when i say fifteen thousand dollars i don't think i'm stretching i mean i peter's right it could it be twenty five thousand forty thousand may just take my my monetary equivalent if you use m2 and by the way my when i said when i used m1 and did that math that's with 40 backing because historically 40 percent has been a high level of backing if you take m2 at 100 backing you get to 50 000 an ounce in a heartbeat so so peter's right my my numbers i think are conservative they could be much higher [Music] you

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Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, jim rickards, peter schiff, euro pacific capital, jim rickards kitco, jim rickards gold 10000, jim rickards prediction for 2020, jim rickards currency wars, james g. rickards (author), federal reserve, jim rickards dollar collapse, jim rickards gold, monetary policy, fed meeting, jerome powell, gold price forecast, us dollar

Id: TnOcRRJHTmk

Length: 14min 35sec (875 seconds)

Published: Thu Jul 30 2020