It is expected that the Federal Reserve will likely decrease its quantitative easing bond-buying program by another $10 billion this week to $55 billion. However, there are some contrarian investors who say the Fed will most likely taper the taper talk because the United States economy needs stimulus.
This, in the end, will cause gold to rise substantially.
Speaking in an interview with the Wall Street Journal over the weekend, Peter Schiff, president of Euro Pacific Capital, believes the party for gold is just getting started – so far this year the yellow metal has risen eight percent (gold is trading at around $1,300). In the future, investors could see gold reaching $5,000.
“I believe the consensus expectation that the U.S. recovery is real and that the Fed will end its [QE] program and normalize interest rates is wrong,” Schiff said. “When the Fed has to admit that its forecast of a sustained recovery is wrong, it will come to the aid of a faltering economy with even more QE. When that happens, gold will rally.”
Of course, it isn’t just because of QE that will assist in Gold’s rise. Other factors at play include increasing commodity prices and a weaker dollar.
“Also, any major geopolitical concerns, particularly if there is a deterioration of the situation in Ukraine, will add to gold's appeal. I also expect renewed physical demand from emerging markets like India and China,” Schiff explained. “Most likely prices have bottomed, as too many speculators are looking for lower prices. The fundamental case for gold has also never been stronger. From a gold short seller's perspective, this will prove to be the equivalent of a perfect storm. Their losses will be severe."
In 2009, it was reported that Schiff told one business news network that gold would hit $5,000 per ounce in the next couple of years – he also made the case that silver would rise to $250 per ounce. In 2012, he said the Federal Reserve would cause gold to jump to $5,000 by 2014.
"One day we're going to look back at $1,700 with nostalgia," Schiff said. "People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price."