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Schiff: 'What Doesn't Kill Gold Makes It Stronger'

Schiff: 'What Doesn't Kill Gold Makes It Stronger'

Photograph by Alessia Pierdomenico/Bloomberg

You have to give credit to Peter Schiff. Lots of gold bugs make noise when the price of gold is high and then get quiet when it falls. The price of gold has fallen 32 percent from its peak two years ago, but Schiff is still banging the drum for it in a commentary today with the Nietzschean headline, “What Doesn’t Kill Gold Makes It Stronger.”

Schiff reasons that gold fell because of speculation against it. He says those speculators are vulnerable to a “short squeeze.” If the price goes up and their short positions lose value, they will need to buy gold to close out their bets.

To Schiff, gold is a safe haven from the hyper-inflation that he predicts will result from overspending by Congress and currency debasement by the Federal Reserve. It hasn’t happened yet, to be sure. The Consumer Price Index is up just 1.8 percent over the past year through June.

Writes Schiff, chairman of Euro Pacific Precious Metals:

What you and I can really hope for is that this massive short-squeeze becomes the impetus to focus the market back on gold’s fundamentals and begins to drive the yellow metal back toward its previous highs. If I’m right that gold is still grossly undervalued, then this might be the beginning of the biggest rally we’ve yet seen.

The timing of Schiff’s commentary isn’t great. Bloomberg reports today that gold, at around $1,280 an ounce, is heading for its longest slump in 11 weeks on speculation that the Federal Reserve will scale back its bond-buying program.

Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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