Peter Schiff's Urgent Update To Gold and Silver Investors

Source: Dominique de Kevelioc de Bailleul, ETF Daily News  (12/2/11)

"'There's an old expression that nobody rings a bell when it's time to buy or sell. . .well, the world's central banks just rang a pretty loud bell to buy precious metals.'"

Following the surprise move by the Fed and five other central banks to lower the interest rate of dollar swaps by 50 basis points, through Feb. 1, 2013, Euro Pacific Capital CEO Peter Schiff issued a special and urgent update to investors.

"There's an old expression that nobody rings a bell when it's time to buy or sell," Schiff began his video message of Wednesday. ". . .well, I think the world's central banks rung a pretty loud bell today to buy precious metals."

As the Dow opened on Wednesday, soaring more than 400 points, gold vaulting more than $30 per ounce and silver adding more than a buck following the Fed announcement that the world will soon be flooded with more dollars due to the coordinated cut in the swaps rate, the U.S. currency dropped sharply against its peers which comprise the UDX.

"I believe that it [the dollar] is going to lose a lot more value, not just against other fiat currencies, but against real money, gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV)," Schiff continued. "I think investors should be buying. Those of you who've been on the sidelines waiting for an opportunity to buy, I would not wait much longer; I would just buy."

Wednesday's ringing endorsement by central banks to sell dollars and buy precious metals—so far—has fit well into the call Schiff made in October for a lower dollar by year end—a bold call, indeed, in that, it flies in the face of famed FX Concept Founder John Taylor's prediction for a euro collapse. Not many traders want to take the other side of a Taylor trade.

"What's really frustrating is that we're supposed to do well in a lousy world market," Taylor told Bloomberg in an Oct. 12 interview. "We're doing very badly."

Nearly two weeks later, on Oct. 25, Schiff defiantly told KWN, "Our short-term target for the euro, maybe by year end, will be up near 1.48," adding, "I think that's going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level. The dollar index should be headed back down to the 72 level."

Schiff recommend to KWN listeners to buy gold and silver as the hedge against the coming drop. So far, Schiff is holding up quite well to senior Taylor.

"I think we will come pretty close to hitting $2,000 on gold this year," Schiff predicted. "It would be hard for gold not to be above $2,000 in 2012. I really think it would be unlikely that we wouldn't see prices north of $2,000 next year." See BER article, Peter Schiff's Boldest Call Ever.

Fast forward to today, Schiff recommended to his video audience that new positions should be taken in gold and silver, with first-time buyers who've been waiting for a pullback to jump aboard.

"You have gold at around $1,700, silver around $32," Schiff said, Wednesday. "I think these are good positions to buy gold for the first time, if you still haven't bought, or add to your positions if you already own."

In addition to his recommendation to buy precious metals, Schiff reminded investors of the ongoing disinformation campaign waged against investors by central bankers and the media all through this crisis. Schiff has continually stated, as far back as the early 2000s, that central bankers and 'respected' media outlets, to put it bluntly, "lie" to investors about the intentions of the Fed; it's all part of, what famed trends forecaster Gerald Celente has said is, a CON-fidence game the Fed plays with the markets.

"Here's the deal, Eric, they are suckering in the people to keep playing the market. This solved nothing," Celente told KWN, Thursday. "So when I see this, this is just a con game. And anybody that sees the game, all they have to do is follow the money. Where is the money going? Look at what gold did, zoom it shot up! Look what silver did, bam! Everybody knows what's going on, they are devaluing our currency."

Schiff provided more detail than Celente about the latest Fed rouse, citing the curious timing of the Bernanke announcement of the day following the Standard & Poor's large list of bank downgrades, underscoring what both gentlemen have been warning investors for a long time—and that is, that the game is "rigged" against investors of dollar-denominated paper assets and to buy gold.

"A lot of people think that what is going on is a bailout for the Eurozone. It's not; it's a bailout for the banks on both sides of the Atlantic," Schiff explained. "It's not a coincidence. . .last night Standard & Poor's downgraded credit ratings for about 20 major banks, including banks like Bank of America [and] Morgan Stanley."

Moreover, Schiff noted a similar observation to zerohedge.com's post regarding Warren Buffet's Bank of America share price, which, as of Tuesday, traded briefly and dangerously below the $5 mark—a mark at which pension funds and other large institutions must sell the stock, which would no doubt cause another Citigroup-like meltdown in shares of BAC.

"Before the bell [Wednesday], Bank of America shares were under five bucks, a new 52-week low, and this announcement came and the banks rallied," Schiff said. "I think this is a bank bailout, a la QE2. This is not about economic growth; it's about propping up insolvent financial institutions by creating inflation."

More evidence of Schiff's contention came from U.S.-based Forbes Magazine on Wednesday morning. Forbes stated that it had observed central banks taking unusual steps to liquefy an unknown (undisclosed?) European bank in ways reminiscent of the 2008 financial system meltdown.

"It appears that a big European bank got close to failure last night," stated Forbes. "European banks, especially French banks, rely heavily on funding in the wholesale money markets. It appears that a major bank was having difficulty funding its immediate liquidity needs. The cavalry was called in and has come to the successful rescue."

Experienced Wall Street observers, such as Schiff, the staff of zerohedge.com and the journalists of Forbes understand the motives and obfuscations disseminated through communiqués of central banks all too well. And those "who do understand this dynamic will buy gold," said Schiff.

And how high could the price of gold go?

Ironically, France-based Societe Generale issued a note to clients on Monday, a couple of days too soon from the Wednesday's Fed's bombshell announcement, in which, it stated, "A major liquidity crisis should not occur this time, as we think we are on the eve of major QE in the UK, U.S. and (a bit) later on in the EZ."

If the analysts at SocGen had read zerohedge.com's Friday post regarding a curious and massive blip on the Fed's "Non-Reserve Balances" statement of an additional $88 billion to its "other" category, they may have wondered if another bank was about to blow up in the system and most likely would have suspended their analysis for a little while longer.

In any event, SocGen also stated it expects the price of gold to soar to nose-bleed heights in the wake of more central bank quantitative easing, as they need to catch up to the unprecedented rate and amount of debt destruction on both sides of the Atlantic.

"Buy gold ahead of QE3 as money creation has a strong impact on prices," according to the SocGen release. "Gold is highly sensitive to U.S. QE, as every dollar of QE goes into M0, triggering the debasement of the USD. Gold = $8,500/oz: to catch up with the increase in the monetary base since 1920 (as it did in the early 80s). Gold = $1900/oz: to close the gap with the monetary base increase since July 2007(QE1+QE2)."
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