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Look, $4,000 for gold may seem like a high price when you look in the rearview mirror . At least you're buying on a pullback. You're buying, you know, a 20 percent correction. But no, I think gold prices will continue to rise. Nobody can even buy silver for $50 anymore. You might have a chance at 59 or 58, but no one has been able to buy silver at 50 since it went above that mark.
So, I think 50 is really a support level. There is no unlimited amount of capital in the world. There are no unlimited resources in the world. And the resources and capital going into developing AI have to come from somewhere. So, other sectors of the economy will have to sacrifice for this. And the question is , can this, can this happen?
Can we afford such a sacrifice? They will print a lot of money so that governments do not default on their obligations. But the consequence of printing money is massive inflation, which is tantamount to default, because the people who get checks from the government, whether they're bondholders for interest or principal payments , If we look at precious metals, of course, everyone knows that gold has had this fantastic run.
Some would call it almost parabolic. And now he has this pause. And you know, Peter, I know you're still bullish on gold, but after this big rally, do you think there might be a period of time where it takes a year or two before gold makes the next big jump? It is possible. You know, we've already had a pretty big pullback from 5500-5600 to 4000.
We're forming a pretty good base here. I think we will start growing again soon. And I think we could easily reach a new high by next year, which is a significant move from this level. Yes. Yes, I don't expect this to be a long-term correction. I think this is a pause that refreshes the market. And I think it's laying the foundation for another big takeoff.
Especially as a potential sovereign debt crisis develops. Because now investors see rising bond yields as a problem for gold, as a hindrance. In fact, this is an advantage, a favorable factor. Because if there is a sovereign debt crisis, where will you go? Where, how, where will you hide from this? You, you choose gold.
If you are getting rid of US Treasury bonds and looking for an alternative "safe haven", then there is simply no other choice. And I think the same thing, if you're European and you're concerned about what's happening in the eurozone, you're concerned about France or other countries—what will you buy?
Yes? Why buy a dollar? Because we have enough problems ourselves. We have these bonds, and we have a debt problem. So gold is the last remaining “safe haven.” And since we will eventually get high inflation as a solution to the debt problem, this will benefit gold. I mean, gold thrives precisely because of inflation.
So rising interest rates, resulting from falling bond prices, are the most likely catalyst for high inflation. Because they force the central bank to print more money. Both to stimulate the economy, if they want to do so, because high rates are depressing the economy, and because they are forced to buy bonds that no one else needs, because if the Fed steps aside, yields will be so high that the government won't be able to pay .
And we saw something similar in the 70s, right? When the reasons leading to rising rates were also positive for gold. Yes, I mean, interest rates were rising throughout the 70s , and that was positive for gold. The only time high rates were a negative factor for gold was in the 1980s. This is because the Fed has been significantly ahead of inflation.
And while inflation may have peaked at 11-12% or 13%, the Fed raised rates to 20%. You know we can't do this now. We don't have the luxury of raising interest rates to 20%. We would n't even be able to raise them to 10% . We have a national debt of over 40 trillion dollars. This is impossible. The US government could afford 20 percent rates in 1981.
We ca n't even come close to affording 10 percent rates today. Yes, why silver, Peter? You have already explained most of the reasons why gold should rise in price. Do you think silver will follow gold and maybe ... This is because both silver and gold are monetary metals. I mean, they have industrial uses.
You know, silver is used in industry even more than gold. And it really depends on the price. If gold were cheaper, it would also be used more often. But they are also monetary metals . They have a long history as monetary metals. And therefore they are very highly correlated with each other. So, if gold is going up strongly, you expect silver to go up too.
And ultimately, it grows more because that's how it's been historically . Of course, history may not repeat itself, but if this is an indicator of the future, it is quite reasonable to assume that if the gold bull market continues, silver will grow even stronger. Do you find the current prices for gold and silver attractive, Peter?
Yes. Yes, look, $4,000 for gold may seem like a high price when you look in the rearview mirror. After all, gold was worth $20 an ounce from 1789 to 1934, $20 an ounce. And then, from 1934 to about 1970, it was worth $35 an ounce. And now, of course, the price is 4,000, almost 4,200 dollars. But last year or early this year it cost 5600, so at least you're buying on a discount.
You buy, say, on a 20 percent correction. But no, I believe gold prices will continue to rise. They have been growing for 100 years. Why should they stop? They won't stop. I mean, they will continue to go up. Silver, to me, looks really interesting because it just broke through a massive " double top": silver hit $50 in 1981 and then couldn't even get to $50 in 2011 before falling back below $20.
And then finally, at the end of last year, it broke out, and when it got above $50, it just went up to $125. We did break through resistance, and although we've corrected a bit now , we've never really gone back down to $50. So, to me, this is a perfect technical development because what was resistance has now become support.
In fact, we can't even get back to that support. No one can buy silver for $50 anymore. You might catch a chance at 59 or 58, but no one has been able to buy silver at $50 since it went above that mark. So I think 50 is really supportive. You probably won't see a price tag of $50. Not that it's impossible, but I think the probability of seeing $50 is less than not seeing it, which means that buying now, around $60, is a very good risk-reward ratio.
You only have about $10 of downside risk. Um, you have at least $70 of upside potential to get to the previous high, $60, you know, $60 each. So, but I think silver will rise above $125 an ounce. I don't think this is a peak and that silver will never be more expensive than this. I think it will be much more expensive than that.
So I think it's worth buying. What about mining stocks , Peter? People should go, whatever they are going to buy, gold or silver, go to SchiffGold and buy there. Because we have the best prices. Uh, what about mining stocks , Peter? So, you know, purely from a business perspective, if you look at the full costs of mining, they are significantly lower than the current price of the commodity, which is the price of gold and silver.
So from a business perspective, they feel quite comfortable, especially high-quality producers. So is this factor appealing to you at this point? Well, it's very attractive. I have been buying shares of gold mining companies for decades. So, uh , and I, you know, I think they're really cheap. Uh , you know, especially considering how much they're making now with the gold price at $4,000, but there's potential for much bigger profits when the gold price goes even higher.
So I think there is a lot of value in this sector and I continue to advise investors who don't have a stake in it to get involved. Um, I already have a significant portion myself, so I have n't been adding to it lately. Um, but if you have some share but you're really under- invested, then I would take advantage of the pullback we had to increase your share.
Uh, most investors don't invest in gold mining companies at all. I think this is a huge mistake. And so... So you, Peter, wouldn't say unequivocally that we're in a bubble if you look at the US stock market. It will depend on how the AI situation develops, right? Yes, I mean, there's a lot of positive earnings growth built into these stock prices, based on expected returns from AI capex .
Now, if investors are right, then this is not a bubble. In fact, it 's possible that they underestimated how big the impact on profits would be. In that case, these stocks are cheap. We won't know about it until it happens. Um, but you know, that might also be overrated. We ...we don't know what the future holds.
I, I, I , I think the future of AI is bright, but you know, it's hard to say: will the investment in computing power, all this equipment and data centers really be necessary in the future? Maybe there will be more efficient ways to provide tokens, output data, or whatever else using more efficient models ?
Or maybe the Chinese will create competitive products, which will make profits not high enough , or we will face some limitations in resources and capital. We may not be able to invest enough to deliver the expected returns. You know, there are a lot of restrictions on these companies in terms of actually being able to make the investments that they think they should make.
There is no unlimited amount of capital in the world. There are no unlimited resources in the world. So the resources and capital going into developing AI have to come from somewhere. So, other sectors of the economy will have to sacrifice something to make this possible . And the question is, can this happen?
Can we afford such a sacrifice? Are we willing to make this sacrifice? Of course. And how important will the role of the Fed be here, Peter? So, you think that in the event of a crisis, the Fed will have to print money, as they always do. But wouldn't that mean that if they did, stocks would at least nominally rise, similar to what happened in Venezuela?
Of course, not on such a scale, but in principle. You know, the Fed or other central banks are never forced to print money. This is their conscious choice. And they choose this because they don't want the alternative, which they consider worse. Although in reality the alternative is not worse. I mean, printing money is the worst option.
But from a political point of view, it is always better to postpone the problem for later. And that's exactly what printing money allows them to do. Yes, they only deepen hidden problems, so when we finally face them, it will be even worse. But they don't care about that. Because they know that someone else will be in charge.
So, it's someone else's problem. I won't have to deal with this. So, they usually try to do what is expedient, not what is right. And this usually leads to printing money. And so, yes, that's probably what will happen. They will print a lot of money so that governments don't have to default on their obligations.
But the consequence of printing money will be massive inflation. Which is equivalent to, you know, default. Because the people who receive checks from the government—whether it's a bondholder receiving interest or principal repayment , or a government retiree receiving a pension, or someone on Social Security—those checks will buy significantly less than they expected.
And so they still remain at a loss, even if there is no official reduction in payments . Yes, we will look at the portfolio structure later. So, before that, Peter, interest rates are now well above 5 %. And, you know, some people say it's not a big deal because the real economy is doing pretty well, and that's the reason rates are going up, it's going to kill inflation, it's going to help the Fed, and everything will be fine.
Could I hear your thoughts on this, Dave? Well, I think that's wishful thinking at best . First of all, I don't think the economy is in great shape. In fact, we just got consumer sentiment data from the University of Michigan. And their current state index has dropped to its lowest level in the entire history of observations.
And this has been counting down since 1951. We've been through many recessions, many wars, pandemics, financial crises—we've had many problems over these 70 years. But never in all these difficult times have consumers been as concerned about their finances as they are now. So, this doesn't mean that we have a great economy.
Of course, there may be sectors of the economy that are doing well. For example, AI or technology companies that invest a lot of money. But overall, the economy is not in the best shape. That's why these numbers are so low. That's why Republicans lose midterm elections, because they're in power, and they're the ones being blamed.
If the economy was great, they would be given credit. So yes, we don't have a good economy. Now, 5% interest rates are not high , you know, in historical perspective. Of course, you know, during the time of the University of Michigan study, starting in 1951. In fact, the interest rates we have now at 5% are lower than they were in the 70s, 80s, and 90s.
But there's a big difference between, say, five percent, where 10- year Treasury bonds are 5.3, 5 and 1/4, 5.3, and 30-year bonds are about 5.6, 5.7. However, the difference between these rates and when we last had them is the amount of debt we have now. We have much more debt. So this rate is much more problematic than it was when there was less debt.
And what's also worrying is not the current level of rates, although that's bad too. And where they're going, because they're going much higher, and it's going to be much worse. Because if you look at the bull market in bonds, we had growth for 40 years, from 1981 to 2021. And Treasury bond yields fell from 16% to about half a percent.
This was a huge decline over a 40-year period. It wasn't a straight line. I mean, there were ups and downs, but the general direction was down. We are now in a " bear" market. Direction—upward. We are only 6 years into this "bear" market. So who knows how many years he has left. But I think the stakes will be significantly higher.
And that's a huge problem for the economy, one that could spill over into a full-blown debt crisis within the next few years, maybe even next year. That's how serious it is. And if you look at our history with debt, we started out as a country with low debt and low interest rates. Everything was fine.
Then our debt started to grow. He was still short, just not that short anymore. And then interest rates really skyrocketed. So , we had low debt and high interest rates. The high rates were a problem, but we could handle it because there wasn't that much debt. Then, when debt exploded after COVID, interest rates actually fell sharply.
So we got very low rates that allowed us to deal with very high debt. But now we will have even more debt and are heading towards high interest rates. This is an impossible combination. And this will lead either to massive defaults and bankruptcies on debts, or to rapid inflation. to receive notifications about updates. Stay with us and stay connected.
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