As the world grapples with Covid-19, precious metals’ prices are pushing higher. Massive moves in gold and silver are coming, according to veteran stock broker, financial commentator, and radio personality Peter Schiff. He says silver may hit $50 per ounce. The rally will be short-lived, however, with Schiff describing the metal as “the new bitcoin.” The rise in gold and silver price is “about to explode” and this is just the beginning of a much bigger move.
“We’re barely getting started,” the CEO of Euro Pacific said in his podcast. He explained that is also coinciding with what’s happening to the US dollar, because gold is the greenback’s “principle competitor” when it comes to reserve assets.
Safety in Gold?
Many people believe gold is a safe-harbor instrument, while others remain skeptical. The clearest demonstration of its lack of safety was Executive Order 6102 in 1933. In a single instant, Franklin Delano Roosevelt (FDR) declared all gold holdings to be property of the government. They just up and *took* the private ownership of gold from private citizens and corporations alike, both foreign and domestic. No warning, no compensation, no recourse, no appeal. People's entire life savings were just flat-out appropriated, on no basis other than the fact that they had it and the government wanted it.
Don't think they won't do exactly the same with 401(K) accounts once the Social Security scheme starts teetering. Or sooner, if the 'reparations' rhetoric continues to gain traction. It's not a huge cognitive leap for the next President, backed by a sympathetic Congress, to simply declare that, because successful people generally have 401(K) accounts and poorer people generally don't, that such accounts are systemically unfair and will therefore be confiscated and redistributed.
The more ubiquitous theoretical reason why gold is a poor safe-harbor instrument is that it is not useful for transactions, owing to its rather coarse units of value. That is, I can use gold to buy a house, but I can't use it to buy a loaf of bread. It's not a liquid asset, and needs to be converted to cash in order to be used for day-to-day scale transactions; and it doesn't liquify efficiently.
This was historically evident, during recent refugee crises. For example, in the early years of the Holocaust, Jews that managed to flee Germany with their wealth found the purchasing power of their valuables to be a tiny fraction of their original value. Jewelers, whether legitimate or fences, would barely give them 10% of their jewels' values, for the simple reason that they knew they were desperate; they need to eat *today*, and they knew Jewish refugees would, out of necessity, sacrifice a pile of cash later in favor of a small amount right now. This described as a utility decay function with a very steep curve.
The yellow metal “will resume its role at the center of the monetary system,” and “the world is going back to a gold standard whether the Federal Reserve wants it or not." “The US dollar is about to collapse and when it does, gold is going to take its place. The bottom can drop out of the dollar any day, and gold could go through the roof any day. So, this is a real race and you have to get out of the dollar before it’s too late,”
A lot of financial trading is done by exploiting differences in need over time. This is something that is often new to folks outside the financial industry. "A dollar is a dollar" isn't really true; a hundred dollars doesn't necessarily have 100X the utility of one dollar, and a dollar paid now doesn't have the same utility as a dollar paid a week from now. In the case of the Jewish refugees –immediate necessity prompted them to trade diamond earrings for shoes and sandwiches.