European Central Bank president Mario Draghi caused quite a commotion last week when he stated that the ECB would do anything in its power to save the euro. Stocks soared and investors saw a bit of confidence return to the market. That was quickly followed by healthy GDP figures from the U.S., allowing a number of assets to climb even higher. Among the best performers was gold, as investors felt the commodity was poised for gains given the commentary from Draghi as well as the wide assumption that Bernanke and the Fed are ready to print more money [see also Three Reasons Why Gold Is Overvalued].
One of the most prolific names talking about gold was investing guru Peter Schiff. Schiff, of EuroPacific Capital, has been known for his relatively bold predictions concerning the precious metal, including his firm belief that it is headed towards $5,000 per ounce. Now, Schiff has stated that Draghi’s most recent comments paint a bullish picture for gold, as it will mean that the ECB will be forced to print more money, devaluing the euro versus gold
“If gold breaks above the $1,650 level with conviction, then I think we are looking at retest of the all-time highs from late summer of 2011″ said Schiff, “I think, ultimately, we take out the highs and we go a lot higher. At some point, if I’m right, these gold stocks are going to take off because they have a lot of catching up to do” [see also Why Jim Rogers Thinks Gold Will Drop 20%].
What Will Come of Gold?
If the ECB is forced to print more money, gold would very likely spike in price and shoot back up to astronomical levels. The biggest unknown left for investors is the time frame for all of this unfolding. Will gold be able to surge to new highs, or will economic uncertainty keep pressure on its prices? Better yet, what will be the fate of fiat currencies around the world as we continue to inject money into various economies. Many feel that a gold standard is inevitable as the U.S. continues to dilute the dollar with the euro looking to undergo the same treatment.
Thus far in 2012, gold is up just over 3%, but is looking to add to that tally in the coming weeks. For now, investors favorite means of obtaining gold exposure is the ultra-popular SPDR Gold Trust (GLD), though there are a number of other products out there. Still, others prefer physical bullion and the safety it provides against market imperfections. Either way one thing is certain, if central banks around the world continue to print money at will, the odds of gold making another historic run are very good [see also The Most Profitable Months to Trade Gold].
Disclosure: No positions at time of writing.