How to Play Schiff’s $5,000 Gold Prediction

Peter Schiff is a household name in the investing world, as he is well-known for his bold statements on the global economy and where he thinks markets are headed next. Schiff is vehemently opposed to stimulus packages as well as the massive deficit that seems to only grow by the day in the states. As such, Schiff was recently quoted as predicting gold to hit $5,000/ounce, a massive increase from its current levels. Though he was unable to quote a specific time frame for when gold will see this rapid jump, he has sound reasoning behind his theory on this precious metal [see also Four Commodities To Buy Before Roubini’s “Perfect Storm”].

First things first, the constant quantitative easing programs and “Operation Twists” that Bernanke & Co. are pumping into the economy are a recipe for disaster. Schiff likens it to a heroin addiction as he claims that the markets are literally surviving on the stimulus and once it erodes away, we will fall back into a recession. “The Fed saying we’re only going to do QE if the economy needs it is like a heroin addict saying he’s only going to take more heroin if he needs it” says Schiff. And he has quite a valid point, what will come of markets when the Fed is unable to ride to the rescue? Surely there will come a time when printing more money simply is not an option.

Schiff feels that our last recession was actually cut short by the stimulus packages and that the deeper, underlying issues are still looming. His theory seems to suggest that we need to rise from the ashes, and hit rock bottom before we can proceed as an economy. One thing that Schiff is sure of is where gold is headed, up. A minimum price point of $5,000 in the coming years as the dollar loses value and our economy spirals into the doldrums yet again [for more on gold, subscribe to our free newsletter].

Investing For $5,000 Gold

For those who feel that Schiff is correct in his rather extreme prediction, or is at least headed in the right direction, we outline several ways to make a play on this precious metal.

  • SPDR Gold Trust (GLD): By and large the most popular gold fund in the world, GLD is home to over $60 billion in assets and tracks physical gold bullion. This fund is popular both for “buy and hold” investors given its physical structure, but also to traders as it has a very active options market. Be warned, however, that a number of investors feel that GLD is no more than a paper asset and is not worth their money.
  • Physical Bullion: Working off of the notion that GLD is a phony, physical gold is most certainly your next best bet. Though  it will not have nearly the same liquidity, physical bullion can be safely stored by its owners, ensuring that they know exactly how much of the precious metal they own. Take a look at American Gold Eagle coins if you are just getting started with physical investing, as these will probably be the best for you price range [see also Three Reasons Why Gold Is Overvalued].
  • Market Vectors TR Gold Miners Fund (GDX): Schiff also noted that equity investments with commodity exposure will prove to be strong allocations in coming years. This ETF invests in a handful of gold miners in order to offer an equity spin on this coveted safe-haven asset.

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Disclosure: No positions at time of writing.

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