Peter Schiff sees emerging long-term trends in the stock market and the gold market.
“I think the action in the stock market and the gold market Friday (June 19) potentially is telling us as to the future course of both markets” said Peter Schiff in his latest personal webcast.
Peter Schiff is CEO and chief global strategist of Euro Pacific Capital Inc., a broker-dealer based in Dorado, Puerto Rico. He is the founder of Euro Pacific Canada Inc and Euro Pacific Bank Ltd and chairman of Euro Pacific Asset Management, LLC.
“Some will argue the late stock market sell-off was due to quadruple expiration of various options and futures contracts that happens every quarter,” said Peter Schiff.
“I think the action in the stock market and the gold market Friday (June 19) potentially is telling us as to the future course of both markets”
Peter Schiff sees emerging long-term trends that go beyond this quarterly event also known as quadruple witching
Quadruple witching days usually experience heavy trading volume, in part, due to the offsetting of existing futures and options contracts that are profitable.
“I think beneath the surface, I think the market action is telling you, potentially, that we have exhausted this bear market rally in the stock market” said Peter Schiff.
Stocks and gold prices are approaching their respective technical resistance/support price levels, so Peter Schiff sees emerging long trends where gold breaks out and stocks break down
Gold closed the day around $1,744 an ounce, which is the highest weekly close of the entire stock market bull run that started after the March plunge.
“So, gold is continuing to look like its getting ready to break out. … This might have been a significant day and week is indicating that the stock market is about to break down, and gold and gold stocks are about to break out,” said Peter Schiff.
“For one thing, a lot of the initial economic news surrounding the reopening has been better than expected. This has juiced the stock market rally. People had prepared for the worst, but so far, they haven’t gotten the worst” he added.
“I think beneath the surface, I think the market action is telling you, potentially, that we have exhausted this bear market rally in the stock market”
Peter Schiff sees emerging long trends that sowed the seeds before the 2020 pandemic global lockdown of the global economy
“People forget that before the pandemic, the stock market was already priced for perfection. It was extremely overvalued” said Peter Schiff.
“There is no reason for the market to return to the level that it occupied before the collapse because it never should have occupied that territory in the first place” he added,
“The real problem will come when people start to realize we’re not recovering to where we were. We’ll be recovering to a recession/depression”.
Peter Schiff sees long term trends emerging which have been taking hold over a lengthy period of deteriorating fundamentals
“The economy was going to turn down even if we never had COVID-19, even if we didn’t have these mandated business shutdowns. We were long overdue for a recession anyway. We had the biggest expansion in history. A recession was going to start. To think that that recession is already over – that somehow a recession that began worse than any in US history even worse than the Great Depression – that it’s already over, that it’s going to be a one, two-quarter phenomenon, that is ridiculous” he said.
“The recession started with a bang for a reason because it is going to last for a long, long time and be much worse than anybody imagined” – Peter Schiff
Peter Schiff sees long term trends emerging where stock break down and gold break up is based on the fundamentals catching up with valuations
“The recession started with a bang for a reason because it is going to last for a long, long time and be much worse than anybody imagined” said Peter Schiff. “At some point, this will have to be factored into stock prices” he added.
Peter Schiff sees long term trends emerging where prices will be coupled with a breakout to the upside for gold and gold stocks.
But Peter Schiff argues that for this scenario to play out, a break out to the upside for gold and gold stocks, the US dollar has to start weakening.
“There is another shoe that needs to drop – a breakdown in the US dollar” said Peter Schiff.
Perhaps that trend could already be underway with a few people in the mainstream warning about this in recent weeks. Yale economist Stephen Roach’s recently warned that “the era of the US dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.” Furthermore, Guggenheim Investments Chief Investment Officer Scott Minerd said that while “there are no signs the world is questioning the value of the US dollar” right now, it’s clear that the greenback is “slowly losing market share as the world’s reserve currency”.
But if the US dollar is losing market share the question is which currency is gaining market share.
“Nearly one-third of Americans think another civil war could break out in the US in the next five years” – Peter Schiff
The world’s most powerful reserve currency is still by far the US dollar with 61.82% or $6.74 T of the world’s reserves held in US dollars.
Then there is the Euro which comes a distant second with 20.24% or $2.2T of the world’s reserves held in euros.
Moreover, in light of the ongoing trade war with China, another potential peripheral sovereign debt crisis brewing in Europe, Brexit, the economic calamity spurred on by the 2020 pandemic lockdown the US percentage as a reserve currency is likely to increase, not diminish.
If the US dollar demise story plays it is likely to be triggered by domestic social unrest, a second civil war
“Nearly one-third of Americans think another civil war could break out in the US in the next five years” according to Newsweek.
But the rising geopolitical tensions with China over India, Twain, and the US trade war could also spark a global conflict, which could also support Peter Schiff sees emerging long trends view, although US dollar would strengthen in this scenario.
Rising geopolitical tensions increase investors’ demand for safe haven assets, precious metals, and also haven currencies, Swiss Franc, and the US dollar.