Gold rallied by over $50 an ounce last Friday and the rally has extended into this week with the yellow metal moving back above $1,700 an ounce. In his podcast, Peter Schiff explained why he thinks that gold has bottomed and this is a significant reversal.
Commodity prices in general have been rallying over the last several days. News that China might be close to ending its zero-COVID policies sparked the rally. Industrial metals and oil both saw big gains.
This is bad news for the Federal Reserve.
“It’s going to see inflation being pushed higher even as the economy continues to soften.”
Increased Chinese demand as the country’s economy reopens could also be a problem for the Fed. The central bank focuses on fighting inflation by lowering demand. But as Peter pointed out, demand is global, not just domestic.
“I always talk about how we can have higher inflation during a recession because I realize that prices are not just determined by the ability of Americans to pay, but it’s the ability of everybody all around the world to pay. Americans are competing with foreigners for the same goods. And, it’s also not simply a function of demand, but it’s a function of supply. Even if demand in America goes down, supply in America could go down even more because demand outside America goes up, and supply is diverted from the United States abroad. So, even if American consumers are buying less, there are even fewer goods available for them to buy. And so, what ends up happening is fewer goods get bought, but the ones that do get bought are bought at ever-increasing prices.”