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After the CPI data came out last week, gold rallied. On his podcast, Peter Schiff talked about the rally and the trajectory of gold. He said we can expect even bigger moves up when the markets figure out the inflation problem isn’t solved.

After the better-than-expected jobs report came out on Oct 6, we had an outside reversal day in gold, meaning the price took out the low for the prior day and then closed above the high for the prior day.  As Peter noted in a podcast, that typically signals the end of a trend. “In the case of gold and silver, the trend that was ending was the downtrend.”

On Friday, Oct. 13, gold charted a huge rally, up nearly $64 on the day. That represented a $110 swing upward from the low a week earlier.

That is a significant move in one week for the price of gold.”

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The big decline in gold leading into the jobs report was due to swiftly rising bond yields. The short bear run took the price of gold down to the $1,820 an ounce range. With the rally on Friday, gold recovered almost the entire decline.

Gold has almost done a complete round trip. So, the money has come in to buy the dip in gold, which is what I expected. The next thing for gold to do is get back above $2,000. That’s where the resistance is.”

Peter said he thinks if gold can break through $2,000 an ounce and hit $2,100, we’ll see a quick run even higher with $64 up days being “par for the course.”

I think we’re going to have a lot more of these days. In fact, I think we’re going to have bigger days. I think we’re going to see days where gold is up more than $100 a day because gold has a long way to go to catch up to where it needs to be.”

Silver charted an outside reversal day on Oct. 6 along with gold. It was up 90 cents the following Friday to $22.73.

Oil was also up big that day. Peter noted that he’s been saying he expects gold and oil to go up in tandem.

Meanwhile, bonds rallied as well. Peter said this was primarily due to the conflict in the Middle East.

He thinks a lot of people are downplaying the situation there in terms of the potential impact. For instance, Janet Yellen said Friday that the conflict wouldn’t likely have any impact on the global economy.

First of all, it’s another problem on a mountain of problems. It’s the last thing we need. It’s not like everything is great and now we’ve got this problem in the Middle East. Everything is awful and now we’ve got another problem that we’ve got to deal with.”

Peter said there is no easy resolution for the situation. We’ve already seen Saudi Arabia back out of a potential peace deal with Israel.

I don’t know how bad it’s going to get, but it’s not insignificant. It’s going to have an impact on the oil price, which was going up anyway.”

It will also almost certainly lead to the US sending aid to Israel. That means even bigger federal budget deficits.

The US is already having trouble selling Treasuries. The last Treasury auction was a disaster and caused prices to tank. There isn’t enough demand to support the level of US government borrowing. The Middle East crisis created a safe-haven bid for Treasuries, but Peter said he doesn’t think that will last.

What’s amazing about these bond auctions is that anybody bothers to show up. Why do people want these bonds? That is the real threat. One of these days, there’s going to be a Treasury bond auction and there will be no bidders. You want to make sure when that day arrives, you’ve got all the gold that you need. Because if you don’t have it at that point, you won’t be able to buy it because the price will be too high. That’ll be the end of it. Because if nobody shows up, well, then the party’s over. Of course, the Fed will crash the party and be the buyer, not of last resort, but of only resort. But that means it’s over. That means the US government is done. It can’t continue the Ponzi anymore because there are no suckers left to buy.”

Peter said Americans will be left holding the bag because they own a currency that is going to collapse in value.

The Federal Reserve has already created a lot of inflation. It will have to create even more when the bond market really starts to collapse and the Fed has to put quantitative easing on steroids to hold it up.

Peter goes on to talk about the CPI report and the trajectory of price inflation, noting that we’re still a long way from the Fed’s 2% target – and the central bank is about out of ammunition. Fed members out on the talking circuit are confirming that the FOMC is pretty close to ending rate hikes. We may see on more 25-basis point hike. But the Fed may not even deliver that.

If the Fed is done hiking rates, how’s it going to stop inflation from getting worse? It’s already moved rates from zero to five-and-a-quarter, five-and-a-half, and the inflation problem hasn’t gone away. We’re still way above 2% despite all those rate hikes. And what is the Fed going to do if after we kind of bottom out at this 3, 4 percent level, we start going back up to 9%? What are they going to do? Are they going to raise another 500 basis points? Are they going to bring rates up to 10%? I don’t think so, but that’s what the market would require. But they’re not going to do that. They’re pretty much out of ammo. So, when the markets digest this, a $63 day in gold — that’s going to be a small move compared to what’s going to happen when investors figure it out.”

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