With the price of oil plunging more than 6 percent and the Shanghai Index hitting new lows overnight, today Peter Boockvar warned King World News that we haven’t seen real chaos yet, but it’s coming and gold is going to skyrocket.
Eric King: “Peter, the game plan is for the West to inflate. The West has to inflate in order to get out of this debt. Your thoughts on the central banks, their attempts to create inflation and where that will end.”
Peter Boockvar: “In theory it makes sense — you inflate your way out of too much debt. The problem is that bond markets in Europe, the U.S., and certainly in Asia, are so egregiously overpriced that the desire for higher inflation, if they are successful, is going to blow up their bond markets…
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“Their desire to create inflation in order to inflate their way out (of the massive debt) is going to completely backfire. They’ve created bond markets that are bubbles like we’ve never seen — yields that these countries have never seen. To generate inflation, with that backdrop, is the most dangerous thing I can ever think of.”
Eric King: “You recently stated:
“The BOJ just amped up the global currency battles. I call this economic Kamikaze and I’ll say for the millionth time, I just don’t get the bear case on gold in light of this with fiat currency having such a large bulls-eye target on it.”
Peter Boockvar: “It’s been so compelling, the action in gold over the past four weeks, that it’s telling me this (cyclical) bear market is over and the bull market is about to resume. And if that’s the case, gold and silver will exceed the previous (all-time) highs.
Just look at the last week. Gold rallied when the market sold off. Gold rallied when the markets went up. And if there’s one technical sign that tells you there has been a change, it’s gold rallying when the markets went up. So, to me, if anybody is a tape watcher they should take comfort in what they’ve seen.
Chinese And The Japanese Will Be Massive Buyers Of Gold
And then of course there is the fundamental factor of the Chinese — just imagine how much gold the Chinese want to buy now after already being the biggest consumer of gold next to India. Imagine how much gold the Japanese are now going to want to buy.
Inflation Is Already Here
All you need to do is recycle out of these declines in energy prices and headline inflation is going straight up this year. Imagine if commodity prices actually start going up, which is only a matter of when, not if, because we are seeing dramatic declines in production in a variety of commodities. And it’s not just in oil, it’s in a variety of industrial metals. And it’s not just in the U.S., it’s globally.
Commodity prices will go up again. And (inflation in the) services side will remain sticky. So you are going to see 2, 3, potentially 4 percent headline CPI (Consumer Price Index) numbers over the next couple of years with this rise in commodity prices. Just imagine what will happen to these bond markets if you see those kind of prints.
We Haven’t Seen Chaos Yet But It’s Coming And Gold Will Skyrocket
What is the Fed going to do when growth is anemic, commodity prices start to go up and headline inflation starts moving up? They’re going to be paralyzed. This is going to be the late 1970s all over again. Gold is going to exceed its $1,900 level and it’s going to go well past that.
All people have to do is chart gold vs the expansion of central banks’ balance sheets over the past 5 years. Gold in the 1970s went up (more than) 20 times. Gold at its peak of $1,900 was up about seven times. Gold is going into the multi-thousands (of dollars). I do believe that we’ve seen the worst just based on the bear thesis running out of gas, the technical picture coming together, China throwing their hat into the FX wars, Japan amping it up, Draghi wanting to amp it up — everything is coming together. This is a…To continue listening to the powerful KWN audio interview with Peter Boockvar CLICK HERE OR ON THE IMAGE BELOW.
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