Economist and well-known gold supporter Peter Schiff believes that gold is on track to have its best year since 1979, when it rose by 126%.
He pointed out that gold prices have increased by over $540 this year so far.
Gold’s stone-hard performance
Schiff discussed in an X post the giant rise in gold prices and the economic factors affecting gold and related stocks.
The price of gold jumped again following the Fed’s decision to cut interest rates by 50 basis points, marking its first reduction in over four years.
“Gold is having one of its best years ever, up over 26%, and on pace to surpass the 32% rise seen in 2007.”
Paper gold and physical gold mining
Schiff shared that while gold is set for a remarkable year, the VanEck Gold Miners ETF, which tracks companies involved in gold mining, only increased by 31%.
This low correlation suggests that many investors haven’t yet noticed the ongoing bull market in gold.
Schiff also revealed a trend among traders who tend to sell gold mining stocks quickly at the first sign of a price pullback.
He explained that if a $40 increase in gold leads to only a 2% rise in mining stocks, then a $5 drop can cause those stocks to lose half of their gains.
This behavior reflects a lack of confidence in sustaining investments in mining companies despite gold’s strong performance.
Future of gold
Schiff also mentioned that gold has gained over $540 so far in 2024, which is unprecedented.
He pointed out that this is especially important, because it is occurring during a time of rising national debt and while the Federal Reserve is cutting already low interest rates, despite inflation remaining well above its 2% target and continuing to climb.
This situation suggests that there are underlying economic issues, quiet hard ones at play that could further impact both gold prices and investor behavior.
Schiff thinks if more investors begin to recognize the strength of the gold market and adjust their strategies accordingly, there could be more growth in both gold prices and mining stocks.
