Fed Cuts Interest Rates, but Still Disappoints


Peter Schiff, who we interviewed at his home four years ago, continues to be bullish on gold and gold stocks. Peter has stayed bearish on the US dollar and long called the end of the US bull market, that continues to defy him, hitting new all-time highs almost daily.

Gold’s Summer Moves Confirm Bull Market

Peter Schiff believes the Fed cutting rates will add to gold’s support. On Wednesday, it wasn’t the case. Schiff explains to Kitco,

“Gold is an alternative to all of these money substitutes that are being created by governments.”

And that,

“They are trying to sustain asset bubbles. They’re trying to make it possible for governments to keep on spending money they don’t have. So, to do that they need to artificially suppress interest rates and that destroys the value of these fiat currencies. And that’s what drives people to seek out a better alternative, like gold.”

Fed Cuts Interest Rates, US Dollar Rises

On Wednesday, the Fed cut interest rates for the first time in a decade. The 25 basis point cut was less than the market expected. Amazingly, the markets wanted a 50 basis point cut. Stocks traded sideways on the news, despite the historic reversal. Gold and silver both lost ground. Gold fell to $1,420 per ounce, while silver lost nearly 1% to $16.33 per ounce in mid-afternoon trading.

The U.S. dollar index gapped up 0.3% to 98.36. What should not be lost on the market participant is that the Dollar index is near 100 and gold is still well above $1,400. If the dollar index falls to the mid-70s as it did in 2011, one can imagine where gold and other hard assets may go.

The Fed cited global developments, otherwise known as anemic global growth, particularly in Europe and muted inflation. Time will tell, but Trump pressured the Fed into this. Albeit inflation is low, Q2 GDP still came in above 2%. Low interest rates and an accomodative Fed will tilt the economic scale back into Trump’s favor as the 2020 Presidential Election intensifies.