Peter, to start off, let’s talk about your most up to date views on the market. You’ve been saying for some time that the U.S. economy is in a bubble that will eventually burst. And you believe inflation is about to surge, which will underpin demand for gold stocks. But this morning’s US CPI reading, showing a rise of 1.1 per cent, doesn’t exactly scream prices are getting out of control. Please tell when you expect inflation to start to rise and why.
Inflation is not rising prices. Rising prices are a result of inflation….
By design the CPI does not capture the full extent by which prices are rising
At some point the effects of inflation will be more reflected in official measures, but consumers certainly feel those higher prices when they shop!!
QE is inflation. Inflation is an expansion in the money supply.
Inflation also lifts asset prices, like stocks and real estate
inflation also wipes out debt, which is why governments want to create so much inflation. They have a lot of debt they want to inflate away as they lack the courage to honestly default
First question now from DL
Energy, agriculture. I also like real asset outside of the United States, that includes Canada. Value stocks with good dividends....
I think the Canadian dollar is oversold, and expect a rally. A rebound in the mining sector and loss of confidence in the U.S. "recovery" will help.
Rob has this followup on the Canadian housing market. Can you please elaborate Peter on why you like real estate here?
I think housing is over priced.
Would rather buy Canadian assets other than houses
So, you're talking about the commercial real estate sector in Canada?
Yes, or non-real estate assets.
Why are you bullish on the Canadian dollar right now?
Because I am bearish on the U.S. dollar. Also it has fallen quite a bit based on the idea the U.S. economy is strengthening and the Fed is tightening monetary policy. Neither is true!!
What’s your view of the Fed under Janet Yellen? As we speak, she’s chairing her first FOMC meeting. Will Fed policy be better, or worse, in your view, under her leadership?
The U.S. is headed back into recession, and the fed is preparing an even larger dose of QE
It will be the same policy, only more of it. So it will be worse.
This is a view you've expressed before. But when is that going to happen? This year, next or further out?
It is already happening. The recovery is fading. They are blaming it on the cold weather. But its not the weather, its the economy that is cooling.
Our friend Rob - a frequent participant in our weekly Q&As - is asking what your expectation is on gold, Peter. Eric Sprott joined us in August of last year for a Q&A. He predicted gold would hit $2,400 by April of this year. Is that forecast wildly optimistic?
It might not have been at the time he made it, but it is very optimistic to make that forecast today. However it is not impossible, just not probable. But by the end of 2015, I think it is far more likely
So a year from now, what type of gold price would you expect?
Much higher. No way to tell for sure. But we could be above 2000. However anything north of 1500 would be extremely bullish for gold stocks, many of which are already pricing in $800 gold or lower
So are gold equities the better deal right now, relative to buying gold physically/outright?
if you buy the right ones, certainly
I just launched a gold fund. EPGFX check it out to see our top holding. Lots of Canadian miners in the fund. There is also information on the fund at www.europacificfunds.com
OK, thanks, we'll be checking that out.
What are your latest views on silver? Silver equities, for the most part, have had a very good 2014, far outperforming the silver price itself. Has this metal, or the equities that track that metal, got ahead of itself relative to the gold market?
Very bullish on silver too. If I am correct on gold, silver will likely perform even better.
plus look at the gold/silver ratio. It favors silver
the ratio normally moves in silver's favor in bull markets
I just wrote on that today: The gold/silver ratio is 65 times, above the 12-year average of 60 times, suggesting silver may be undervalued relative to gold. Click out today's analyst upgrades and downgrades story to read more.
Yes, and at bull market peaks, the ratio is much lower than the average