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Gold prices: Is the sky the limit?

Schiff’s optimistic stance on gold stems from his skepticism towards the fiat currency system.

“There's no ceiling on the price of gold because there's no floor to the value of the dollar,” he explained. “And the dollar is going to lose a lot more value and you're going to need a lot more dollars to buy an ounce of gold.”

The U.S. dollar’s diminishing purchasing power, primarily due to inflation, is a key factor in this context. Inflation leads to higher prices for goods and services, meaning it requires more dollars to buy the same items as before.

In November 2023, the U.S. consumer price index saw an annual increase of 3.1%, down from its peak 9.1% increase in June 2022.

However, the price of many necessities remain elevated. The latest CPI report showed that, over the last year, the food index increased 2.9% and the shelter index rose 6.5%.

Inflation often arises due to the ability of central banks to freely print fiat money. Gold, on the other hand, cannot be created out of thin air. The precious metal’s inherent scarcity is a significant factor in its reputation as a reliable hedge against inflation.

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Gold vs stocks

To be sure, stocks are also regarded as a viable option for combating inflation — and they’ve also been rallying as of late.

However, Schiff still prefers the good old yellow metal for one reason: value.

“For the long run, it's better to own productive assets, especially if you can buy them cheap. The problem is right now U.S. stocks are extremely expensive and historically, it's very dangerous to overpay for stocks,” Schiff said, adding that gold is “actually very cheap historically.”

He highlighted gold’s potential to outshine stocks during times of escalating prices.

“If you look back at prior periods where inflation was a problem, like the 1970s, the price of gold, in one decade where the Dow went down, the price of gold went from $35 an ounce to $850,” he said. “So think about that percentage gain and, in fact, by 1980 the Dow Jones and gold were trading at roughly the same price — imagine a world where both of those are the same price because that's the world where we're headed.”

Schiff is putting his money where his mouth is. Euro Pacific Asset Management’s recent 13F filing revealed that the top two holdings of Schiff’s firm at the end of Q3 were Barrick Gold (GOLD) and Agnico-Eagle Mines (AEM), both heavyweight players in the gold-mining sector.

Should gold prices ascend as Schiff anticipates, these gold-mining companies could see a significant upturn.

Investors can also gain exposure to the precious metal through ETFs like the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU).

And if you want to get involved more directly, you can always purchase gold bars and coins from your local bullion shop or online dealer.

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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