‘The pretend fight is over’: Peter Schiff warns of a US dollar crisis, calls the Fed’s pivot ‘a mistake’ — but believes it will send this 1 asset ‘through the roof’

US dollar crisis?

Schiff looked at the U.S. dollar index, which measures the value of the greenback relative to a basket of foreign currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

The index was established in 1973 with a base value of 100, reached a high of 164 in 1985, and hit a low of around 70 in 2008.

Most recently, the index fell following Powell’s remarks suggesting a policy shift.

On Aug. 23, Schiff noted, “The Dollar Index closed at 100.67. The index could easily sink below 90 before year-end, challenging the 2020 low.”

This forecasted depreciation in the dollar could have broad implications. A weaker dollar generally makes U.S. exports cheaper and more competitive abroad, potentially boosting U.S. manufacturing and export sectors. However, it also makes imports more expensive, which can contribute to domestic inflation by increasing the cost of foreign goods and services.

Looking ahead, Schiff predicts this downward trend will persist into 2025, stating, “I think that low will be breached in 2025, triggering a U.S. dollar crisis, crashing the economy and sending consumer prices and long-term interest rates soaring.”

Schiff didn’t provide further details in that post, but a rapid decline in the dollar’s value could undermine international confidence in the U.S. currency as a store of value and medium of exchange. The resulting economic turbulence might also impact the U.S. economy by making it more expensive to service dollar-denominated debt, particularly for foreign borrowers.

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Fed’s mistake?

Schiff’s grim forecast for the U.S. dollar leads him to favor an alternative as a store of value: gold.

“Gold rose today to close above $2,500 for the 2nd consecutive week," he noted in another post on Aug. 23. "Meanwhile, the U.S. Dollar Index sank to a 13-month low.”

He interprets this trend as evidence that the Federal Reserve's policy shift is ill-advised. “This clearly confirms the Fed's pivot is a mistake,” he argues.

Schiff has consistently maintained that the battle against inflation is far from over. With the Fed’s pivot signal, his conviction only deepens, anticipating further increases in prices. He predicts a continuing inverse relationship between the value of the U.S. dollar and gold, stating, “Higher inflation and lower rates mean the dollar goes through the floor as gold goes through the roof.”

Traditionally, gold is considered a safeguard against inflation, as it is a tangible asset not subject to the whims of monetary policy that can inflate the supply of fiat currency. The yellow metal has gained considerable investor attention recently, with its price soaring by 23% in 2024 compared to the year prior.

Schiff isn’t just theorizing; he’s investing according to his beliefs. The latest 13F filing from Euro Pacific Asset Management reveals a significant emphasis on the precious metal within Schiff’s investment strategy.

As of July 30, the largest holding at Euro Pacific Asset Management was gold mining company Agnico Eagle Mines (AEM). Meanwhile, Euro Pacific’s second-largest holding was Barrick Gold (ABX), another heavyweight player in the gold mining business.

For those aligned with Schiff’s outlook and considering gold as an addition to their investment portfolio, options abound. Investors can purchase gold bullion, own shares of gold mining companies, invest in gold ETFs and even tap into potential tax advantages through a gold IRA.