I wrote an article about Peter Schiff’s market predictions back in 2013 (here) – and didn’t have plans on writing another; but as much as I tried, I simply couldn’t resist. Unsurprisingly, Mr. Schiff is out with some new predictions for the coming year (he’s just one on a long list of soothsayers that the financial media has introduced us to over the years). I thought it would be appropriate to update my previous article to see how his past predictions (and some new ones) have fared over the past few years.
But let’s give Mr. Schiff the chance to provide his new predictions; here’s what he had to say in a discussion with Jeff Macke of Yahoo! Finance (link):
“This year, I believe gold prices are going to hit all-time record highs in just about every major currency except the U.S. dollar; we might have to wait until 2016 before gold prices hit a record high in dollars… Now is a good time to buy [gold].”
Think about that for a second: the GLD was at ~$123 when that video was posted on January 28 (it’s down a few percentage points since then). With Mr. Schiff calling for a record high in dollars (meaning north of ~$180 on GLD from a current ~$119), that implies a potential return of 50%. His comments lead me to believe that, at worst, you might have to wait to the end of 2016 for that to play out; when I can find 50% returns over a 12-24 month time period, I get excited!
But since the host of the program didn’t bother to address Mr. Schiff’s prior predictions (the same can be said for anyone I’ve ever seen interview him in the past few years), I thought it would be appropriate to do so for readers; if you’re like me, you want to know a guy’s track record before you listen to him. In the case of Mr. Schiff, I’ll refer to some of the more notable comments he has made in the past few years:
January 2012 (Yahoo! Finance) - Schiff says he's "more optimistic about gold" this year than he's ever been and says all the shorts and newly turned gold bears will miss the imminent rally. Moreover, gold mining stocks (such as Newmont Mining and Barrick Gold Corp.) will finally play catch-up with gold, he says, meaning big returns for investors who have stayed with these stocks as they have significantly lagged the precious metal.
Well, we’ve had three years now for that call to play out (I think “imminent” fits within that time frame): since January 2012, GLD has fallen roughly 20-25% (depending on the start date in the month); over that same period, Newmont Mining (NEM) and Barrick Gold (ABX) have even lagged that atrocious outcome by a wide margin, falling ~60% and ~70%, respectively. The S&P 500 has risen by more than 60% over that same period, before dividends.
October 2012 (CNBC Video) – “One day we’re going to look back at $1700 with nostalgia... it’s not going to take too long – just in a few years, we are talking gold $5000… that might end up being the low end of the range… gold’s only got one direction to go, and that’s higher… I think you’re going to see a big move sometime in the next couple of years.
Gold was trading north of $1700 at that point; nearly two and a half years later, we’re still waiting for it to reclaim those levels (down ~30% since then). It might have been a bit premature to call $5000 an ounce the low end of the range…
Mr. Schiff put a tighter time constraint on that prediction in February 2013 (link):
“Can it get to $5,000 in six months? Probably not. In two to three years it’s more likely. I doubt it will take five years. If it takes that long, it will go higher.”
Two years down, one to go; all GLD needs to do is quadruple – then climb another 5% – to reach Mr. Schiff’s goal of $5,000 per ounce. It might take a little longer than originally anticipated to reach $5,000 per ounce (or even $2,000 per ounce) – but I’m sure Mr. Schiff will be there to say “I told you so” when it does…
June 2013 (Fox Business) – “You have a lot of speculators that are selling gold, there’s no doubt about it; how much more downward pressure they can exert in the days and weeks ahead is hard to tell. What I do know is that the price can’t stay down here.”
The chart that was shown during that video clip showed gold at $1210 per ounce; as I noted earlier, GLD closed on Friday below $119 (trades at 1/10th of the price on an ounce of gold). It has been eighteen months since then – easily covering the time frame put forward by Mr. Schiff (“days and weeks ahead”). Gold hasn’t only stayed down here – it has moved even lower.
In that video, Mr. Schiff was pushed on the fact that he was calling for “real” inflation that wasn’t reflected in government data; he turned to an unfortunate example to prove his point:
“Look at the price of oil today at $97 a barrel and rising. Prices are rising, and they’re going to rise at lot faster.”
With hindsight, oil doesn’t look like the best example…
Finally, let’s revisit the Bloomberg article (link) that was the inspiration for my first write-up:
“He predicts bullion will reverse its 21 percent year-to-date decline and probably surge 52 percent to reach a record $2,000 an ounce within a year. That’s just the beginning: Before President Barack Obama leaves office in 2017, the U.S. will default, the dollar will collapse, hyperinflation will strike and gold will skyrocket, he says.”
That was in November 2013 (November 4 to be exact); on that date, GLD closed at $126.81 (per Yahoo! Finance). In the end, gold didn’t come anywhere near reaching Mr. Schiff’s $2,000 an ounce in the coming year; in fact, it never even got close to crossing $1,500 per ounce. One year later (November 4, 2014), GLD closed at $112.22 – down 11% from a year earlier.
Conclusion
It’s been a tough couple of years for Mr. Schiff’s market predictions; after holding steady in the $160 - $180 range from late 2011 to early 2013, GLD has moved lower in a big way over the past 24 months. But that hasn’t stopped our fearless prognosticator: he has come out as confident as ever, calling for listeners to double down on gold (of course he wouldn’t put it that way: that would imply that he has been dead wrong for a few years now).
One day, he will be right; when that day comes, the financial media will parade him out for his moment of glory. He is certainly not alone in this category.
But the outcome for Mr. Schiff’s listeners will be much less certain: it will be difficult to overcome the gaping hole that’s been built between the returns for gold (as measured by the GLD) and the market index over the past four years (-25% versus a 60% increase for the S&P 500, before dividends).
I’ll close with the same comment I made back in 2013:
“If Peter Schiff backed up his call of $2,000 an ounce within a year (that would be a gain of more than 50% from current levels) by putting 10% to 15% of his net worth into some options with a strike at that price, I wouldn’t make a peep (I would still think it’s ludicrous to make such a short-term prediction, but I would commend the fact that his actions matched his apparent conviction); of course, if he’d started that in 2009, when he first started calling for $2,000/$5,000 gold, he would’ve lost more than half of his money by now."
