Precious metals have been hitting new all-time highs this month, but economist Peter Schiff is arguing that their bullish run could be indicative of a financial crash.
During his December 18 appearance on The Julia La Roche Show, Schiff warned that the U.S. economy is approaching a historic crisis, arguing that inflation and steep gold and silver prices were reducing confidence in the U.S. Treasuries and setting the stage for a sharp decline in the dollar.
Accordingly, the analyst said he holds very little cash and has remained almost fully invested for years. He argued in favor of dividend-paying foreign stocks, emerging markets, and resource-related equities spanning precious and industrial metals, energy, and agriculture. This strategy, he said, is a long-standing inflation trade that has begun to outperform meaningfully.
Silver and gold prices sound an alarm
Gold is central to Schiff’s outlook, as its rising price can trigger a self-reinforcing cycle: as confidence in the dollar weakens, more investors move into gold, forcing the U.S. to offer higher interest rates to attract debt buyers. However, silver is also noteworthy, as both assets can “pull the rug out from under the U.S. dollar and treasury and “send unemployment soaring.”
The long-time dollar critic also questioned the durability of the reserve currency status, which he said has allowed the U.S. to consume more than it produces by exporting dollars instead of goods.
In a dollar crisis, he reasoned, that dynamic would reverse abruptly. That is, imports would become far more expensive, foreign demand for U.S. stocks and bonds would fall, asset prices would decline, and living standards would drop sharply for most Americans.
Schiff concluded by warning that a dollar crisis could erupt suddenly, potentially during Asian trading hours, given that U.S. creditors in the region hold large amounts of dollar-denominated assets.
The stock market is in danger
Further on in the discussion, Schiff remarked that 2025 was the first time in many years that foreign markets had significantly outperformed U.S. equities, which remain overvalued after a decade-long bull run characterized by easy money.
Capital flows are already beginning to reverse. For instance, foreign investors who poured money into U.S. assets over the past decade are now repatriating funds, while American investors are increasingly looking abroad in search of better returns. This shift, Schiff believes, could prove challenging for the U.S. economy.
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Source: https://finbold.com/a-dollar-crisis-could-erupt-overnight-economist-warns/
