Gold prices zoom into record books, set sights on further gains

Gold prices rallied to record highs on Thursday as the U.S. dollar sank to its lowest level in nearly two years.

Futures traded at the COMEX for the front-month July contract surged $25 to $1,889.10, edging out its previous high close of $1,888.70 set on August 22, 2011.

Gold has been “making record highs consistently for a couple of years now in other currencies, so the dollar was the lone exception,” said Peter Schiff, CEO and president of Westport, Connecticut-based Euro Pacific Capital. “Now the dollar's joining the party.”

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Ed Moy, chief strategist at gold retailer Valaurum and head of the U.S. Mint from 2006 to 2011, told FOX Business that gold’s recent surge has some similarities to the last time the precious metal reached a new peak – in the aftermath of the 2008 financial crisis.

This time around, as during the crisis, the government has “put together record fiscal and monetary stimulus” Moy said, pointing to Congress injecting $2.2 trillion, the Federal Reserve printing $2.2 trillion and extending another $5 trillion through loans to banks.

By comparison, during the financial crisis, there was a total of $1.2 trillion of fiscal stimulus and about $4 trillion worth of money-printing over a five-year period.

Moy called the scale of the COVID-19 stimulus “staggering” compared with 2008, and said all of that money sloshing around in the system has people worried about the possibility of inflation. He predicted gold prices would continue to rise until a COVID-19 vaccine is discovered and several treatments prove effective.

Schiff, meanwhile, warned the U.S. faces a “very serious reckoning” in the not-too-distant future as foreigners dump Treasurys and corporate bonds and begin the process of “de-dollarizing.”

He believes the result will be a “tremendous upward pressure on domestic inflation,” leaving the Fed in a bind.

At that point, Shiff said the central bank will have to decide between saving the dollar by selling Treasurys or buying more bonds and letting the dollar spiral lower.

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The former would cause interest rates to rise and take the stock market down and “crush the real-estate market” and economy while the latter would result in a “currency crisis and hyperinflation like in Argentina or Zimbabwe,” he said.

Schiff said one thing is for certain, though: Whichever path the Fed chooses, “gold goes much higher.”