Peter Schiff: Gold’s Slide Rests on a Bet the Fed Can’t Deliver

Gold prices fell to a one-year low on Friday (October 30) as a drop in technology stocks put pressure on precious metals. Economist Peter Schiff warned this week that inflation could rise further and said the Federal Reserve is not doing enough to control it.

According to Reuters, falling technology stocks may have prompted investors to sell gold to cover losses elsewhere in the market. Commerzbank analysts suggested precious metals could recover following the decline.

Speaking at the New Orleans Investment Conference on Thursday (October 29), Schiff said consumer prices had continued to rise throughout the year, even as gold and silver prices declined. At the time of his remarks, silver was trading below US$52 per ounce and gold was around US$4,020.

By late Friday, silver had fallen to US$49.12, while gold dropped below US$3,900.

Schiff criticized Federal Reserve Chair Kevin Warsh, describing him as a “dove in hawk's clothing.”

He questioned whether Warsh would take a tough enough approach to inflation.

Earlier in the week, the Federal Reserve held its benchmark interest rate in a range of 3.75 to 4 percent at its October 28 meeting.

“You’ve got this huge increase in inflation, and the pressures are continuing to build. What has he done? One 25 basis point rate hike, one, and all the markets are expecting is one more in December,” said Schiff.

M2 money supply has grown at an annualized rate of about 6 percent since Warsh took office, he said, while the Fed’s balance sheet has changed little.

Based on his estimates, inflation rose from 2.7 percent in 2025 to about 4 percent during the first nine months of 2026. He expects it to reach 5 percent this year and exceed 7 percent in 2027.

Schiff offered his interpretation of the circumstances surrounding Warsh’s nomination.

He said that President Donald Trump’s criticism of former Fed Chair Jerome Powell, along with pressure involving Fed Governor Lisa Cook, had raised concerns about the central bank’s independence.

Those concerns, he argued, had weakened confidence in the US dollar, helping support gold prices. He speculated that Treasury Secretary Scott Bessent backed Warsh’s nomination because his reputation as an inflation hawk could reassure markets that the Fed would remain independent.

He contrasted Warsh with former Fed Chair Paul Volcker (1979-1986), who raised interest rates to approximately 20 percent when inflation was around 12 to 13 percent, adding that today's monetary policy remains too accommodative to contain inflation.

Schiff estimated that US financial institutions could be sitting on about US$2 trillion in unrealized losses tied to fixed-rate mortgages. He warned that the figure could climb to US$3 trillion if mortgage rates rise to 8.5 percent.

According to him, the estimate is based on roughly US$8.5 trillion in outstanding fixed-rate mortgages carrying an average interest rate of 4.6 percent. He cautioned that further rate hikes could deepen these losses, put additional pressure on home values and lead to more mortgage defaults.

“The predicament that Warsh was in is: okay, we have an inflation problem, but we can't actually do anything about it because if we try to do anything about it, we're going to have a financial crisis,” he said of Warsh.

During his remarks, Schiff pointed to rising US government debt and interest expenses, estimating annual debt interest payments could reach US$2 trillion next year. He warned that continued government borrowing and rising interest costs could eventually trigger a sovereign debt crisis, further undermining confidence in the US dollar.

Despite the recent decline, Schiff acknowledged that a correction was reasonable after gold and silver reached record highs earlier in 2026. Gold peaked at US$5,589.38 per ounce on January 28, while silver hit US$121.62 the following day.

Schiff nevertheless expects precious metals to benefit over the longer term as inflation persists and confidence in the US dollar weakens. He said that once investors recognize the Fed's limitations, gold and silver could climb to new highs.

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Securities Disclosure: I, Aastha Sethi, hold no direct investment interest in any company mentioned in this article.