Peter Schiff Blames the Fed as Gold Crashes 25%: Why Markets Aren't Buying It

Gold has fallen over 25% from its recent peak near $5,600 to under $4,200 per ounce. This sharp decline has erased over $10 trillion in value, surprising many in the market. Peter Schiff, a veteran economist and gold advocate, calls the selloff irrational.

Schiff argues that falling real interest rates are typically bullish for gold. However, traders are interpreting Federal Reserve rhetoric as hawkish despite a weakening economic outlook. He anticipates a reversal with rate cuts and quantitative easing if the economy falters.

In contrast to the bearish gold sentiment, Laopu Gold Co. reported a 221% increase in revenue to 27.3 billion yuan in 2025. The company attributes this to rising demand for gold jewelry and ornaments among Chinese consumers. Its profit also surged by 230%.

Why Did This Happen?

The gold selloff defies typical market logic. Rising inflation and geopolitical tensions usually drive gold demand, yet prices have fallen. Schiff dismisses the selloff, citing historical trends where falling real rates support gold.

Traders may be misreading the Fed's stance, particularly Chair Jerome Powell's rhetoric. Schiff argues this is based on an incorrect assumption of a strong US economy. He warns of potential financial instability if inflation persists and the economy weakens.

Fiscal risks are another factor. Treasury Secretary Scott Bessent has confirmed financing war spending through debt rather than taxes. This could lead to higher inflation and exploding deficits.

How Markets Responded

UBS Global Wealth Management sees gold rising to $5,900–$6,200 in 2026. The firm cites rising U.S. debt, geopolitical tensions, and de-dollarisation as drivers of gold demand. These factors could support a stronger gold market over the coming years.

In the short term, gold remains in a narrow trading range. ING Commodities Strategists note that geopolitical risks are offset by macroeconomic headwinds like a stronger dollar and higher real yields. The US-Israeli conflict with Iran adds uncertainty to the market outlook.

What Analysts Are Watching Next

The Fed's future policy direction will be crucial. Schiff predicts a shift toward rate cuts and quantitative easing if the economy falters. This could reverse the current bearish trend in gold prices.

Central bank buying and diversification demand also play roles. ING remains constructive over the medium term, highlighting the impact of central bank buying and stagflation risks. A prolonged US-Israeli conflict with Iran, however, could reinforce higher-for-longer rates and cap gold's upside.

UBS recommends a mid-single-digit allocation to gold in diversified portfolios. The firm sees gold as a hedge against macroeconomic and geopolitical risks. With rising public debt and investor concerns over traditional safe-haven assets, gold's appeal is growing.

West Red Lake Gold Mines has been added to the VanEck Junior Gold Miners ETF (GDXJ). This inclusion, part of the ETF's quarterly rebalancing, is expected to enhance the company's market visibility and liquidity. The move allows retail investors indirect exposure to junior gold equities.