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The Fed is trapped; buy gold now, Peter Schiff says

Peter Schiff has a warning for gold investors: Don't fear the Fed.

"Gold has already priced in whatever taper is coming," Schiff, CEO and chief global strategist of Euro Pacific Capital, told CNBC. "If anything, it has overpriced it."

Gold is slightly lower Tuesday on the heels of a stronger dollar and a report from Jon Hilsenrath of The Wall Street Journal suggesting that the Fed will continue to reduce—or taper—its bond-purchasing program when it meets next week. The prospect of a Fed exit has terrified gold bugs and led to bullion's worst annual performance in 2013 since the end of the Clinton administration.

(Read more: Gold settles nearly 1% lower as Fed fears grip market)

But those fears are misplaced, according to Schiff. As he sees it, the Fed has no viable exit strategy, and once the market realizes that, gold could become the hottest trade of the year.

"If the Fed starts tapering, the whole economy will tank," Schiff said on "Futures Now." "Stocks will suffer, the dollar will collapse, and all the Fed's stimulative programs ... since 2008 will have been for nothing. That's why they have to keep printing money. They can't stop. And eventually, that will make gold a very attractive investment."

In other words, the Fed is trapped in a vicious cycle of easy money, unable to fully revive the economy yet hesitant to end the very programs that it hoped would do just that.

Of course, Schiff has made similar claims in the past two years, none of which have worked out particularly well. And he remains noncommittal about the exact timing of gold's possible accent.

But gold remains his top investment choice, Schiff said, adding, "It's a no-brainer."

—By CNBC's Maxwell Meyers.

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