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By: Brian Price
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Gold suffered its worst day of the year on Tuesday, as bullion fell 2 percent. And when it comes to where gold is going next, Peter Schiff and Paul Krake have completely opposite perspectives.
Krake, of View from the Peak, has a target on gold of $1,000, roughly $300 below current levels. But Schiff, CEO of Euro Pacific Capital, says gold is heading above $5,000.
Schiff's bullish case is premised on the idea that central bank actions will create inflation, which will lead to much higher gold prices.
"Central banks are creating too much money, there's too much inflation, interest rates are too low, and so I want to store my purchasing power in something that central banks can't print," Schiff said on Tuesday's episode of "Futures Now." "I think we're headed much higher because they are not going to stop the presses. They are going to run them into overdrive."
One obvious problem with this thesis is that the Federal Reserve has been reducing, not increasing, the size of its bond-buying program. But Schiff says that quantitative easing will never end.
"If the Fed continues with their taper and ends QE, we will be back in a recession. The stock market will be in a bear market. The real estate market will be in a bear market. And then what is the Fed going to do to respond to that? The only thing it can do is print more money and restart the presses and do more QE," Schiff said.
Read MoreChina's gold fever to cool in 2014
But Krake pointed out that even if Schiff is right, more QE will not necessarily send gold higher.
"Peter, how do justify the following: Last year you had the greatest balance sheet expansion across global central banks in history, yet gold had its worst performance in 30-odd years?" Krake asked.
"Did you ever trade anything? Buy the rumor, sell the fact? Gold rallied for over a decade in anticipation of that," Schiff responded. "We shook out some of the weaker players. Meanwhile, gold is outperforming all other assets in 2014."
That counterargument flabbergasted Krake.
"To make the argument that 'buy the rumor, sell the fact' justifies the greatest move in 30 years versus the greatest balance sheet expansion in central banking history? That is a bit of a lame argument, I'm sorry," Krake said.
Gold prices are having another positive run on Monday, rising 1 percent at the day's highs, which brings the metal $50 above where it traded when April began. But with the situation in Ukraine growing more volatile, and the Fed reiterating its commitment to improving the labor market, the rally in gold could just be getting started.
"Gold should probably have a stronger response to many of the things going on than it is right now. I'm a little confused why it isn't going higher," said Jim Iuorio of TJM Institutional Services. "Everything I read and see should be supportive of gold prices. The situation in Ukraine is getting worse, and the Fed has shown they would rather err to the side of dovish."
In eastern Ukraine, several buildings have been taken over by pro-Russian militants. And a Monday deadline that the Ukrainian government set for the protesters (whom U.S. Ambassador to the United Nations Samantha Power says are professionals involved with the Russian government) to leave the buildings has come and gone.
Recently, Russia has warned that Ukrainian actions against the pro-Russian protesters could lead to a civil war. These tension in eastern Ukraine come after the Russian annexation of the Crimean peninsula.
Geopolitical tensions tend to be good for gold, given the metal's use as a safe-haven asset. But that's not the only catalyst traders are looking at.
Earnings season is ramping up this week, and a lot is on the line. After a terrible few sessions for stocks, investors will look to corporate results to determine whether the economy actually lost steam in the first quarter of the year.
"There's no doubt in my mind that earnings are going to make or break the market this week," said Anthony Grisanti of GRZ Energy.
Companies as varied as Citigroup, Coca-Cola, Johnson & Johnson, IBM, Google, and Chipotle are set to report. And what increases the drama is that analysts are expecting Q1 earnings to drop 1.6 percent year-over-year. If earnings do actually shrink, then this past quarter will mark the first decline in S&P 500 earnings since Q3 2012.
Of course, that might not happen. Over the past three years, 71 percent of S&P 500 companies have beaten earnings estimates, and the average earnings growth rate has come in 3.1 percent above expectations, according to FactSet. If that trend holds this year, then actual earnings growth rate will be 1.8 percent, points out FactSet senior earnings analyst John Butters.
However, despite the low estimates, the start of earnings season has actually been relatively weak. Just 52 percent of the 29 S&P 500 companies that have reported have beaten estimates, according to Thomson Reuters I/B/E/S.
And just as weak economic data was pegged on the weather in the first quarter, companies have blamed harsh weather for weak earnings. Nearly half of the S&P 500 companies that have released results have mentioned a negative impact from weather, FactSet reports.
Marc Faber says the stock market is setting up for a decline more painful than the sudden crash of 1987.
"I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash," Faber said with a devious chuckle on Thursday's episode of "Futures Now." "And I suspect it will be even worse."
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Faber, the editor and publisher of the Gloom, Boom & Doom Report, has recently called for growth stocks to decline. And he says the pain in the Internet and biotech sectors is just getting started.
"I think there are some groups of stocks that are highly vulnerable because they're in cuckoo land in terms of valuations," Faber said. "They have no earnings. They're valued at price-to-sales. And this is not a good metric in the long run."
To be sure, there are prominent investors that disagree with Faber, among them legendary stockpicker Bill Miller, who said this week that conditions for a bad market simply don't exist.
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But it's not just momentum stocks that Faber is wary of. He says that investors are coming to a stark realization.
"I believe that the market is slowly waking up to the fact that the Federal Reserve is a clueless organization," Faber said. "They have no idea what they're doing. And so the confidence level of investors is diminishing, in my view."
After starting off the year at 3 percent, the 10-year Treasury yield has spent the last two months in a tight range between 2.6 percent and 2.8 percent. But Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock, says that yield could rise to 3.5 percent this year once economic data start to improve.
"It's in the next one to two months when we're going to see if this data really accelerates, and that's what's going to break you out of this 2.60, 2.80 range," Rosenberg said on Tuesday's episode of "Futures Now."
At this point, he's predicting that the 10-year yield finishes the year at "three and a quarter," though it could rise as high as "three and a half if we end up even stronger on the year in terms of data growth."
After two tough sessions for the market, the S&P 500 hit a one-month low on Tuesday morning before turning positive for the day. But technical analyst Louise Yamada says the stock slide isn't over just yet.
"I don't think the pullback is already over," Yamada, of Louise Yamada Technical Research Advisors, said on Tuesday's episode of "Futures Now." "I think that it's an interim pullback, and we've certainly seen what we've expected, in the Internet and biotechs coming off. And I think that although they may bounce, there's probably still a little bit more to go on the downside."
Worse yet, the selling could spread to other sectors, such as aerospace and consumer discretionary stocks.
"What we're concerned about it whether or not some of the other stocks that have gone straight up are starting to move sideways, either in a consolidation or in preparation for some distribution," Yamada said, referring to a bearish pattern that indicates a market top. "It's a little iffy here."
What would cause real concern is if the S&P trades below 1,750.
"If we break that level, that will be the first lower low that we would have seen all the way back to 2011, really," Yamada said.
Economists have already blamed soft numbers on harsh winter weather. Now CEOs will get their shot.
As the first-quarter earnings season gets started, 9 out of the 21 companies that have reported have mentioned the negative impact of their weather on earnings, according to FactSet. Notably, 6 of these 9 failed to beat earnings expectations.
While the current sample size is small, if this trend continues, then 214 S&P 500 companies will cite the negative impact of weather. This compares with the 195 S&P 500 companies that mentioned it in their fourth-quarter results.
The wide range of companies reporting weather disturbances could be an indication that weather has been a true drag on economic activity in 2014.
"Maybe in quarters past it's been more of an excuse, but this time around, it's probably a more legitimate reason why earnings and revenues have fallen short of expectations," said FactSet senior earnings analyst John Butters.
The problem is that when it comes to any given company, gauging just how big of an impact the weather has had can be nearly impossible for investors and financial analysts alike. As one analyst told CNBC.com, there's simply no way for an outsider to assess whether a company could be overstating the effect of a harsh winter on sales.
On General Mills' earnings call, CFO Don Mulligan said that "severe winter weather resulted in weak sales trends across the food industry and our categories." Later in the call, RBC analyst David Palmer challenged management to clarify the weather impact, given that "restaurants were suffering over those same two months, and so it seems logical that people were eating more at home."
In response, the company's chairman and CEO, Ken Powell, said that in addition to disrupting plant operations and logistics, harsh weather led to fewer trips to food retailers, restaurants and cafeterias. So consumers were "staying at home and probably drawing down a bit from their own pantries, which slowed down the industry."
The minutes from the Federal Reserve's March 18-19 meeting are set to be released on Wednesday, and they could be quite constructive for investors struggling to forecast the Fed's next move.
The minutes "always move the market," said Jeff Kilburg of KKM Financial. "Because at the end of the day, the Fed is still in complete control of the S&P 500."
While most expect the Fed to continue to shave $10 billion off of its monthly quantitative easing program at each meeting, the open question relates to the Fed's ultralow target on the federal funds rate. Many were surprised when, in her March 19 post-statement news conference, Fed Chair Janet Yellen said the first rise in the target for the key institutional lending rate could come six months after the Fed wraps up QE.
Some reassurance came on Monday, when Yellen said the Fed's "extraordinary commitment" to improving the labor market "is still needed and will be for some time, and I believe that this view is widely held by my fellow policymakers at the Fed."
What remains unclear is whether this was Yellen's way of walking back her now-infamous "six month" comment. But given that the minutes will provide a record of the thoughts presented at the very meeting that Yellen's press conference followed, the document could help investors figure out how seriously this timeline should be taken.
"Investors want to know how much 'thought' went into her comment about a possible rate rise in six months," David Seaburg, head of Cowen sales trading, told CNBC.com over Twitter. "The minutes will show."
"I'd like to see Yellen's comments on rates to see if she reinforces that six-month period after the taper ends," echoed trader Anthony Grisanti of GRZ Energy.
Pimco may run the world's biggest bond fund. But that doesn't mean the company is universally enthusiastic about the bond market.
"Equities probably outperform bonds this year," Pimco market strategist and portfolio manager Tony Crescenzi said on Thursday's episode of "Futures Now." "Pimco would be fully invested in the S&P 500 this year."
"This may sound a bit different to hear from Pimco," Crescenzi conceded.
Yet Pimco's prediction about economic growth really leaves it with no choice but to prefer equities.
In the past, "we've focused on the idea of a 'new normal,' and we've been projecting growth of about 2 percent for a long time, and that's been where it's been," Crescenzi said. But now "we expect economic growth of between 2.5 percent and 3 percent in the United States this year. For Pimco, that's pretty high."
Of course, the "new normal" is the theory famously promulgated by Mohamed El-Erian, the recently departed former CEO and co-CIO of Pimco. In 2009, El-Erian presciently predicted that growth would remain unusually slow in the post-financial crisis period.
In a January appearance on CNBC, El-Erian said the "new normal" would soon end, and Crescenzi agrees that it's about time for that sluggish period to fade into the rearview mirror.
"PIMCO is projecting the old normal to return this year!" Crescenzi wrote enthusiastically in his notes to CNBC.
Many traders look to the copper futures market to provide clues about where stocks are headed. But as copper spiked on Wednesday after an earthquake struck off the coast of Chile, Wall Street was once again reminded that moves in commodities markets may not be quite as predictive of broader economic trends as one would hope.
On Tuesday night, an 8.2-magnitude earthquake hit the seabed off of the northern coast of Chile, resulting in six deaths and the evacuation of nearly a million people.
The news also spiked copper prices, as traders became concerned about supply given that Chile is the world's No. 1 producer of copper. But after hitting a three-week high in early Wednesday trading, the metal moderated as copper producers said they were not impacted by the quake.
Copper futures are closely watched by many, given the widespread theory that "Dr. Copper" provides a "check-up" on the health of the global economy. Copper indeed has a wide multitude of industrial functions, making copper usage a rough gauge of worldwide industrial demand. And copper and the S&P frequently move in the same direction.
However, over the last 12 months, stocks have soared and copper has tanked. This led many to warn that the action in copper was presenting a warning sign for stocks. But as copper's move off of the earthquake indicates, commodity prices quite often march to the beat of their own respective drums.
"For any sort of commodity, the end-all, be-all is that it's supply-and-demand-driven," said Brian Stutland, the CIO of Equity Armor Investments. "And supernatural events and surprises happen in the world that affect the supply-and-demand economics."
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