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Whatever the Fed does, gold will rally: Pro

Robert George Young | Photographer's Choice | Getty Images

All eyes are the Federal Reserve's policy announcement. But while it's expected to be one of the year's most important events for stocks and bonds, Peter Schiff believes he has already figured out the likely impact on gold. Because according the CEO of Euro Pacific Capital, whatever the Fed announces will end up being bullish for the precious metal.

Many expect the Fed to announce that they will begin to reduce, or taper, the pace of its massive bond buying program. According to the latest CNBC Fed Survey, market participants see the a taper of about $15 billion coming, and a plurality believes that it will be announced this month.

(Read more: Market expects $15 billion Fed taper soon: CNBC survey)

Peter Schiff believes that a smaller taper is coming. But he says that no matter what the Fed announces, gold will end up rising.

On CNBC's "Futures Now" on the eve of the Fed's expected announcement, Schiff outlined three scenarios, and went on to explain why each would end up being good for gold.

Scenario 1: No taper

"If it's no taper at all, I think gold will rally," Schiff said.

This makes a great deal of intuitive sense, as tapering concerns have certainly appeared to weigh on the gold market in the back half of the year. After all, Fed bond-buying has depressed interest rates, making noninterest-bearing assets like gold look more attractive. And because the Fed simply "prints" the money used to buy those bonds, some believe quantitative easing will end up creating inflation, which would be a boon for gold.

That said, Schiff does not see a Fed announcement of no tapering as a likely scenario.

(Read more: The best Fed taper scenario possible?)

Scenario 2: Small taper

"If the Fed does taper, I think they're going to do the absolutely minimum amount that they feel they can realistically get away with," Schiff said.

He believes that the Fed simply wants to taper for symbolic reasons.

"I don't think the Fed ever really wanted to taper," Schiff said. But "so many people are expecting a taper that it they don't taper, they might be afraid of the message that sends about how weak the U.S. economy truly is."

And in that scenario, where the Fed tapers down the $85 billion monthly program by less than the $15 billion the market expects, "gold will rally," Schiff said. After all, "gold's already discounting not only tapering, but also the end of the QE program, which isn't going to happen."

(Read more: Fed taper? Might as well be tightening, Wien says)

For Schiff, once the market realizes the Fed isn't really serious about ending their easing program, gold will go much higher.

Scenario 3: A big taper

Schiff admits that if the taper "is big, then gold might sell off." But he adds: "I don't know that it will stay down."

Why's that? Well, Schiff wrote to CNBC.com that "if the Fed tapers, within a few months it will likely reverse course, and increase its monthly QE about the $85 billion per month that it tapered from."

Schiff believes that the Fed will re-enter the bond market in order to save the economy. Once it increases the size of its QE program again "this will hurt the Fed's credibility, and call into question the viability of any stimulus-induced recovery," Schiff wrote. "This is very bullish for gold."

(Read more: Gold to fall to fresh lows on US recovery: Goldman)

In that way, Schiff says whether the Fed announces no tapering, a small amount of tapering, or a large taper, by the end of the year, "gold is going to be higher."

And not just a bit higher. Schiff added, for the sake of clarification: "I think it could be a lot higher, which is why I'm still buying it."


—By CNBC's Alex Rosenberg. Follow him on Twitter: @C NBCAlex.

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