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Peter Schiff: The market's 'pipe dream' is ending

As stocks attempt to come back from a historic market selloff, Euro Pacific Capital CEO Peter Schiff said any gains, including Tuesday's bounce, are "notoriously suspect."

Stocks tumbled into the close on Tuesday, marking the sixth-straight day of losses for major U.S. indexes and erasing all gains from the day's brief rally.

Schiff has been vocal about his bearish take on the U.S. stock market, and his belief that another round of quantitative easing is coming. Speculators on Wall Street have called a raise in interest rates anywhere between September and next March.

But Schiff isn't wavering on his stance that a rate hike at this time could send the U.S. economy spiraling into a recession, especially given the past week's market plunge.

Read More Schiff: America is on a 'race to the bottom'

"For awhile, people thought that the stock market can handle higher interest rates. That was just a pipe dream. They can't," Schiff said Tuesday on CNBC's "Futures Now." "That's the only thing propping up the market."

The Dow Jones industrial average and the S&P 500 ended Tuesday more than 1 percent lower, extending losses for the past week to almost 11 percent.

According to Schiff, the prospect of rising interest rates is the main driver behind the selloff.

"People want to blame it on China, but it's not about China. The U.S. market was falling before the Chinese slight devaluation," Schiff said.

"There has been a lot of technical damage done, and if the Fed isn't going to come out and come clean about the fact that it's not raising rates, I think this correction will turn into a bear market," he added.

Schiff is known for his bold predictions, including his call on the 2007 housing crisis. He also previously said that gold will go to $5,000.That has yet to happen, but Schiff is sticking to his bullish call.

Read More Trader slams Schiff: You make 'outlandish predictions'

Gold has fallen more than 10 percent in one year to $1,140. However, Schiff said Tuesday that the precious metal is ready to rally.

"There are a lot of people who are short gold who are going to be in for a world of hurt when this price starts to move back up," he said. "We get back above $1,200 and it's going to be some real pain for those shorts."

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