Frank Holmes Is Bullish on Gold: It’s Outperformed the S&P 500 (Video)
Last month, US Global Investors CEO Frank Holmes said he thinks gold may well hit $1,500 this year. He listed the specter of increasing inflation, a weakening dollar, and income growth in China and India as three reasons to be bullish on the yellow metal.
This week, Holmes appeared on CNBC’s Squawk Box and continued to make a case for buying gold.
As Holmes pointed out, gold is actually outperforming the S&P 500.
What’s really interesting is since 2000, the price of bullion has outperformed the S&P 2-to-1, 200% more performance on your money. And last year, it was up 13%, double-digits again. And year-to-date, it’s outperforming the S&P 500.”
Holmes has been bullish on gold for a while. He seems to be one of the few people out in the mainstream that understands what’s going on. During the Squawk Box interview, he said the massive money-printing around the world has made gold an important part of an investment portfolio.
He has also been one of the few people expressing real concern over spiraling levels of debt. In February, Holmes called American debt a “head-spinning sum.”
For nearly a decade now, the Fed has kept interest rates at historically low levels, flooding the economy with cheap money … I see this growing debt bomb as just the latest sign that investors might want to consider adding to their gold exposure. The yellow metal has been sought as a safe haven during times of economic and systemic market risk.”
During his Squawk Box interview, Holmes also noted tightening gold supply.
On gold supply from mines – it’s peaking. So, we’re going to see a shrinkage in supply.”
The numbers bear him out. The recently released Metals Focus Gold Focus 2018 report projects mine production to remain “broadly flat,” coming in at around 3,295 tons. This continues a trend we’ve been seeing over the last several years. Gold supply plateaued last year. Global mine output rose just a paltry 5.7 tons in 2017, according to data compiled by the World Gold Council. That represented the smallest increase since 2008. Mine production in 2016 was also roughly equal to 2015.
Plateauing mine output has led to speculation that we could be nearing or at “peak gold.” This is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s. During the Denver Gold Forum last September, the World Gold Council chairman said he thinks the world may have already reached that point.
Holmes hit on another trend he sees as a positive for gold during the CNBC interview – rising tariffs.
I’m a big believer that government policies are a precursor to change. So we track whatever the money supply’s growth rates are and real interest rates. Well, tariffs are always inflationary … So, now you’re going to get a tariff war going on. Higher inflation. Higher gold prices.”
Holmes went on to say even if the trade war doesn’t play out, he still sees higher inflation on the horizon. In fact, he believes inflation is understated. He said that if we went back to factors that were used to calculate CPI back in the ’90s, inflation would probably be around 8 or 9% right now.
I launched the airlines jet ETF. Why? Because I saw the cost of my flights went up 300%. My optionality of flight options dropped by 20%. That’s inflationary!”
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