Frank Holmes, the CEO of U.S. Global Investors, discussed gold prices, a secular bull market, and real asset prices during his recent interview with Kitco News.
Holmes said that all the money being printed across the globe will drive real asset prices higher in the coming months and serve as a “big driver” for making money.
“I think what’s really important here is real assets are going to be a big driver for making money, and real assets that can have expanding and increasing dividends will attract the eyeballs and capital in the capital markets.”
He said gold producers will have a record amount of free cash flow this quarter. He also mentioned that anyone worried about the recent pullback in prices needs to take a long-term approach and not become shaken out by near-term price swings.
“Gold stocks, they’re going to have a record free cash flow this quarter. Record. And that’s very bullish, copper stocks same thing, so I think we’re in a very very sweet spot for both stocks and for overall commodity demand, and there’s so many negative people, I get it from gold, gold falls back $20 and everyone wants to jump off a bridge. It’s ridiculous.”
Gold Prices Could Still Slump
Holmes added that we are now in a secular bull market and that gold prices could slump even further and we’d still be in an uptrend. We’re seeing central banks entering the fray, which Holmes says creates a “new playing field.”
“We’re in a secular bull market in gold, the 50-day is above the 200-day, gold could easily fall below the 50-day down to the 200-day and still maintain the secular bull market, that’s what we’re in, and all this money printing, and all this fiscal policy to stimulate economic is extremely constructive for the economy and the Central Bank of Canada said they’re going to maintain vigorous, rigorous cheap money, you’re seeing central banks have talked about it, buying ETFs, buying stocks, it’s a new playing field.”
Even with gold prices in a bull market, the “smart money” is still underweight in their exposure to gold, with Holmes adding that institutions are notoriously late to the party.
“Look at Canada. Look at the pension funds and all those really brilliant institutions. The TSE (Toronto Stock Exchange) is like 8% gold stocks, their weighting is 1%. They’re so underweight. So when you see these secular moves like you had from 2001 to 2007, the institutions all of a sudden didn’t jump in until 2003 and 2004 into gold stocks.”
Gold Market In An Great Position?
Despite the pullback in prices, Holmes said the gold market is in a “perfect” position, and big investors like Warren Buffett taking a stake in a gold company just bring more attention to the sector.
“We’re in a nice, simple move here. It’s perfect, everyone is bearish, gold trades higher, gold stocks are catching the bids from investors like Warren Buffett, these are all game changers that don’t happen overnight. What Warren Buffett did is all of a sudden increase the audience of people looking at gold stocks, that’s very positive, and looking at the GLD.”