If Captain Stubing was the intrepid leader of "The Love Boat," then Frank Holmes is the passionate purveyor of "The Love Trade." The CEO and CIO of U.S. Global Investors says it's half the reason why gold will continue to rise.
"Fifty percent of the world's population is from countries that have GDP's growing 8-9% and they believe in gold for gift-giving," Holmes says. And when you combine that demand driver with what he calls the more publicized "fear trade" that has stoked the metal's safe haven status, the gold story -- and its price -- will remain robust for many years to come.
"Over any 12-month period, gold can go up or down 15%," but he cautions that "any time gold goes up 30% in a year, there's a 98% chance of a correction." Since we recently (last fall) went through that turmoil, Holmes says gold could easily add 15% from here in the next year and rise to $1,750 an ounce.
Other catalysts for an extended rally in gold include increased central bank buying in Europe as part of a broader portfolio rebalancing that saw its sovereign debt holdings rise at just the wrong time, as well as something as arcane as an accounting change. He says when the Basel III accord takes effect this fall, it will allow banks to carry gold on the books at par rather than a discount. It's all part of what he refers to as a "matrix" or "nonlinear" mix of circumstances that point higher.Read More »from Gold Will Rise on “Fear and Love” Trades: Frank Holmes