Breakout

Where gold is going and how to play it: Frank Holmes

Breakout

Don’t call it a comeback but since reaching lows last week gold has been on the rebound.

Weak jobs numbers, rising tensions between Russia and Ukraine, the European Central Bank indicating it may not recur to more stimulus, and the Iraqi Central Bank’s recent gold grab are all contributors to the rising price of the yellow metal which was up 1% Tuesday morning.

Breakout’s Jeff Macke sat down with Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors to discuss where gold is going and how to play it.

Physical demand for gold is immense in Asia, says Holmes. “Gold is leaving North America going to Switzerland, being melted down into smaller wafers and being sold to China, at a rate of 200 tons so far this year.”

China’s affinity for gold feeds what Holmes calls the “love trade,” raising prices.

Meanwhile, the “fear trade,” is coming into play with concern over the Federal Reserve’s policies and low jobs numbers.

“Last year inflation fell from 1.7% down to 1.2% and now it’s pushing back up against 1.7%,” says Holmes.

Holmes says to look out for the FOMC minutes tomorrow, as they will certainly have an impact on the fear trade and in the meantime, “have a 10% weighting in gold, 5% in gold coins or jewelry and then 5% in gold equities.” 

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