Gold officially entered bear market territory on Friday, down 20% from the cycle high. Prices fell below $1,500 per ounce for the first time Since July 2011.
Frank Holmes at US Global investors told Business Insider that this was being driven by contagion from Cyprus. "There appears to be more substance to contagion from Cyprus than was thought."
He thinks that has compounded the seasonal effect on gold prices. "Gold prices typically fall between now and June" he said with regard to emerging market demand for the precious metal.
While analysts have been lowering their price targets for gold, Holmes sees a "high probability" of a 15 percent rally in the next 12 months.
Holmes said that whenever gold makes such big prices moves, he looks at historical price changes. A move of 2 standard deviation like we saw today, or more year-over-year, has only happened on 10 trading days or 0.4 percent of the time in the last 10 years.
"The math indicates that the metal will not stay at these lows. And in this negative real interest rate environment, we believe gold will return to more normal levels."
But they say past performance isn't a guarantee of future outcomes. To that he said he would be "more concerned if interest rates were above inflationary rates."
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