The gold price is down from levels seen earlier this year, but Frank Holmes, CEO and chief investment officer at US Global Investors (NASDAQ:GROW), thinks the yellow metal is poised to move up.
“When you look at a 20 year chart, gold is ready to break out. When you look at the historical pattern for 23 years, gold has outperformed the S&P 500 (INDEXSP:.INX) two to one,” he told the Investing News Network in an interview.
Holmes believes it’s a fall in interest rates that will trigger this upward momentum for gold.
“I think when rates start coming off again and we’re back to negative rates — each time we’ve had this, the government has had to print more and more money. The monetary model is not just to grow linearly — it’s the exponential growth of paper money,” he explained during the conversation. “So they’ll have to drop rates faster and more furious, they’ll have to print money much more regularly. And in a New York second gold will be US$2,300, US$2,500, US$3,000. And then all of a sudden it will be a wakeup, and those that bought on the dip and HODL’d their position will do well.”
Looking over to gold stocks, Holmes said speculative interest in juniors is likely to ignite once the precious metal gets to the US$2,300 mark. He recommended looking at explorers that have the highest reserves per share.
When it comes to larger gold companies, he said US Global’s GO GOLD and Precious Metal Miners ETF (ARCA:GOAU) focuses on companies with strong free cashflow and high returns on invested capital.
“I think (investors have) to be very conscientious in the gold stock space of boards of directors and look for management that is protective of cashflow and has return on invested capital discipline rather than just growing for the sake of growth,” he said.
Watch the interview above for more from Holmes on silver, as well as energy transition commodities.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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