Frank Holmes #01 - When does Gold hit $10,000?

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A conversation with Frank Holmes, CEO of US Global Investors


US Global Investors is a boutique investment management company. It specialises in actively managed equity and bond strategies, and has a longstanding history of expertise in gold and precious metals, natural resources and emerging markets.

Holmes started his career by graduating from the University of Western Ontario with a bachelor’s degree in economics, then working for some larger firms. He decided to go out on his own with a small group of "highly successful entrepreneurs," with an investment firm in the world capital of mining: Toronto (60% of global mining finance). He purchased a controlling interest in US Global Investors in 1989 and became CEO 1999. He was the 2006 Mining Journal mining fund manager of the year; he clearly knows a thing or two about investing and general market dynamics and is a gold-focussed investment mind.

Today, he regularly goes on major news broadcasters like CNBC, Bloomberg, BNN and Fox Business, and he has also been profiled by the FT.

The Red Dinosaur behind Holmes, designed by a famous Chinese sculpture artist, is a social/political statement that China is making everything for the world, and the T-Rex represents that China is "eating the world." Holmes believes the Chinese are monopolising all manner of commodities, production and industry. Whilst the dollar is weak right now, Holmes thinks America will get through this because of its unique DNA of adaptability, even though all of the G20's finance ministers and their central bankers are functioning like a currency-defacing cartel. He was one of the first fund managers to make use of digitisation, scientific processes and a systematic approach towards investment decisions rather than the historical norm of reputation and bluster. Investors could learn a thing or two from this. Homes thinks a vaccine for COVID-19 would be a game-changer for market sentiment, but he doesn't think it would change the current bull run gold is on. If Biden wins, taxes will be raised and "radical left politicians" will put Biden under immense pressure. All in all, it will be bad for the stock market. We will have to "see what happens." A lot of people won't admit they are voting for Trump, hence the polling numbers VS Clinton last time out.

Since the gold peak in 1980, the definitions of inflation and Consumer Price Index (CPI) have changed 3 times says Holmes. If one was to use the CPI number in 1980 today, gold should be US$7,000/oz. Inflation has gone up, rendering the old indicator meaningless. The algorithm for the old CPI number is no longer relevant. Driven by maths and quantum, Holmes looks at the centre deviation moves over a rolling 12-month period, going back over a decade, and he looks at 60-days going back 5-years. We are up "two standard deviations over 60-days," and we are up "one deviation over a rolling 12-months." Mathematically, this means there is an 80% probability that we will have a 10% correction over the next 60-days. It is likely to trackback to c. US$1,800/oz, but Holmes thinks the long trend will continue.

What did you make of Frank Holmes and US Global Investors? If we get him on the show again, what would you like us to ask him about next time? Comment below and we will respond.

00:00 - Introduction
3:21 - Red Dinosaur: A Backstory
4:12 - The Route to Investing: Frank's Background
11:50 - The Beginning of U.S. Global Investors: Goals and Progress
20:04 - Understanding History: The Tools for Better Investing
27:44 - The Geopolitical Situation: What Could've Been Different?
36:17 - Sentiment and Millennials: Will Gold Remain a Safe Haven?
48:00 - Price of Gold: Are Lessons from 1980 & 2011 Still Relevant?
52:08 - A Realistic Approach: Headlines Screaming "$10.000 Gold!"
55:13 - U.S. Election: Trump's Legacy and Potential Future
1:00:53 - Focus on Banning TikTok: Conversations Behind the Scenes

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