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Gold Safer Bet Than Treasuries For First Time in 35 Years; Price Should Easily hit $7,000

The Daniela Cambone Show May 17, 2024

“Gold should be worth more than $7,000 based on monetary base increases over the past four years,” says Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors. He tells Daniela Cambone that the yellow metal will continue to reach all-time highs as we enter an election year globally, with government debts rising and central banks hoarding gold. Holmes also remains optimistic about copper and platinum. “As the world goes green, it needs copper and platinum. We’re going to see supply shocks in these metals.” Watch the full conversation to learn more about Holmes’s insights.

CHAPTERS:

00:00 Gold and US dollar
2:51 Gold and China
6:10 Gold less volatile than treasuries
7:11 Inflation
9:34 Platinum deficit
11:57 Unpaid crypto taxes
13:58 JPMorgan bitcoin ETFs
17:00 Gold buying
18:56 Bitcoin versus gold
20:50 Meme stocks

TRANSCRIPT FROM VIDEO:
00:00
Look, gold’s making all-time highs, so there’s clearly other drivers to the gold market. People are starting to move into these alternative assets like gold, like silver. Central banks are recognizing that. The central bank is buying gold by the tons right now. We better own more gold, and in particular, we ought to be owning some dollars. How do I choose? Where should I park my cash? I think we’re going to continue to see this sort of chipping away that gold will continue to make all-time highs.

00:29
Why are people still on the sidelines here?

00:38
Hey folks, Daniela here from ITM Trading. Just a quick note before we get to today’s interview. I know we cover a lot of ground and go into some pretty deep content here. So if you ever have any questions surrounding interviews or need help and want more information regarding building a strategy based on owning gold and silver, then I highly encourage you.

01:04
to book a free session with one of my incredible colleagues over at ITM Trading. I repeat, it’s a free session. It’s extremely informative, eye-opening, and I truly believe you will enjoy it. So you can do so by booking a calendarly appointment. There’s a link below in the description. It’s easy to do. It’s quick. And like I said, highly encourage everyone to do it. Let’s get to today’s interview now. Welcome back to the Daniela Cambone show here on ITM Trading.

01:33
Well, historically, gold and the US dollar had an inverse relationship, but we’re seeing this trend break down more and more. Here to talk about this and more is Frank Holmes. He is the CEO of US Global Investors, and he’s also the chairman of Hive Digital. Frank, always good to be with you. Welcome to the show. And it’s great to be with you, Daniella. Yeah.

02:00
How are you feeling during this gold market? Look, you’ve been in it for a long time. First and foremost, how are you feeling? I’m feeling very well. I think that gold is greatly substantially understated in people’s overall portfolios. I think that gold is one of those incredible assets that this century’s all performed the S&P 500 by over 50%. So having the weighting in it is just wise, included, and to be rebalancing each year.

02:30
So I’m very bullish. It’s great to see this recent flurry of new highs came within like a 30 minute price discovery of various commodities, but all time high. So I think that this is a very positive constructive sign for alternative assets like gold and silver coins. Absolutely. And look, you do a lot of education, Frank, right? That’s really at the root.

02:57
of what you love doing. I mean, I’ve known you for so long and you really enjoy educating people, especially on the topic of gold. And you really took a deep dive and looked at the relationship between gold and the US dollar, which historically have always had an inverse relationship. But now you say, look, gold’s making all time highs, dollar’s still incredibly strong. So there’s clearly other drivers to the gold market. We know China, they’re buying gold, the central bank.

03:26
is buying gold by the tons right now. Talk to us more about what you’re seeing here about the breakdown between tracking gold and the US dollar. Well, first this century, it started off with this big push for China coming to the WTO. And in that push was an additional G20 finance ministers and central bankers pushing MMT, modern monetary theory.

03:54
which basically said that governments can print as much money and then just, they can tax it away at any time they want. And this sort of uncontrolled spending and borrowing money is actually much greater outside of America on a relative basis. When you look at debt as a percentage of GDP for China relative to America, you look at Japan, uh, you look at many of the other sort of early emerging markets, uh, gold is no doubt, um,

04:23
is been understated relative to these other countries, the amount of debt they’re putting on. And I think it’s sort of now coming to this year in particular because it’s an election year. And this is a very interesting election year because it is 70% of the world’s population. It’s unprecedented. It’s a huge force that 5 billion people are going to the election polls this year.

04:49
and these other governments are all printing so much more money. So therefore, you’re seeing money road to for safety. And that safety is gold. And it is the dollar. So on a relative basis, the dollar is actually also a strong currency go to, but not as profound as gold. And during this century, we’ve had something that’s really escalated is the BRICS countries and the BRICS countries since then, the past four years.

05:19
have really made a push against this administration in the US to be able to have another alternative to the swift currency settlement. And so far, it’s not really hurt the dollar. It’s hurt the euro if you look at overall trade. What people don’t realize is that China and Russia are closed economies, that your credit cards do not work there. It’s not fungible. So you really can’t have a global currency that’s not fungible.

05:48
like the dollar is. So with that, people are starting to move into these alternative assets like gold, like silver. Central banks are recognizing that and the unprecedented election cycle and all the money printing says, hey, we better own more gold and in particular, we ought to own some dollars. Frank, it’s really interesting that you bring that up. And the other chart that I find quite interesting is that for the first time,

06:17
In 45 years, gold is less volatile than treasuries. We all know treasuries has always been the number one safe play, but now gold outpacing treasuries. Does that surprise you? Yes, it does. And it’s also to share with you that gold is less volatile than the S&P 500. And we’ve seen that evolve over the past eight years, each year becoming less and less volatile and more stable. And I think that

06:45
Great investors like Ray Dalio has influenced this being the largest hedge fund and having what he’s called the parity trade He will have 10% up to 25% and gold is of asset class This is created a legitimizing sort of concept for many institutions to own gold as a safe harbor So I think that’s another rational reason for it You another another interesting another interesting point

07:14
Bloomberg Markets Live Pulse Survey ran a survey that found the biggest US tech stocks, so like Nvidia, are not only a bet on innovation, but also a possible hedge against inflation. Of course, gold was still number one for the majority of the respondents. 46% said they’d still choose gold, but nearly a third, 30%…

07:43
chose the tech behemoths came in second place. I found that surprising right after gold. Yeah. Your thoughts Frank. So did I because the volatility is so much greater. Right. But I would think that that’s really driven by a new group of CFA’s that are not baby boomers, but millennials and generations X by instead that are so focused on everything being

08:12
technology. And I’m also surprised that the ecosystem of Bitcoin hasn’t shown up to the degree because it’s quite huge. Even though it’s way lost. We’ll fire in the the respondents. But I think they got only 5 percent. We’ll fire in that chart for you. And I share with you because I go to these conferences and I go to those gold conferences and.

08:39
And I go to the Bitcoin conferences are and I go to other tech investment conferences and none of them are big like the cryptos and and so I find that really fascinating but I would share with you that next week I’m going to Michael Dell’s big event in Vegas and a couple of weeks ago. I was with NVIDIA’s in Silicon Valley San Jose and that was like Warren Buffett

09:05
having 15,000 people, then they go into a convention hall, all the companies using their technology and it’s a big love fest. But it’s really quite fascinating to see that this idea of technology stocks, they do pack the room. They do pack these conventions where a lot of investors besides technologists show up. Right. I just…

09:33
The fact that folks are parking their money there as a safe haven play just puzzles me. But no, it’s all data. It’s just the performance numbers have been so. I’m surprised they haven’t done monster drink because monster drinks, the second best performing stock in the past 20 years outside of Nvidia. I want to also get your thoughts and I’m happy you brought up crypto because I always say

10:02
He’s in the gold world, but he’s also very much involved in the crypto world. And, you know, he’s proof that you can be in both and live a very happy life. But two thoughts before we move on from precious metals here. One, let’s talk about the strength in the platinum market. The pushing it back above a thousand an ounce. Analysts warned that growing supply and solid demand will continue to increase the precious metals growing deficit. This is according to a report that just came out from the World Platinum Investment Council.

10:31
They said the platinum market recorded a deficit of 369,000 ounces. At the same time, the council has revised the annual expected deficit to 476,000 ounces, which follows an 85,000 deficit in 2023. So major deficits coming up here in the platinum market. Are you uber bullish platinum, the PGMs, your thoughts? I am. And I think of 30 years of sort of incremental…

11:00
suffocation by regulations, and we can see this in Canada for mining sector, that the Canadian pensions invest abroad more than they do in mining in their own country. But it’s also happened in South Africa, and in South Africa is the same sort of phenomena in the past 30 years, that it’s much more difficult to bring a mine on stream. They have tremendous energy resource issues, but the world needs platinum.

11:28
And as the world goes green and eats copper and it needs platinum, and I think that we’re going to see these sort of supply shocks where the world continues to have babies, there continues to be governed policies for green and clean energy. And this is only gonna put big price inflation into particular metals like platinum and copper. On the topic of regulation, Frank.

11:52
I thought of you because according to our report from the National Post, the Canadian revenue agency is currently looking to collect 54 million in unpaid crypto trading taxes. That’s about 39.5 million American. But according to one lawyer, this figure is just a drop in a bucket and suspected unpaid taxes tied to cryptocurrency activities in the fiscal year. So could there be a major crackdown in Canada, in countries globally?

12:22
Regarding unpaid taxes when it comes to cryptos. What are you hearing and seeing? I Think that it’s ongoing in the battle between what’s a centralized asset a decentralized asset I noticed that in that for gold There was always sort of regulatory media and negativity towards gold until the GLD came out in 2003 for area and and then all of a sudden it developed a more of a legitimized asset base

12:50
from a regulatory point of view. And I think now that Bitcoin has come out, we’ll be to something similar, but we have to recognize that it is a decentralized asset and governments are tax hungry because there have been so much money printing, the monetary base outside the G7 countries is even greater. So you are seeing policies coming after crypto. There’s also going to be the concern on Amazon going after the space.

13:20
because they want the energy for their data centers. Bitcoin is really an intangible piece of cost of electricity. You need electricity to make an ounce of gold, and you need electricity to make a Bitcoin. And now AI comes along, and they need electricity also. So there’s a big rush, a huge infrastructure, global build-up for data centers.

13:47
Also, another note on Bitcoin, Frank, I’m sure you saw the news, JP Morgan and Wells Fargo, the latest major global banks to disclose exposure to Bitcoin via some sort of spot Bitcoin ETF. The two lenders filed their 13-up disclosures on May 10th, revealing a modest investment in the Bitcoin ETFs. We’ll throw in the numbers so everyone can see here. So what does this tell you?

14:16
more and more banks looking and parking some cash in Bitcoin ETFs here.

14:23
Well, it’s a big debate because it came up with a policy last week was to prevent any lending against your ETFs and Bitcoin, but you could borrow money against your gold ETF. So I don’t think the regulatory attack is over. It’s just morphed and changed of buying it. And I think if the concept is coming back as a decentralized asset, and what it’s so big.

14:52
Right now, you have something like 195 countries in the world. So let’s say 195 central banks, but you have plus 18000 active nodes all over the world validating this ecosystem. And so I think that that is the big part that makes it so resilient to the attacks from China, the attacks from various jurisdictions on the ecosystem.

15:18
And now it’s showing up to be so significant in balancing the grid, which I’ve been doing now for five years in Sweden. Whenever the energy I can tool down, go up, I basically absorb green only energy, but it’s surplus energy. And that is very different than AI, because it needs 99.9 points like gold, pure gold, they need energy up all the time. So I think that there’s some big differences.

15:47
But I think the concept, Daniella, on the money printing of generations going to gold, central banks is traditional. I think that the younger investor is going to Bitcoin because they want to have something that’s decentralized, that characterizes a private property, a portable private property. And I think that that concept will grow. But Frank, doesn’t the fact that there are now ETFs…

16:18
financialize Bitcoin and that was it kind of goes against why it was created. Like it was created people want to be outside the system. Well, now it’s part of the system. Well, it makes it easier for the government to come in and grab a bunch of gold assets or Bitcoin assets. If there’s a huge concentration of assets listed on the New York Stock Exchange, it makes it much more centralized for governments and there are many

16:47
thought leaders in the gold space that also say that in addition to the Bitcoin, who both read from the Old Testament of having these portable assets. Right. Frank, I just want to wrap by getting back to your initial opening statement of how you think it’s so imperative that people have exposure to gold. And we talk about how central banks are clearly aware of this notion, buying it at record amounts, but we all see it.

17:17
the retail investor is not fully there, right? Are you surprised, I mean, especially with the rally we’ve had in gold, why are people still on the sidelines here? I think it’s just ongoing. General media still has a negative storytelling regarding gold as an asset class, and not media like yourself. That’s why sophisticated, actually more educated, sophisticated people go to you.

17:46
and watch your show. And I know from our space, we did demographic studies and we found that a high concentration of gold investors actually had graduate degrees, that they understood geopolitics much more than the general retail. Oh yes. The general retail is gonna buy monster drink because that’s what they stop at them and get the gas and they buy a monster drink that can’t be caffeinated. That’s all, there are two different worlds.

18:15
that I sort of relate to in that global investment theme. But I think that we’re going to see gold, as you know, deeply understated. It should be at more than $7,000 based on monetary base increases in the past four years. So I think we’re going to continue to see this sort of chipping away that gold continue to make HTH, all time highs, as the crypto ecosystem likes to call it. They love these little acronyms like

18:45
ATH and hold on for dear life. Buy the dip, don’t be afraid. What do you tell people, Frank, who maybe don’t have exposure to Bitcoin or gold, and they ask you, because I know you get asked all the time, which one do I choose? How do I choose? Where should I park my cash? Well, I always tell people to buy 24 karat gold jewelry is always the simplest idea.

19:13
for gift giving and silver coins. I give my employees every Christmas a silver coin. I grew them out as presents. I have thousands of these silver coins. I bought one silver under $5. I still have been generous in giving out for gift giving. So I think that that’s the best gift to go and buy. I think at $29, you have to pay $32 or $33. It’s cheap on that relative basis. And it’s a way for people to appreciate this sort of portable wealth.

19:43
But as an investment, right? Just giving aside, as an investment, how people make that choice if they had to make a choice? I think it’s a bit of a group thinking, but I have my own products. I’m known for the world of gold. I have my gold equity ETF, which is quant driven on New York Stock Exchange, and it’s done spectacular well versus the other gold equity ETFs. I think that when gold has a sustainable run,

20:12
that you’re going to see that the gold royalty companies and gold stocks that have free cash flow will significantly start to outperform because it’s going to be the generalist quant person that’s going to that they’re agnostic towards gold they’re just going to go and looking for with this growth momentum on a per share basis and there’s free cash flow and those stocks have outperformed overall markets. There you go.

20:43
Last thought, last thought, you saw GameStop soaring 60% as roaring kitty who drove meme crazy, the meme craze, sorry, resurfacing. He drove the GameStop mania of 2021. He posted online for the first time in roughly three years trading in GameStop as we’re speaking has halted multiple times due to volatility. I guess my question is, is all that GameStop revival going to come back and haunt us? Do you think, Frank?

21:12
The meme craze is a back. Well, I think that there’s this a battle on free speech that’s taking place. The whole knock on meme, which is a new form of hieroglyphics, you think of communication with a younger demographics and how all of a sudden it morphed into stocks, there’s been a big push by regulatory arms to censor memes, be political memes, be investment memes.

21:41
And so I think it’s probably healthy that they come out because it’s a it’s a form of free speech, if you believe in in that sort of concept. But they did. We do know in other countries in particular where the regulatory arm, like in England, the BBC going after Google, going after various social media platforms to try to stop any mean, especially when it was political. Then all of a sudden became financial.

22:11
I know from the investment world that there was new rules that came out under Gensler regarding influencers, about retweeting anything. This is a big push against influencers in that meme world. I do believe that I’ve said this and if they had more memes by young people investing in gold stocks and silver stocks, they would probably be much more informed that the younger investor regarding gold stocks.

22:39
because that’s how they communicate. Yeah. Really good, interesting insights and thoughts. Frank, so good to see you and catch up with you. It’s great to be with you. We’ll see you soon, Frank. And thank you all for watching. Be sure to stay tuned to the Daniela Cambone show and sign up at danielacambone.com so you can stay on top of it all. That’s it for me. Thanks for watching.

SOURCES:

https://twitter.com/bulldogholmes

https://www.usfunds.com/

https://www.newyorker.com/books/under-review/a-hedge-fund-founders-obsessive-storytelling

https://nationalpost.com/news/canada/cra-clawing-back-54m-in-unpaid-crypto-taxes

https://cryptoslate.com/jp-morgan-wells-fargo-latest-major-banks-to-disclose-bitcoin-etf-exposure/#:~:text=JP%20Morgan%20and%20Wells%20Fargo,investment%20in%20the%20Bitcoin%20ETFs.

https://www.google.com/finance/quote/JETS:NYSEARCA?sa=X&ved=2ahUKEwin4ZevjJOGAxWUJUQIHfZ0C08Q3ecFegQIFxAX&window=YTD

Sources & References In This Article

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