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Buy Gold While Supplies Last, Says Fund Manager

March 10, 2010 – Comments (2)

Definitely watch the accompanying interview with Frank Holmes. Continue watching all the way to the end where Holmes discuses Gold behavior in relation to negative real interest rates.

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Buy Gold While Supplies Last, Says Fund Manager
Posted Mar 09, 2010 09:35am EST by Peter Gorenstein

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[excerpt]

Frank Holmes, CEO and CIO of U.S. Global Investors, a long time gold bull sees no reason for this trend to end.

He tells Aaron in the accompanying clip, "there are many compelling factors both from a supply side and then from the demand side that looks like gold will trade higher."

Holmes' reasons to bullish on gold:

-- Massive federal deficits and low interest rates in the United States and elsewhere will raise inflation risks and keep downward pressure on currencies.

-- Rising incomes in Asia, where affinity for gold runs deep, will have a sizable positive impact on demand; Holmes tells Aaron that China is now the largest producer of gold in the world but that won't drive down prices because the government is "using it as a reserve currency for themselves." However, bulls should note China's chief for exchange official said this morning they would limit their purchases.

-- Peak Gold? Gold production from mines is not adequate to meet demand. Production is dropping around the world. Holmes notes worldwide production ell 10% in 2008 and is especially dramatic in South Africa - the world's largest producer.

Holmes, however, does have a few words of caution for those looking to get rich on gold. He only recommends a 10% allocation in gold that would be divided evenly between bullion and stocks. Among his favorite gold stocks is Randgold Resources Limited, a stock he owns and has recommended here in the past for its strong management.

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