Gold Will Rise on “Fear and Love” Trades: Frank Holmes
By Matt Nesto | Breakout – 12 hours agohttp://finance.yahoo.com/blogs/breakout/gold-rise-fear-love-trades-frank-holmes-141353513.html
If Captain Stubing was the intrepid leader of "The Love Boat," then Frank Holmes is the passionate purveyor of "The Love Trade." The CEO and CIO of U.S. Global Investors says it's half the reason why gold will continue to rise.
"Fifty percent of the world's population is from countries that have GDP's growing 8-9% and they believe in gold for gift-giving," Holmes says. And when you combine that demand driver with what he calls the more publicized "fear trade" that has stoked the metal's safe haven status, the gold story -- and its price -- will remain robust for many years to come.
How robust?
"Over any 12-month period, gold can go up or down 15%," but he cautions that "any time gold goes up 30% in a year, there's a 98% chance of a correction." Since we recently (last fall) went through that turmoil, Holmes says gold could easily add 15% from here in the next year and rise to $1,750 an ounce.
Other catalysts for an extended rally in gold include increased central bank buying in Europe as part of a broader portfolio rebalancing that saw its sovereign debt holdings rise at just the wrong time, as well as something as arcane as an accounting change. He says when the Basel III accord takes effect this fall, it will allow banks to carry gold on the books at par rather than a discount. It's all part of what he refers to as a "matrix" or "nonlinear" mix of circumstances that point higher.
Likewise for China and copper. If recent reports of "ghost cities," slowing growth and rising inflation in China have shaken your confidence in the world's favorite growth play, then Holmes says you need to get on board the Chinese rail story. "People are missing the huge underground movement," he says, while pointing to a Shanghai building boom that he argues "has built more subways in 10 years than New York City has in a 100 years."
Push back a little on the distinct threat of some cooling by the world's top commodity consumer, and you're likely to get run over by a 240 mph high-speed train and infrastructure spending plans that have at least another decade to go -- and thus support the price of copper, steel and coal. Push back again on the dearth of private investment versus continued public spending and you're likely to trigger a statistical geyser of money supply analysis and infrastructure commitment in the emerging markets.
Have a look at the clip and feel free to applaud or argue otherwise in the comment section below, or email us at breakoutcrew@yahoo.com.
Rock Solid Truth
Supply side economists just don't get it. They are in power during a boom up....only. Once the boom heads down ......the demand side economists gain power.
Right niw we are in deflation and depresion.....so until purchasing power of the masses is increased deflation will continue to rule.
as an investor yes there is upside boom up growth in certain parts of the world......but none of it by internal demand....all by stimulus and credit and central bank expansion policies......but there has to be a self sustaining purchasing power to back it up......nowhere in thsi post did I read anything about how much demand is being created......only how much supply is being created.
Build it and they will come.....only applies when THEY have money.
Investors and speculators will make a killing......but Brazil and China have to create internal self sustaining purchasing power.....period or the entire glacc haous comes down.
Roubini was just there....there is noone on the trains. Others have reported about it They have the infrastruture for billions of people making $50,000 (US) slaries.
But noone has shown us the plan for putting those salaries into action.......because the entire world has depended on US purchasing for this last expansion. Our boomlet is saving now. Ourchgasing is over. Housing is over...........globalization needs a new purchaser of last resort....
Yes there is great trade between and among the emerging markets......but that really can't take off until there is a new reserve currency. We are not going back to gold.....
Therefore, in the current environment...the Fed most definately has control of the global flow through currency rates due to our reserve status.
China can't go cold turkey....they will have to go through a long rehab to get off the heroine of the US "coin"sumer.
Oil and food are the new gold....there is just too much demand.....and you have to change the gold into something to get food and to get oil and gas......so it is just an investor plaything......it just doesn't have the value that it used to.
Now a farm in Argentina.....now we are talking about something of value.
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