Love And Fear Can Be Powerful Forces In The Gold Market, Says Frank Holmes

Photo: Love And Fear Can Be Powerful Forces In The Gold Market, Says Frank Holmes

According to some, love can conquer all. For the financial community, losing sight of gold's primary uses world market comes with great risk. In many western countries, high purity gold jewelry isn't an aspirational purchase. But in other areas of the world, the gold demand has a cyclical profile that revolves around festivals like Ramadan and Diwali.

When Frank Holmes talks about the “Love Trade” in gold, he isn't describing the love of a goldbug or stacker for the yellow metal, he is talking about the billions of people around the world who buy gold to demonstrate their love, or celebrate their faith!

India is home to well over a billion people, and their love for gold precedes the modern age. The festival of Diwali is one of the most popular times of the year to give gold, and with the rising purchasing power in India, paying attention to the gold buying habits there will only become more important as time goes on. China is a huge buyer of gold for holidays like Lunar New Year, so keeping this in mind when looking at price patterns is a smart idea.

Fear Of Loss

While the East is buying gold for the sake of love, the West may be at the point where purchasing gold is driven by fear. The real interest rate available to capital is near negative at the moment, and it has been negative for during the past year. This means that even though investors are paid some interest for holding government debt, the inflation will wipe that gain right out in real terms.

It is often noted that because physical gold pays no interest or dividend, it is at a major disadvantage when compared to most financial assets. But in an environment where the safest government debt yields little to nothing when inflation is accounted for, gold becomes a very stable way to preserve value, even if the price is flat. But as Frank Holmes pointed out in a recent interview, when the actual return on money is negative in the U.S., the price of gold rises.

This means that gold becomes attractive for two reasons. Not only does it offer a level of safety that rivals government debt, it also can give investors a return in real terms. While one never knows what will happen this time around, these sort of situations have been very supportive of gold as an asset class many times before.

Make The Market Work

It has never been easy to make money, and when it comes to creating profits from precious metals, it can be even more tricky. Metals are the bane of fiat currency, so it is no surprise to find that many in the financial press are not fond of metals at all. But if you want to have exposure to an asset class that has performed extremely well in the past, there are potentially profitable ways to do so.

Frank Holmes started his career by helping to take Franco-Nevada public, and today, they are one of the world's most successful royalty companies. He is also the CEO and Chief Investment Officer of U.S. Global Investors, which has a number of funds that give investors exposure to emerging markets and metals, among other things.

If you want to learn about how to get involved in market sectors that require specialist knowledge, a person like Frank Holmes could be good source to turn to. On November 20th and 21st, Frank Holmes will be speaking at the annual Silver and Gold Summit in San Francisco, and he will be joined by some of the most experienced names in resource investing.

If you want to find people like Doug Casey, Marin Katusa and Rick Rule in one place, the Silver and Gold Summit is the event to attend. We are honored to bring such a great event coming to downtown San Francisco, and we are thrilled to welcome investors of all kinds!