Gold Prices Are Buying Opportunity, Could Rally 20% By Year End - Holmes

Release Date: 
Friday, May 5, 2017

Gold prices fell this week as positive economic news suggested the Federal Reserve will continue on its path of higher interest rates.

"Gold futures headed for the biggest weekly loss since Donald Trump was elected president as better-than-expected U.S. jobs data further eroded demand for the metal as a haven… Signs of stability and growth have kept gold under pressure most of the week, with the metal crashing below its 200-day moving average. On Wednesday, Federal Reserve officials signaled they view a recent slowdown in U.S. economic growth as temporary and will stay on a gradual path of policy tightening…." ("Gold Set for Biggest Weekly Loss Since November as Demand Wilts," Bloomberg, 5/5/17.)

Gold ended the week down $39.80, closing at $1,228.90. Silver prices closed at $16.41, down $0.85.

Gold Prices Are Buying Opportunity, Could Rally 20% By Year End - Holmes
U.S. Global Investors CEO Frank Holmes told CNBC that the recent drop in gold prices presents a buying opportunity for investors before a rally sends prices higher.

"Gold's latest swing lower could be a screaming buying signal. Frank Holmes, who runs an investment management firm specializing in gold, says he's optimistic that the precious metal could rally by more than 20 percent within the next 12 months - a forecast that's not just based on "fear" of a negative geopolitical event, rising interest rates or an economic soft patch…

"'There is the 'love' driver, and that's also very significant…' Holmes' "love driver" refers to the ravenous appetite for gold in China and India. He calls them major players, accounting for 40 percent of the world's population. His comments come as gold tries to recapture its luster… But Holmes, who encourages investors to have a 10 percent gold weighting in their portfolios, wants investors to see this as a buying opportunity - calling the latest bearish activity 'temporary…' Holmes predicts gold will become more attractive even as the Federal Reserve continues its interest rate hike policy…  The latest statement isn't discouraging Holmes from abandoning his bullishness for gold, even if volatility increases. 'I think we are going to see these see-saws which are great trading opportunities for gold investors,' he said." ("Gold is tumbling, but here's why now might be the time to buy," CNBC, 5/4/17.)

Gold Is Money - Casey
Professional investor and Chairman of Casey Research, Doug Casey explained why gold has been the optimum form of money for thousands of years.

"It's an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money... Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold… There are very good reasons for this, and they are not new reasons…

"Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:

"Durable: A good money shouldn't fall apart in your pocket nor evaporate when you aren't looking. It should be indestructible… Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size… Consistent: A good money is something that always looks the same, so that it's easy to recognize, each piece identical to the next... Convenient: A good money packs a lot of value into a small package and is highly portable... Intrinsically valuable: A good money is something many people want or can use...

"Actually, there's a sixth reason Aristotle should have mentioned, but it wasn't relevant in his age, because nobody would have thought of it… it can't be created out of thin air… These are the reasons why gold is the best money. It's not a gold bug religion, nor a barbaric superstition. It's simply common sense. Gold is particularly good for use as money, just as aluminum is particularly good for making aircraft…If you try to make airplanes out of lead, or money out of paper, you're in for a crash…." ("Doug Casey On Why Gold Is Money," Zerohedge, 5/1/17.)

Chinese Demand For Gold Up In First Quarter
The World Gold Council reported that Chinese demand for gold rose by 8% in the first quarter of 2017.

"CHINA'S consumer demand for gold rose 8 percent year on year to 282.4 tons in the first quarter of 2017, compared with an 18 percent drop in global demand due to a slower pace of central bank buying and a previous high base, the World Gold Council said yesterday. China's investment in gold bars and coins jumped 30 percent to 105.9 tons in the first quarter, the fourth-highest on record…

"Chinese investors reignited their passion for bullion in the past two quarters, as 'concern over the weakness of the yuan lingers, outlook for the property market is gloomy, and the stock market looks weary,' said Roland Wang, WGC's managing director for China … 'Demand will be further supported by the launch of new products from banks on mobile applications, which are making gold more accessible to China's retail investors,' the report said…." ("Chinese demand for gold rises 8% in Q1," Shanghai Daily, 5/5/17.)

Cashless Society Puts Consumers at Mercy Of Banks And Governments - Rickards
Jim Rickards, author of New York Times best seller Currency Wars: The Making of the Next Global Crisis, warned that the allure of a cashless society threatens consumers.

"I've written many times about how the so-called 'cashless society' is a Trojan horse for a system in which all financial wealth is electronic and represented digitally in the records of a small number of megabanks and asset managers.

"Once that is achieved, it will be easy for state power to seize and freeze the wealth, or subject it to constant surveillance, taxation and other forms of digital confiscation. Given these potential outcomes, one might expect that citizens would push back against the war on cash. In fact, the opposite seems to be happening.

"A recent survey revealed that more than a third of Americans and Europeans would have no problem at all giving up cash and going completely digital… Of course, there's no denying that digital payments are certainly convenient… The surest way to lull someone into complacency is to offer a "convenience" that quickly becomes habit and impossible to do without.

"The convenience factor is becoming more prevalent, and consumers are moving from cash to digital payments just as they moved from gold and silver coins to paper money a hundred years ago. When the next financial panic comes, those without tangible wealth will be totally at the mercy of banks and governments who will decide exactly how much of your own money you're allowed to have each day. Just ask the citizens of Cyprus, Greece and India who have gone through this experience in recent years. It will come to the U.S. soon enough." ("Governments Are Winning The War On Cash - Rickards," MarketSlant, 5/4/17.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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