Jan. 30, 2018 11:40AM PSTPrecious Metals
Frank Holmes, CEO and chief investment officer of US Global Investors, talks about gold, blockchain technology and more in this interview.
At this year’s Vancouver Resource Investment Conference, the cryptocurrencies vs. gold debate took center stage. At the show, the Investing News Network had the chance to speak with Frank Holmes of US Global Investors (NASDAQ:GROW) to get his insight on bitcoin, gold and the future of technology.
The gold price increased almost 13 percent last year, but bitcoin surged over 1,200 percent. As a result, cryptocurrencies were discussed frequently at the conference. “The gold vs. cryptocurrencies debate is a misguided argument. Early bitcoin buyers were gold bugs and they never sold their gold to buy it, they diversified into it,” Holmes said.
Holmes, who is also chairman of HIVE Blockchain Technologies (TSX:HIVE), explained how bitcoin has woken up the world to blockchain technology. “Blockchain is going to revolutionize all payment systems. Bitcoin is what email was to the internet, bitcoin is waking the world up to blockchain technology,” he said.
Watch the video above or read the transcript below to learn more of Holmes’ thoughts on cryptocurrencies, where the gold price is going in 2018 and top stock picks.
INN: The gold price increased almost thirteen percent last year and started this year above the $1,300-per-ounce mark, do you expect gold prices to perform well in 2018?
Frank Holmes: What’s really amazing about mainstream media is that is so negative about gold, and gold since the beginning of 2000 has outperformed the S&P two to one, so it’s done much better. The DNA of volatility of gold is plus or minus 20 percent, it was up 13 percent. So, this year– I forecast last year gold to go $1,300 — I think, it can easily go to $1,500 this year. I think inflation indicators are being reassessed and that inflation is actually a lot higher because if you look at the 1990 model for determining CPI, we have 8 percent inflation, not 2.1. And we also have a strong global economy. PMI, Purchasing Managers’ Index is very robust, that’s great for the love-trade and that’s Asia and China, and India that predominantly buy gold for love.
INN: One of the big debates here at VRIC is the gold versus cryptocurrencies debate. What would you suggest resource investors looking to invest into cryptocurrencies?
FH: I think it’s a misguided argument. Bitcoin early adopters were gold bugs and they never sold their gold to buy it, they diversified into it. All the research I’ve done and going around and talking to people that were the original investors, they were around 70 years old and they liked the fact that bitcoin was decentralized, they liked the fact it was capped at 21 million coins to be issued and so, as you have more and more buyers coming in all the time through Coinbase etc., then guess what? It’s going to grow exponentially.
So, I don’t think it’s really hurting gold. I think, what’s really important is these ICOs, initial coin offerings, they’re hurting junior mining because the millennials, which numbers are bigger than baby-boomers, they don’t have the wealth but they would turn around for it, they have Tinder for dates, and by the way, I want to buy this ICO, this new currency, they can open an account in five minutes and do a trade, not wait days for a brokerage account. So, there’s too many regulations in opening an account and if they could streamline that brokerage business and streamline the cost of doing financing then, I think you would have more money going and speculating in junior mining. The speculators have gone to the ICOs.
INN: So, let’s say resource investors were to look into cryptocurrencies, how much percentage would you suggest them to allocate in their portfolios maybe compared to precious metals?
FH: Well, one or two percent because it’s emergent and speculation. Remember, this is not investing, this is speculating because the DNA of volatility of bitcoin in a month is plus or minus 50 percent, it can double and fall and so, that’s a unique animal.
That’s why I invest in a company called Hive Blockchain Technologies, we mine virgin coins. They’re not going to allow an ETF to come out because a hacker may have got paid with bitcoin and he sells it into an ETF so, that’s why there’s no bitcoin ETFs. So, we don’t have to worry about that as Hive Blockchain. We’re mining virgin coins in Iceland and we’re expanding into Sweden so, it’s a very exciting plan. So now, we have blockchain technology, and blockchain’s going to revolutionize all payment systems, stock trading 24/7, costs will drop by 90 percent. So I think, when you look at bitcoin is what email was to the internet, bitcoin is waking the world up to blockchain technology.
INN: Going back to gold, what factors should investors keep an eye on this year that could impact the gold price and the gold market?
FH: Well I think, there’s calculations CPI numbers is going to change, we’re going to get a bigger inflation. The drop of corporate taxes, what did Walmart do? The biggest consumer company in the world, it immediately turned around and paid all its employees and increased the minimum wage dramatically so, they’re now spending more. So, we’re going to get a stronger inflationary cycle, and the global economy is also in an uptick. US President Trump is very much anti-regulations and it’s showing up in the capital markets, they have confidence.
INN: You’re also going to be part of a streaming/royalties presentation later today at VRIC. Why should resource investors look into streaming/royalties companies in 2018?
FH: You know what I found is that a lot of money will not go into active funds. I can go and outperform the ETF, the GDXJ and still, money’s all going into this index that it became a serious problem last year that it captured 95 percent of all the fund flows. Now all of a sudden, they own more than 20 percent of companies and they blew out in June $3 billion dollars and it really hurt junior mining and mid-cap mining, it hurt the whole industry.
So, I came out with a smart-beta and the smart-beta ETF called GO GOLD (NYSE:GOAU, TSX:GOGO) and it’s a smart-beta, and 30 percent are royalty companies. Now, by having 30 percent of royalty companies what we’ve shown is that it outperforms the GDXJ 92 percent of the time on rolling twelve-month periods. So, I think that royalty companies are a real key part of any portfolio because that smart-beta ETF will far outperform the GDX and GDXJ which has billions of dollars in assets in it.
INN: What is your best piece of advice for resource investors this year?
FH: The task of knowledge. Get with young people and find out what they’re spending their money on in technology and what apps they are using to pay for bills. I learned this whole thing of blockchain from my godson and my sons, and that was really truly beneficial for me to stay young at mind. So, when you go to these conferences and bring your children, make sure you listen to them and learn.
INN: Finally, would you be able to share with our audience what are your favorite stocks or what companies you like right now?
FH: You know one of the things I am really bullish on is copper. I think, copper would go to $5 a pound. I like little juniors like CopperBank (CSE:CBK), which has a micro-cap with huge optionality for copper. I like Copper Mountain Mining Corporation (TSX:CMMC), which is a producer. I think, these stocks have huge upside potential, why? Because the electrification of the world, Tesla (NASDAQ:TSLA) cars, blockchain, all this stuff is copper, copper, copper and there’s going to be strikes early this year and any supply disruption, the world’s got strong Purchasing Managers’ Index numbers, the world is growing in a nice pace. The copper demand is much greater than the supply, no major new discoveries, nothing coming on-stream, guess what? The upside for copper is a positive surprise.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.