Gold prices are breaking out to fresh two week highs above $1,300 an ounce. President Trump is threatening a 5% tariff on all Mexican goods beginning June 10th if the country fails to crack down on illegal immigration. Canada’s gold camps are desperate for a rise in gold prices.
Frank Holmes, CEO of U.S. Global Investors, speaks with Kitco about gold and its role as an inflation hedge. Holmes points to negative real interest rates in Europe and why Chinese imports could push up inflation in the U.S.
Holmes talks precursors to a Recession. The money manager explains,
“Historically when you look at tariffs, it’s a taxation, and that taxation is going to be picked up by the consumers in America, and so that’s going to be inflationary for buying products.”
The host asks about the strong US dollar and how gold will rise if that trend continues. Holmes points to near negative interest rates in the U.S. with inflation falling.
In addition, lower rates from a more dovish Fed will also provide a boon for gold prices, Holmes said.
Why Gold Prices Will Rise
“Now we’re seeing rates are much lower than they were in October, and that is also a very supporting underbelly structure for the price of gold, and if you add inflation on that, gold in a near second is going to be $1,400.”
Frank talks about the rise in gold swaps from many of the world’s banks and their negative talk towards Bitcoin. Gold price suppression is another topic hit on. Ultimately the two discuss the rise of Bitcoin and why gold may triumph in the end.
Bitcoin’s Volatility is a Crutch – Holmes
“1% is the daily volatility of gold. Same thing with the S&P 500. But, Bitcoin is 5%-6% – so you could really be losing a lot of money with Bitcoin.”