Frank Holmes: “Chindia” Buying Gold on Dips, 20% Corrections Are “Non Events” (Podcast)

Coming up we’ll hear from Frank Holmes, CEO and Chief Investment Officer at U.S. Global Investors.  Frank talks about a seasonal norm he sees playing out in the gold market over the next few months, touches on what affect the election might have on the financial markets and provides some very interesting data on the gold demand coming out India.  Don’t miss another fascinating interview with Frank Holmes, coming up after this week’s market update.

Gold and silver markets moved higher ahead of Wednesday night’s presidential debate, led by gold mining stocks.  The GDX Gold Miners surged 8% by mid week.  However, the platinum group metals aren’t yet confirming a broader rally in the sector in a convincing way.

As of this Friday recording, platinum prices come in at $936 an ounce, down 0.3% on the week.  Palladium is off 3.2% to trade at $628.

It’s hard to know what to make of the weakness in the platinum and palladium markets.  Platinum has been on a steady decline since the beginning of August.  In the past it has sometimes served as a leading indicator not just for precious metals, but for the economy and stock market.  However, since platinum is such a small and specialized market – with the bulk of demand coming from the auto industry – it is susceptible to being pushed and pulled by forces that don’t necessarily apply to gold and silver.  Platinum and palladium are primarily used in industry and have virtually no history as monetary metals. Gold and silver have been used as money for thousands of years and continue to play that role.

Gold and silver markets are clinging on to gains this week although neither one has moved much one way or the other for most of the last two weeks now.  Gold prices check in at $1,267 per ounce to register a 1.1% advance since last Friday’s close.  Silver is managing a small 0.3% weekly gain to bring spot prices to $17.55.

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In recent days, the government delivered bad news to seniors who receive Social Security benefits.  They will get a cost of living adjustment of just 0.3% in 2017.  Needless to say, the token increase won’t match rising costs of living for millions of pensioners.

The government’s own figures show price inflation running at 1.5%.  And according to the Bureau of Labor Statistics, rents are rising at an annual rate of 3.4%.  Costs for medical care services are going up at a rate of 4.8%.  The latter cost category often hits seniors especially hard.

Meanwhile, health insurance premiums are surging at double digit rates as Obamacare looks more like it’s going to become Obamawreck under the next president’s watch.  Hillary Clinton tried her best to defend President Obama’s record in the final presidential debate.  No easy task.  His signature healthcare law, which Congress infamously didn’t read before passing, is working out so badly that even Bill Clinton called it “the craziest thing in the world” in an unscripted moment on the campaign trail.

The people that are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It’s a craziest thing in the world.

Nancy Pelosi: We have to pass the bill so that you can find out what is in it.

But perhaps the most expensive legacy that president Obama will leave is a near doubling of the national debt to some $20 trillion.  In fairness, Obama’s Republican predecessor George W. Bush exhibited no fiscal restraint either.  Under Bush’s watch federal spending grew at a faster clip than it did under Bill Clinton’s.  The point is that deficit spending has become a bipartisan habit that nobody in either party wants to shake.

The massive and growing national debt looming over us and future generations went virtually unacknowledged in the first two presidential debates.  Kudos to debate moderator Chris Wallace of Fox News for finally calling out both Donald Trump and Hillary Clinton on their plans to saddle America with even more debt.

Chris Wallace: We need to move on to our final segment and that is the national debt, which has not been discussed until tonight. Our national debt as a share of the economy, our GDP, is now 77%. That’s the highest since just after World War II. But the non-partisan Committee for a Responsible Federal Budget says, Secretary Clinton, under your plan, debt would rise to 86% of GDP over the next ten years. Mr. Trump, under your plan, they say it would rise to 105% of GDP over the next ten years. The question is- Why are both of you ignoring this problem?

Of course, neither Trump nor Clinton had a good answer.  Trump would cut taxes without cutting spending and hope that a booming economy leads to growing tax revenues.  Clinton imagines that she can raise revenues by taxing the rich more.  She may find out the tax base actually shrinks as the wealthy pull back on domestic capital investment.

But if she does become president, Hillary Clinton can count on her friends on the Federal Reserve Board to buy government debt in unlimited quantities.  In theory, there’s no deficit too big for the Fed to paper over.  The question is, at what point will the spending, borrowing, and printing cycle spiral out of control and trigger a currency crisis.  We could find out the answer to that question some time during the next president’s term in office.

There is no better protection from a dollar crisis than physical precious metals.  Regardless of what happens in November, gold and silver are likely to come in handy for investors in the years ahead.

Well now without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to be joined by Frank Holmes, CEO and Chief Investment Officer at U.S. Global Investor. Just a few weeks ago Mr. Holmes received another award from The Mining Journal and was named America’s best fund manager for 2016, one of many awards he’s received now in the mining industries for his fantastic track record. He is also the co-author of the book The Goldwatcher: Demystifying Gold Investing and is a regular guest on CNBC, Bloomberg, FOX Business and the Money Metals podcast.

Frank, it’s good to have you back on. Congratulations on another well-deserved award and thanks for joining us again today.

Frank Holmes: Well, thank you for that recognition, but I want to make sure that your listeners know that portfolio manager Ralph Aldis is also key in that whole thought process and director of research and oversees the gold funds with myself. He’s a geologist. He has a master’s in mineral economics, a master’s in geology. I like to tease him he has more degrees than a thermometer.

Mike Gleason: Well, congratulations to you both, for sure. Well, on that note we’ll start out here with the mining stocks because they’ve had a quite tumultuous year, Frank. Just looking at the GDX, one of the main mining stock indices here, it nearly tripled over the first 6 months of the year but then gave back about half of those gains. We may have found support recently at roughly 21 or 22 on the GDX. So do you think the downside move has exhausted itself in the miners and that we have seen the low here or is there more downside to come?

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