Frank Holmes: Gold Price to Double in 5 Years

Source: Mineweb, Geoff Candy  (9/1/10)

"Holmes says there are two types of gold buyers: 'price takers' and 'price makers.'"


Historically, September is a very good month for gold. On average, the price rises around 2.5% from its August price.

But, according to Frank Holmes, it is not just during September that gold will do well, he expects gold to double in the next five years.

Speaking on the Mineweb Gold Weekly podcast, Holmes said, that is more than a "15% compound rate of return and that's far better than what you're going to expect from the stock market as a whole. The same thing is much higher than what you're going to get in a five-year bond—a five-year bond is paying you less than 2%—so the net in that one is that gold is becoming more attractive as a diversifier."

It is not, however, just its role as a diversifier, where gold is being supported, according to Holmes.

He believes that there are two types of gold buyers. One, he terms the "price takers," who are "basically a buyer of gold for jewelry," which he says is an emotional reason to buy gold.

The second group, he calls the "price makers." These are people who are buying gold as an investment and are, he adds, growing rapidly.

"This is predominantly because gold is, basically, looked [at] and perceived more and more as a safe haven investment. The U.S., Western Europe and Japan are close to buckling under the weight of their own sovereign debt issues, and government budget deficits remain large and persistent. . .as a result, the major paper currencies is low," Holmes said, adding that in the seven most populous countries in the world you find the strongest emotional attachment to the metal, while it is in the G7 countries where you find much of the investment buying.