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Get ready for new records; gold, commodities in 'sweet spot' - Frank Holmes

Kitco News

(Kitco News) - The Purchasing Managers' Index (PMI) has hit two-year highs in August, suggesting that a pickup in demand for raw commodities, as well higher inflation, is on the way, said Frank Holmes, CEO of U.S. Global Investors.

Holmes added that gold miners are likely to see record cash flow this quarter as a result of rising commodities demand.

“The Purchasing Managers' Index is a forward-looking index. The GDP number is behind this, so the Purchasing Managers' Index is a precursor for commodity demand,” Holmes said.

The PMI was in contractionary territory for the U.S., Euro Area, and China this summer as a result of COVID-19, and most of the recovery back to expansionary territory can be attributed to monetary and fiscal policies.

Inflation is likely to also pick up as a result, Holmes said.

“If you use the CPI number that was used in 1980 when gold hit $850, silver $50 an ounce, and the gold-silver ratio was 17 to 1, if you used that model today, inflation is over 8%,” he said.

Real assets will be the winning investment vehicle this year, Holmes noted.

“Real assets are going to be a big driver for making money, and real assets that can have expanding and increasing dividends will attract the eyeballs and capital in the capital markets. Gold stocks, they’re going to have record free cash flow this quarter,” he said.

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