Gold prices are far from forming a bubble, fund manager Frank Holmes said Monday at the two-day inaugural Internet-based Kitco Metals eConference.

Spot gold increased in value by roughly five times over the last decade from around $250 an ounce to a record high of $1,265.30 earlier this summer, according to one price vendor. But there is room for further gains, said Holmes, the chief executive officer and chief investment officer of U.S. Global Investors, which operates several natural-resources funds.

“I don’t believe there is a bubble in gold,” Holmes said. “I really don’t…I think gold over the next five years can double.”

The speaker cited a number of factors that have helped gold rally over the years, many of which are still at play.

Back when gold was falling toward $250, he said, the U.S. had positive real interest rates, in which rates were higher than the pace of inflation. The government was running an annual budget surplus and the U.S. dollar was relatively strong.

“That has all reversed,” Holmes said.

Global economic conditions “are now very favorable for gold as a safe-haven investment,” he said. The U.S., Western Europe and Japan are all dealing with debt loads and large government deficits, hurting faith in paper currencies.

Meanwhile, China has become a major gold consumer, with the rapidly growing middle class looking to buy the metal.

In fact, many of the world’s emerging economies have limited consumer debt but with the capacity for rapid growth, the speaker said. This means rising increases in income fueling demand for gold at a time when the supply is not growing rapidly.

“You’re going to have a long cycle of nice demand for gold,” he said. In particular, he said, this buying tends to pick up whenever gold corrects lower by $100 to $150.

“If history is any guide, gold is about to get even more exciting over the next quarter because historically we get a lift from emotionally charged holiday seasons around the world in cultures that truly believe in gold as an asset class,” Holmes said.

The market has entered the front end of a several-month window in which physical demand often rises due to the gift-giving seasons of Ramadan in the Muslim world, Diwali in India, Christmas in Western nations and the Chinese New Year.

Holmes commented that gold has outperformed equities over the last decade, yet also had less overall volatility.

By Allen Sykora of Kitco News;

Editor’s Note: Meet the Kitco News Team at the Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration