Despite a weakened economy, stocks continue to rise on the back of monetary stimulus, which is bound to push gold prices even higher, this, according to Frank Holmes, CEO of U.S. Global Investors.
Stocks are going up “because of the trillions and trillions of dollars of money printing from the helicopters of central bankers. The G20 central bankers, the G20 finance ministers, that’s a cartel, like OPEC,” Holmes told Kitco News.
Fundamentally, gold’s supply deficit should also provide tailwinds, Holmes said.
“Last year, as I’ve mentioned, everyone was surprised that palladium could go from $1,000 to $2,700, and I said short-term, why can’t gold do that?” he said. “We’re going to see gold pop. $2,700 is easy for me to see that.”
Holmes added that the gold miners should also perform exceptionally well during periods of upward bullion price movements.
“A lot of the gold mining companies are going to show free cash flow, like the Barricks and Newmonts that have been on a tear, and the generalists buy free cash flow stocks, whereas the S&P 500, because of the coronavirus, these companies are getting beaten up so bad, some are seeing 70%, 80% drop in revenues,” he said.
Investors who want to buy individual gold mining stocks should focus on the royalty streaming companies and companies with strong free cash flow, Holmes added.
"There are stocks that have free cash flow. Focus on those. Focus on the royalty companies. They have a superior business model," he said.
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