Gold, according to Frank Holmes of U.S. Global Investors, is driven by the “fear trade” and the “love trade.” Fear is when the financial press repeats stories of gloom and doom. The love trade is when people buy gold out of love and confidence in the metal. China and India practice the gold “love trade.”
Holmes popularized gold’s “fear trade” and “love trade” in January 2011.
U.S. Global Investors
Frank E. Holmes
Chief Investment Officer
Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999.
Under his guidance, the company’s funds have received numerous awards and honors including more than two dozen Lipper Fund Awards and certificates. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal. He is also the co-author of “The Goldwatcher: Demystifying Gold Investing.”
Outlook 2011: Fear And Love In Gold Trading
Frank Holmes, U.S. Global Investors|Jan. 8, 2011, 11:35 AM
Fear Trade: The fear trade is what you often hear about from the media and the gloom-and-doomers. The fear trade is driven by negative real interest rates—where inflation is greater than the nominal interest rate—and deficit spending. Whenever you have negative real interest rates coupled with increased deficit spending, gold tends to rise in that country’s currency.
Love Trade: The love trade is significant and unique to gold. People buy gold out of love and those in emerging markets are especially amorous of the metal. We refer to the most populous seven of the emerging economies as the E-7. Currently, the E-7 countries hold nearly half of the world’s population but make up less than 20 percent of global GDP. The G-7 industrialized nations are a mirror of this; they host 11 percent of the world’s population but control more than 50 percent of the global economy.
Gold and the “Love Trade”
By 5min Forecast
Published: January 12, 2011
“There are two main drivers of gold demand,” says U.S. Global Investors chief and Vancouver favorite Frank Holmes, helping put the demand in perspective: “The Fear Trade and the Love Trade.”
The Fear Trade is what we have in the West, “driven by negative real interest rates—where inflation is greater than the nominal interest rate—and deficit spending. Whenever you have negative real interest rates coupled with increased deficit spending, gold tends to rise in that country’s currency.
“In the U.S., we’re in the middle of an extended period of negative real interest rates that will likely last through the year.”
The Gold “Fear Trade” and “Love Trade”
On July 5, 2011, in Commodities, by Tim
There’s a “fear trade” in the West, but a “love trade” in the East where both China and India continue to demonstrate how loveable gold coins, bars, and jewelry really are.
May 17, 2013
Gold Bullion: 4 Fundamental Facts
by Frank Holmes
Bullion Vault Gold News
3. A lack of love from the Love Trade is affecting fundamentals
Too many people focus on the Fear Trade, which is when investors buy gold coins or a gold ETF out of a fear of the fallout that may result from governments’ rising debt levels and weakening currencies.
The Love Trade, on the other hand, is the buying of gold out of an enduring love for gold. Two emerging countries that make up almost half of gold demand – China and India – have had a long relationship with the precious metal that is intertwined with their culture, religion and economy. With half of the world’s population buying gold for their friends and family, it’s important to put into context what is happening in their countries.