Gold is tumbling, but here's why now might be the time to buy

  • Gold's latest swing lower could be a screaming buying signal, says investment firm manager Frank Holmes.
  • He says gold could rally by more than 20 percent within the next 12 months.

Gold's latest swing lower could be a screaming buying signal.

Frank Holmes, who runs an investment management firm specializing in gold, says he's optimistic that the precious metal could rally by more than 20 percent within the next 12 months — a forecast that's not just based on "fear" of a negative geopolitical event, rising interest rates or an economic soft patch.

"There is the 'love' driver, and that's also very significant, the U.S. Global Investors CEO and CIO said Wednesday on CNBC's "Trading Nation."

Holmes' "love driver" refers to the ravenous appetite for gold in China and India. He calls them major players, accounting for 40 percent of the world's population.

His comments come as gold tries to recapture its luster. Gold hit its lowest level Thursday since March 17.

Prices are now trading around $1225 an ounce, nearly 4 percent less than the same time last year.

And, the metal has now lost about 5 percent of its value over just the past six months.

But Holmes, who encourages investors to have a 10 percent gold weighting in their portfolios, wants investors to see this as a buying opportunity — calling the latest bearish activity "temporary."

Holmes predicts gold will become more attractive even as the Federal Reserve continues its interest rate hike policy. Rising interest rates typically have a negative impact on gold prices, and Wall Street is predicting at least two more hikes this year.

The Fed voted to keep rates steady on Wednesday, but acknowledged economic growth is slowing.

The latest statement isn't discouraging Holmes from abandoning his bullishness for gold, even if volatility increases.

"I think we are going to see these see-saws which are great trading opportunities for gold investors," he said.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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