Italy Downgrade Rumors Support Gold Bulls

Gold is becoming an increasingly attractive investment as a hedge against sovereign risk and volatility in the foreign exchange markets. Can investors still get into gold? Tom Pawlicki, precious metals analyst at MF Global, and Frank Holmes, chief executive and chief investment officer of U.S. Global Investors, shared their outlooks.

“We’ll get a bit of a correction as we go into the summer months, but longer-term, gold will trade much higher,” Holmes told CNBC.

“Right now, the drama has to do with Greece," whose situation is pressuring the euro, he said.

Debtor Nations

In the meantime, Pawlicki said there are a number of factors that make gold an attractive investment play.

“There are rumors about an Italy downgrade so these things are going to continue and the safe haven bid is going to be maintained for gold,” he said.

Pawlicki noted that gold prices are up around 11.5 percent while stocks are only up 8 percent since the February lows. And strength in emerging market currencies should make gold attractive to price-sensitive buyers, he said.

“Also, as we come into the Indian wedding season and a big festival in about a week and a half, we’ll see strong demand from those players,” Pawlicki added.

More on Europe:

• Gartman: Euro, EU Are Doomed
• Crisis to Boost US Stocks
• Slideshow: Scenes from Greek Protests

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More Views on Gold:

• Invest in Gold During These Volatile Times: Portfolio Manager
• Mad Money: Buy Gold to Defend Against Greece?

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CNBC Data Pages:

• Dow 30 Stocks—In Real Time
• Oil, Gold, Natural Gas Prices Now
• Where's the US Dollar Today?

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CNBC Slideshows:

• The World's Biggest Gold Reserves

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Major Gold & Gold Miner Securities:

Barrick Gold

Newmont Mining

AngloGold Ashanti

Freeport McMoRan

SPDR Gold Trust ETF

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Disclosures:

No immediate information was available for Holmes or Pawlicki.

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