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A Closer Look at Gold and Gold Stocks

Lily Jamali, host of Bloomberg Television in Canada, welcomes Frank Holmes to the program to discuss movements in the price of gold, as well as how he picks winners in the sector. Frank begins by noting that gold has had a good rally so far this year, noting that the yellow metal started off negatively, but that year-to-date it is up nicely. Lily follows up by asking how Frank determines both winners and losers among the universe of gold stocks. Frank says he looks at a “triangle” of factors, including a company’s revenue, cash flow and its return on invested capital over the last quarter as compared to the previous four quarters.

Frank also discusses the massive inflows into gold ETFs and what the recent rebalance in the VanEck Vectors Junior Gold Miners ETF (GDXJ) might mean for investors. Tune in to the full replay below!

 

WATCH THE INTERVIEW

 

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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the interview were held by one or more accounts managed by U.S. Global Investors as of 03/31/2017: VanEck Vectors Gold Miners ETF (GDX), VanEck Market Vectors Junior Gold Miners ETF (GDXJ), Newmont Mining Corp, Barrick Gold Corp, Agnico Eagle, Direxion Daily Gold Miners (DUST).

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals.  The weights of components are based on consumer spending patterns.

Cash Flow is a measure of the amount of cash generated by a company’s normal business operations.

Return on Capital (or return on invested capital) is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments.

The price-to-book ratio (P/B Ratio) is a ratio used to compare a stock's market value to its book value.