My Conviction in Gold Royalty Companies and Bitcoin

Author: Frank Holmes
Date Posted: November 10, 2017 Read time: 47 min

Some of you reading this might already be familiar with the "Parable of the Talents," but it's worth a brief retelling. The story, which appears in the gospels of Matthew and Mark, involves a master who entrusts three servants with some of his "talents," or gold coins, while he's away on business.

Press Release: U.S. Global Investors Reports Improved Net Income for First Quarter 2018 Due to Strategic Investment in First Public Blockchain Firm to Mine New Digital Currencies

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors


Some of you reading this might already be familiar with the “Parable of the Talents,” but it’s worth a brief retelling. The story, which appears in the gospels of Matthew and Mark, involves a master who entrusts three servants with some of his “talents,” or gold coins, while he’s away on business. Two of the servants take a risk by putting the money to work and end up doubling their master’s wealth. The third servant, however, buries his share to “keep it safe” and so doesn’t generate any returns. (Indeed it likely loses value because of inflation.)

When the master returns, he’s so pleased at how the first two servants grew his wealth that he puts them in charge of “many things” and invites them to share in his own success.

The third servant, though, he calls “wicked and lazy” and says he might as well have deposited the money in a bank while he was away—at least then he would have received a little interest. The servant is punished by having his share of the talents given to the two who faithfully grew their master’s money, leaving him with nothing.

The lesson here should be plainly obvious, and we can express it in a number of different ways: There can be no reward without risk. You must spend money to make money. You reap what you sow. This should resonate with investors, entrepreneurs and any true believer in the power of capitalism.

Jesus’ parable applies not just to individuals but to corporations as well. Companies must grow to keep up with the rising cost of labor and materials and to stay competitive. To do that, they must put their money to work just as the two servants do.

And just as the two servants were invited to share in their master’s success, corporate growth has a multiplier effect—for the company’s employees and their families, shareholders, the local economy, strategic partners, companies up and down the supply chain and much more.


A Bonanza for Precious Metal Royalty Companies as Exploration Budgets Have Declined

I think the business model that best illustrates the meaning of the “Parable of the Talents” is the one practiced by gold and precious metal royalty companies. As much as I write and talk about royalty companies, I still encounter investors who aren’t aware of how significant a role they play in the mining space.

As a refresher, these firms help finance explorers and producers’ operations by buying royalties or rights to a stream. Because miners have had to slash exploration budgets since the decline in metal prices, the kind of financing royalty companies provide has only grown in demand—as evidenced by the mostly positive earnings reports this week.

Chief among them is Franco-Nevada, which had a very strong third quarter, reporting earnings of $55.3 million, or $0.30 a share, up 3.4 percent from the same three-month period last year. The Toronto-based company, having also recently diversified into the oil royalties space, closed its purchase of an oil royalty for C$92.5 million, bringing the number of its oil and gas assets up to 82. Including precious metals and other minerals, the total number of assets Franco-Nevada had in its diverse portfolio as of the end of the quarter stood at 341.

Here’s the multiplier effect: Not only do the miners benefit from the deals, allowing them to continue exploration and other operations, but shareholders are rewarded handsomely. Since the company went public nearly 10 years ago, it’s raised its dividend each year and its share price has outperformed both gold and relevant gold equity benchmarks. After its earnings announcement on Monday, Franco-Nevada stock closed up more than 6 percent on the New York Stock Exchange (NYSE), its best one-day performance in nearly a year and a half. Shares hit a fresh all-time high this week.


Precious metal royalty names have outperformed gold and gold producers
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Other royalty companies’ reports were just as impressive and show the rewards of putting your “talents” to work. Sandstorm Gold, reporting higher operating cash flow of $11.9 million, has acquired as many as 10 separate royalties since the end of September on properties in Peru, Botswana and South Africa that collectively cover more than 2.4 million acres.

Osisko Gold Royalties bought a $1.1 billion portfolio of 74 precious mineral royalties, including a 9.6 percent diamond stream. The company reported record quarterly gold equivalent ounces (GEOs) of 16,664, up 65 percent from the same quarter last year, and record quarterly revenues from royalties and streams of $26.1 million, up 48 percent.

Royal Gold also had a strong quarter, reporting operating cash flow of $72 million, an increase of 30 percent from last year, and returned as much as $16 million to shareholders in dividends.

Wheaton Precious Metals, the world’s largest precious metal streaming company, showed a sizeable decline in profits in the third quarter, but it continued to generate strong cash flow and looks poised to meet its end-of-year production guidance.

Although some investors might not realize how important these companies are to the industry, many other investors are opting to place their bets on royalty names, seeing them as having ample exposure to precious metals without some of the risks associated with producers. In its review of the third quarter, the World Gold Council (WGC) reported that global gold demand fell to an eight-year low as investment in gold ETFs slowed to 18.9 metric tons, down from 144.3 metric tons in last year’s September quarter. This could be a consequence of the media’s continued negative coverage of gold, despite its competitive performance against the S&P 500 Index. Whatever the cause, in this environment, there was no lack of love for royalty names, as you can see in the chart above.

A Changing Financial Landscape

We were one of Wheaton Precious Metals’ seed investors in 2004, when it was known as Silver Wheaton. Because Franco-Nevada wouldn’t be spun off from Newmont Mining for another three years, Wheaton had first-mover advantage. It was something new, something different. This, coupled with what I recognized as a superior business model, gave me the conviction to allocate capital into the fledgling company, a move that turned out to be highly profitable.

Today I have the same conviction in blockchain technology and digital currencies. As of the end of October, the initial coin offering (ICO) market had raised $3 billion so far this year. That’s more than seven times the amount generated in crowdfunding in all of the previous years before 2017. And Bloomberg just reported that Google searches for “buy bitcoin” recently surpassed searches for “buy gold.”

Search queries for buy bitcoin surged past buy gold
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With bitcoin’s market cap having grown past that of Goldman Sachs and Morgan Stanley, cryptocurrencies can no longer be written off as a curiosity. Major financial institutions have become bullish, having filed approximately 2,700 patents in blockchain technology.

Abigail Johnson, the youthful chairman of Fidelity, was quoted as saying, “Blockchain technology isn’t just a more efficient way to settle securities, it will fundamentally change market structures, and maybe even the architecture of the internet itself.” Johnson allegedly has a crypto-mining computer rig in her office, and Fidelity accountholders are now able to see their bitcoin holdings on the brokerage firm’s online platform. USAA, the massive financial firm used by millions of U.S. military personnel and their families worldwide, provides the same service.


This all comes as Coinbase, a leading digital currency broker, saw a record number of people opening new accounts on its platform recently, doubling the number of accounts from the beginning of the year. In one 24-hour period, 100,000 new accounts were opened.


Millennials Driving Interest in Blockchain Technology and Cryptocurrencies

A lot of this growth in demand is thanks to millennials, the largest U.S. generation. Forget the stereotype of the “entitled” millennial in the workplace and the misconception that they’re all wasting their money on $10 avocado toast. Consulting firm Deloitte estimates that by 2020, millennials will make up 50 percent of the workforce and control between $19 trillion and $24 trillion. Many are savvy investors and were found to be more likely to be aware of their brokerage account fees than older generations, according to Charles Schwab’s Modern Wealth index.

Millennials lead different lifestyles than older generations. Many of them choose to rent instead of own to stay mobile. They’re more likely to get their news from Twitter than from TV. Online dating apps have helped foster today’s hookup culture, but while young people now might have more sex partners than before, they’re having less sex overall than their parents or grandparents might have had at that age.

It’s little surprise, then, that millennials are among the earliest and most enthusiastic adopters of blockchain technology, bitcoin and digital currencies in general—none of which existed even 10 years ago. A poll conducted by Blockchain Capital found that large percentages of millennials would prefer $1,000 in bitcoin to $1,000 in other assets. More than a quarter said they would prefer bitcoin to stocks, while nearly a third preferred it to bonds.

Percent of millenials who would prefer 1000 in botcoin to 1000 in
click to enlarge

What I find especially encouraging is that only 4 percent of those who took the poll owned or had owned bitcoins. I say encouraging because this suggests there’s quite a lot of upside potential for bitcoin ownership, which in turn could raise prices further. As I shared with you recently, Metcalfe’s law states that the bigger the network of users, the greater that network’s value becomes. Consider Facebook. The social media giant has more than 2 billion active users. That’s 2 billion pairs of eyes Facebook is able to charge top dollar for advertisers to reach, helping it deliver record profits in the third quarter.

We could see the same thing happen across the blockchain and cryptocurrency network as more and more businesses and people embrace this new form of exchange.


Ploughing Capital into Blockchain

It should be clear by now that something is changing in financial markets, and this is what inspired me to allocate part of our capital in a company with first-mover advantage in the cryptocurrency space, just as we did with Silver Wheaton years ago. As the “Parable of the Talents” teaches us, no reward can come to you without some risk-taking. Doing nothing is not an option.

That company is HIVE Blockchain Technologies, a blockchain infrastructure company involved in the mining of virgin digital currencies. The first company of its kind to sell shares to the public, HIVE began trading on the TSX Venture Exchange on September 18.

I’m very excited about this new chapter in our company’s history. If you weren’t on today’s earnings call, you can download the slide deck here to learn more about our deal with HIVE and what it means for our investors and shareholders.


Discover how China became the worlds second largest economy


Index Summary

  • The major market indices finished down this week.  The Dow Jones Industrial Average lost 0.50 percent. The S&P 500 Stock Index lost 0.20 percent, while the Nasdaq Composite fell 0.20 percent. The Russell 2000 small capitalization index lost 1.30 percent this week.
  • The Hang Seng Composite gained 1.82 percent this week; while Taiwan was down 0.63 percent and the KOSPI fell 0.59 percent.
  • The 10-year Treasury bond yield rose 7 basis points to 2.40 percent.

Domestic Equity Market

SP 500 Economic Sectors
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  • Real Estate was the best performing sector of the week, increasing by 3.21 percent versus an overall decrease of 0.16 percent for the S&P 500.
  • Macerich was the best performing stock for the week, increasing 18.35 percent.
  • Nvidia raced past estimates. The company earned $1.33 a share on revenue of $2.64 billion, easily beating Wall Street estimates as revenue from its data-center business jumped 175 percent versus a year ago.


  • Financials was the worst performing sector for the week, falling 2.65 percent versus an overall decrease of 0.16 percent for the S&P 500.
  • Tripadvisor was the worst performing stock for the week, falling 19.78 percent.
  • Snap tanked after its quarter three earnings. Its daily active users climbed 3 percent to 178 million and its revenue surged 62 percent to $207.9 million. However, both numbers were well below estimates, sending shares down by about 17 percent after Tuesday’s closing bell. Additionally, the company wrote down nearly $40 million because its Spectacles product turned out to be a flop.


  • Roku crushed its first earnings report as a public company. The streaming TV box provider beat Wall Street revenue estimates. The report gave investors confidence that the company is making progress on its plan to evolve from a commodity hardware company into an advertising business.
  • A press release issued by Salesforce said the company expected to finish its next fiscal year with revenue of $12.45 billion to $12.5 billion, making for about 20 percent growth versus the current year. Additionally, the company plans to hit $20 billion in revenues by 2022.
  • Intel and AMD shares climbed after the two companies announced a plan to take on Nvidia, the largest maker of graphics chips. The partnership is set to combine an Intel central processing unit (CPU) with an AMD graphics processing unit (GPU), according to the Wall Street Journal. The chips would be intended to be used in laptops and capable of handling high-end video gaming.


  • Apple could be on the hook for $1.2 billion in interest on its Irish tax bill. The company is currently disputing a $15 billion bill after its tax arrangements in the country were deemed to be "state aid."
  • Qualcomm said it is going to do whatever it takes to fend of Broadcom’s hostile takeover. The offer price undervalues Qualcomm and is below what its board would seriously consider, the Financial Times reported. That’s in spite of the 28 percent premium that Broadcom’s offer places on Qualcomm’s closing price Thursday, when the deal was first announced.
  • Disney’s shares slumped about 4 percent in after-hours trading Thursday after the company missed on both the top and bottom lines.

Frank Talk Insight for Investors

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A Blog by Frank Holmes, C.E.O. and Chief Investment Officer

The Economy and Bond Market



  • The JOLTS (Job Openings and Labor Turnover Survey) report job openings came in at 6.1 million in September, little changed from the previous month’s numbers, the Bureau of Labor Statistics reports.
  • The New York Federal Reserve on Friday kept its view on U.S. gross domestic product growth for the fourth quarter near 3.2 percent.  
  • The U.S. economy maintained its resilience during October, with strong economic data across the board. The third quarter GDP report showed the domestic economy running at a 3.0 percent annualized growth rate.


  • The University of Michigan Sentiment dropped to 97.8, falling from its previous print at 100.7.
  • Alaska was downgraded one notch by Fitch to AA from AA+. The ratings company cited the state’s "material decline in financial resilience" due to the energy downturn. Alaska has relied on one-time revenues from its reserve funds, Fitch said.
  • Initial jobless claims rose to 239,000, up from the prior week’s 229,000.


  • The job market is slowly but surely heading toward a milestone not seen in at least 17 years as unemployed Americans responding to job vacancies find work. While vacancies held at 6.09 million in September, figures last week showed the ranks of jobless Americans fell in October to 6.52 million. Sustained progress would eliminate the gap for the first time in records going back to 2000.

JOb vacancies rising in tight US labor market while ranks of unemployment shrink
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  • The National Federation of Independent Businesses (NFIB) reversed its position on the House Republican tax reform bill on Thursday, backing the newly proposed changes by Rep. Kevin Brady. "This amendment would create substantial tax relief for millions of small business owners who were left out of the original bill. We urge Republican and Democratic members of the House to support this amendment going forward," Juanita Duggan, president and CEO of NFIB, said in a statement. Brady’s proposed amendment would provide a lower tax rate for smaller firms that otherwise wouldn’t have qualified for the 25 percent rate on pass-through businesses.
  • China is taking a key step to opening its markets to foreign investors as it announced plans to relax foreign-ownership restrictions on Chinese banks, effective immediately, and said it would also lift the ceiling on foreign-ownership limits for securities funds and joint ventures to 51 percent from 49 percent over the next three years.


  • With the release of the administration’s tax reform proposal, tax-exemption is under attack. The House Republicans’ "Tax Cuts and Jobs Act,” if enacted, would mean shrinking the tax-exempt municipal market by between 25 percent and 33 percent. The bill proposes terminating private activity bonds, repealing the use of advance refunding bonds and tax-credit bonds, and prohibiting the sale of tax-exempts for professional sports stadiums.
  • The European Commission said the U.K. will grow slower than every other major European economy in the coming years. The commission’s figures suggest that by 2019, UK economic growth will have slowed to just 1.1 percent, slower than in Italy, Spain and Greece.
  • The rise in U.S. house prices since the recession has created a market favorable for sellers and more Americans now think it’s a better time to sell a house than to buy, according to Fannie Mae. That wasn’t the case for much of the past seven years and could become a headwind to further gains in the housing market.

Gold Market

This week spot gold closed at $1,276.08, up $6.36 per ounce, or 0.50 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 0.58 percent. The S&P/TSX Venture Index gained 0.36 percent for the week. The U.S. Trade-Weighted Dollar closed the week down 0.59 percent.

Date Event Survey Actual Prior
Nov-9 US Initial Jobless Claims 232k 239k 229k
Nov-13 CH Retail Sales YoY 10.50% 10.30%
Nov-14 GE CPI YoY 1.60% 1.60%
Nov-14 GE ZEW Survey Current Situation 88 87
Nov-14 GE ZEW Survey Expectations 19.5 17.6
Nov-14 US PPI Final Demand YoY 2.30% 2.60%
Nov-15 US CPI YoY 2.00% 2.20
Nov-16 EC CPI Core YoY 0.90% 0.90%
Nov-16 US Initial Jobless Claims 235k 239k
Nov-17 US Housing Starts 1186k 1127k


  • The best performing precious metal for the week was palladium, 0.41 percent. Gold is set to buy Aurico Metals for $1.80 per cash share for a 38-percent purchase price premium on the Toronto Stock Exchange. Centerra currently holds more than $350 million in cash and has now secured a $125 million acquisition facility, according to Bloomberg.
  • Gold prices rose after Saudi Arabia said a recent attempted missile strike at Riyadh’s airport could be an act of war by Iran. Additionally, Turkish investors are continuing to buy gold with demand expected to reach the highest since 2013.
  • According to Google Trends, global searches for “buy bitcoin” have overtaken “buy gold” demonstrating a surge in popularity of the cryptocurrency. However, the BullionVault Gold Investor Index edged slightly higher to 54.6, demonstrating the number of buyers is higher than sellers.

Gold Looks Unchanged from a year earler
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  • The worst performing precious metal for the week was platinum, down 0.82 percent. Due to platinum’s primary use in internal combustion engines, the metal could be among the biggest losers from electrical vehicle growth, reports Mining Review. The World Gold Council said it’s a tough quarter for gold as prices weakened in September and October. Global gold demand fell 9 percent in the third quarter as investor buying slowed and regulations in India tightened, reports Eddie van der Walt.
  • Torex Gold reported a peaceful strike at their ELG Mine as workers demand a change in labor union. The company also announced an unexpected loss for the third quarter at $0.18 per share rather than the estimated loss of $0.01 per share.
  • Eldorado Gold moved its Skouries projects into care and maintenance state as legal action begins on three lawsuits. The company seeks protection against the Ministry’s failure to issue routine installation permits, writes Allison Saunders of Bloomberg.


  • Kirkland Lake Gold announced a 120 meter down-plunge of the swan zone where the company identified high grade drill results of 52.1 g/t gold over 7.15 meters.
  • Lumina Gold Corporation reported positive findings from its gold-copper project in El Oro Province of southern Ecuador where gold doubled from 4.0 to 8.8 million ounces at a grade of 0.65 grams per ton.
  • AlGold Resources Limited carried out additional drilling on its Tijrit property in Mauritania which extended the width of the mineralization and added significant gold. The results demonstrate a high-grade finding of 6.14 g/t gold over 4 meters. Orca Gold received ministerial approval for its acquisition of the Kinross Cote d’Ivoire property portfolio.


  • Gold consumption in the world’s second biggest importer, India, is on track to hit a seven-year low after tax and regulatory changes dampened demand, according to the World Gold Council. Indian gold imports were also down 31 percent last month from the previous year. Factors hampering demand include increased purity standard, revised anti-money laundering act and an uneven monsoon season hurting income.
  • Demand for gold jewelry in Saudi Arabia and the United Arab Emirates is likely to fall after rising briefing, as the countries are set to impose a valued added tax in January, reports Claudia Carpenter. In Saudi Arabia, demand slumped 9 percent due to weak oil prices and rising cost of gold jewelry.
  • Former Federal Reserve Chairman Alan Greenspan does not see the proposed Republican tax plan as a major factor in expanding the economy, writes Scott Lanman. Greenspan does however support reducing corporate tax rates to 20 percent, which would bring the United States “back to neutral as far as our relative competitiveness around the world is concerned.”

Whats in a elements name

Energy and Natural Resources Market



  • Natural gas was the best performing major commodity this week rising 7.7 percent. The commodity rallied to its highest since May as weather forecasts expect temperatures may be below normal in the eastern half of the U.S. next week. In addition, U.S. stockpiles are tracking 1.8 percent below the 5-year average.
  • The best performing sector this week was the S&P 1500 Oil & Gas Equipment and Services Index. The index of oil and gas service providers rose 3.4 percent thanks to a bullish forecast from Morgan Stanley and the announcement of a $3 billion share buyback from Baker Hughes.
  • SolarEdge Technologies Inc., a solar power panel manufacturer and service provider, was the best performing stock in the broader resource market this week. The stock rallied 12.9 percent to a 52-week high after the company boosted sales outside the U.S. and third-quarter earnings exceeded expectations, prompting analysts to raise their price targets.

Solar edge technologies rises to fresh 52 week highs
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  • Copper was the worst performing major commodity this week, dropping 1.4 percent. The commodity dropped as reports from Chile, the world’s largest copper producer, show exports of the metal rose to the highest since December 2014.
  • The worst performing sector this week was the S&P 1500 Paper and Forest Products Index. The index dropped 3.7 percent after anticipated delays to the Trump tax plan may delay further the introduction of an infrastructure build-out bill.  
  • The worst performing stock for the week was OCI NV. The Dutch fertilizer producer dropped 9.1 percent after RBC Capital Markets suggested India’s decision to scrap a tender for urea, a crop nutrient, may put an end to the fertilizer rally of 2017. 


  • China’s producer prices, which are highly correlated with commodity demand, were surprisingly strong in October, while consumer inflation picked up pace in a sign the economy remains robust. Both measures came ahead of expectations, despite investors’ fears that the government’s crackdown on polluting factories would hurt factory output.
  • The U.S. dollar weakened on tax reform worries, pressured by possible delays to the much-anticipated corporate tax cut. Any potential delay in the implementation of tax cuts would tend to work against the U.S. currency, analysts said. Despite the negative implications for U.S.-based corporations, the weakness in the dollar may result in a boost for commodity prices which traditionally have a negative correlation to the U.S. dollar.
  • U.S. gasoline demand hit a record high in August, and most recent data suggests the trend may be sustained, and gasoline demand may continue to prop up crude prices. Gasoline demand rose to 9.77 million bpd in August; the level was the highest on record, according to the EIA’s data.


  • China customs data provided disappointing commodity demand trend data for investors. Iron ore imports by China slumped last month to the lowest since February 2016, sinking more than 30 percent, as mills prepared for unprecedented state-ordered curbs on steel output over the winter. In addition, China’s October oil imports fell sharply from a near record-high of about 9 million barrels per day (bpd) in September to just 7.3 million bpd, the lowest level since October 2016.
  • Some market participants have begun to question whether the crude rally still has legs; the reality is that hedge fund speculative positions are sitting at a record long, of over 1 billion barrels. In addition, momentum and sentiment indicators are showing 94 percent of futures traders are bullish. All of this coincides with the 1-year forward curve sitting at levels not seen since February 2017, which are similar levels that major producers have used to hedge future production. With this much excitement chasing the rally, some investors have voiced concerns that the rally may running out of legs.
  • Institutional demand for gold slumped to an eight-year low in the third quarter as the prospect of higher U.S. interest rates and tighter monetary policy resulted in less buying from institutional investors. Data released by the World Gold Council showed demand for bullion fell to 915 tonnes in three months to September, down 9 percent from the same period a year ago.

China Region



  • Hong Kong and China had a solid week, with the Hang Seng Composite (HSCI) up 1.82 percent and the Shanghai Composite up 1.81 percent.  Vietnam’s Ho Chi Minh Stock Index climbed 2.90 percent for the week.
  • Chinese home improvement and property company Welling Holding Group (382 HK) jumped 25.95 percent this week after its majority stake holder Midea offered to buy out the company’s remaining shares for HK$2.06 apiece.  The stock is currently halted.
  • Hong Kong’s HSCI put in more multi-year highs this week, now trading at levels last seen almost a decade ago, in 2007.  Information technology put in a particularly good showing, with the sector rising 5.23 percent in the last five trading days.


  • Thailand’s SET Index dropped 70 basis points for the week.
  • Conglomerates and materials were the only two sectors to finish in the red for the week in the Hang Seng Composite, falling 1.26 and 0.52 percent, respectively.
  • Both exports and import in Taiwan missed analysts’ estimates this week.  Year-over-year imports came in up 0.1 percent, shy of an expected 2.1 percent gain in the October period, while exports rose only 3.0 percent, falling short of expectations for a 7.0 percent print.


  • Today, the Chinese government announced it is indeed scrapping rules limiting foreign ownership on banks and fund firms, thus granting global financial companies increased access to the Chinese economy and boosting the openness of the Chinese financial system. 
  • While the United States celebrates Veteran’s Day (and thank you for your service, to all of our men and women in uniform!), China will focus upon the recent commercial phenomenon known as Single’s Day (due to the constellation of ones or “singles” in the date 11/11).
  • A recent study by UBS Group AG and PricewaterhouseCoopers observes that billionaire wealth increased 17 percent to $6 trillion in 2016, Bloomberg reports.  Notably, the number of billionaires in Asia surpassed the U.S. for the first time, though American billionaires still control the most wealth at roughly $2.8 trillion.  China has the highest number of billionaires in Asia.

Asian Wealth Rose at a faster pace than global counterparts
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  • North Korea remains a primary focus during U.S. President Trump’s current trip to Asia, though most headlines and reports thus far have focused on the positive trade announcements and deal-signings.
  • Smog in New Delhi, India, became so thick this week it caused school closures, halted traffic on highways, and sent “residents scurrying to buy air purifiers and filtration masks,” Bloomberg News reports.  The mega-city had deadly carcinogenic pollutants running 10 times the reading in Beijing!  The article reports that some experts are calling the situation a public health emergency.
  • Monetary policy missteps remain relevant, and with a current 92.3 percent likelihood of a Federal Reserve rate hike in December, and a recently-announced Jerome Powell to head the Fed in the future, hints directions for both U.S. and global monetary policies will be as closely watched as ever in the near future.

Emerging Europe



  • Russia was the best performing country this week, gaining 4.2 percent. Rising oil prices and expectations for higher dividends pushed equites higher. Brent crude oil gained 2.5 percent this week, on political tensions in Saudi Arabia.
  • The Czech koruna was the best performing currency this week, gaining 1 percent against the U.S. dollar.  Prospects of further monetary tightening are boosting demand for the currency. The central bank hiked its key rate by 25 basis points on November 2, and more hikes are expected as annual inflation accelerated to 2.9 percent in October, from 2.7 percent in September. Policymakers target 2 percent price growth with a tolerance band of 1 percentage point on each side.
  • The energy sector was the best performing sector among eastern European markets this week.


  • Greece was the worst performing country this week, losing 3.9 percent. The Greek central bank chief Stournaras said that Greece’s banks have shown progress in tackling a stockpile of non-performing loans, but this would remain a key challenge for the country going forward. He also added that high debt and a high level of unemployment were also key challenges to the Greek economy.
  • The Russian ruble was the worst performing currency this week, losing 1.1 percent against the U.S. dollar. The ruble declined against the dollar as oil climbed to the highest level in two-and-a-half years. Nomura recommended shorting the ruble against the dollar and the euro. Seasonal support for the Russian currency deteriorates from November through January, while new financial sanctions pose another risk, the broker said.
  • Real estate was the worst performing sector among eastern European markets this week.


  • According to BNE IntelliNews, Russian stocks will be paying the highest dividends over the next twelve months. The MSCI Russia Index was trading with an average dividend yield of 5 percent at of the start of November, while the broader MSCI Emerging Market Index has a dividend yield of 2.3 percent. This week Tatneft, a Russian oil and gas company, announced higher dividends, and Sberbank announced it may be raising its dividend payout to 40 percent of profits for 2017 and 50 percent in 2018. Currently, Sberbank pays 25 percent of profits.
  • The European Union raised its 2017 economic growth forecasts for all of its eastern members as export growth and consumer spending boost output. Estonia, the Czech Republic, Romania and Slovenia had the biggest upgrades from the last projections in May. Poland is seen growing 4.2 percent and Hungary rising 3.7 percent, according to the report. Easter Europe is expected to grow at a faster rate than Western Europe.
  • Eurozone investor confidence jumped significantly more than forecast this month. It was reported at 34, hitting its highest level in more than a decade, and well above the forecast of 30.8, underlining the strengthening conditions in the euro bloc. The Sentix Investor Confidence Index is a monthly survey which shows the market’s opinion about the current economic situation, as well as expectations for the next semester. A higher reading, below zero, is seen as positive, while a lower reading is negative.

Eurozone investor confidence continues to climb
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  • A key meeting scheduled for November 7 between U.S. Vice President Michael Pence and Turkish Prime Minister Binali Yildirm has been postponed to November 9. During this meeting, political problems are expected to be discussed. Recent increased tensions between these two NATO countries captured a lot of media attention. Rising oil prices and political noise pushed the lira lower against the U.S. dollar. The outcome of this meeting could be important for the lira.
  • Hungarian consumer price growth slowed for a second month in October. Inflation dropped to 2.2 percent from a year earlier, compared with 2.5 percent in September. Inflation slowed mostly due to base effects as significant fuel price increases from a year ago faded from the index, statistician Beata Kollar told Bloomberg reporters in Budapest. The driver of inflation continues to be food as well as alcohol and tobacco products, which rose 3.3 percent and 6.8 percent, respectively.
  • The Wall Street Journal said a steady economic recovery helped European companies beat earnings expectations this quarter, despite currency headwinds and rising commodity prices. It highlighted that 54 percent of companies in the STOXX Europe 600 that had reported quarterly earnings, as of Wednesday, beat expectations. However, it added that this is slightly lower than in the year-earlier quarter and second quarter of 2017, when 57 percent of firms exceeded earnings expectations.

Leaders and Laggards

Weekly Performance
Index Close Weekly
Russell 2000 1,475.51 -19.41 -1.30%
S&P Basic Materials 363.98 -4.59 -1.25%
Nasdaq 6,750.94 -13.50 -0.20%
Hang Seng Composite Index 4,050.83 +72.24 +1.82%
S&P 500 2,582.56 -5.28 -0.20%
Gold Futures 1,275.70 +6.50 +0.51%
Korean KOSPI Index 2,542.95 -15.02 -0.59%
DJIA 23,422.21 -116.98 -0.50%
S&P/TSX Global Gold Index 192.62 +0.54 +0.28%
SS&P/TSX Venture Index 794.83 +2.85 +0.36%
XAU 80.60 -0.12 -0.15%
S&P Energy 513.67 +5.53 +1.09%
Oil Futures 56.82 +1.18 +2.12%
10-Yr Treasury Bond 2.40 +0.07 +3.00%
Natural Gas Futures 3.22 +0.23 +7.77%


Monthly Performance
Index Close Monthly
Korean KOSPI Index 2,542.95 +84.79 +3.45%
Hang Seng Composite Index 4,050.83 +102.19 +2.59%
Nasdaq 6,750.94 +147.39 +2.23%
XAU 80.60 -6.54 -7.51%
S&P/TSX Global Gold Index 192.62 -10.01 -4.94%
Gold Futures 1,275.70 -13.20 -1.02%
S&P 500 2,582.56 +27.32 +1.07%
S&P Basic Materials 363.98 +0.80 +0.22%
DJIA 23,422.21 +549.32 +2.40%
Russell 2000 1,475.51 -31.42 -2.09%
SS&P/TSX Venture Index 794.83 +3.51 +0.44%
Oil Futures 56.82 +5.52 +10.76%
S&P Energy 513.67 +6.89 +1.36%
Natural Gas Futures 3.22 +0.33 +11.32%
10-Yr Treasury Bond 2.40 +0.05 +2.30%


Quarterly Performance
Index Close Quarterly
Korean KOSPI Index 2,542.95 +223.24 +9.62%
Hang Seng Composite Index 4,050.83 +386.63 +10.55%
Nasdaq 6,750.94 +494.38 +7.90%
Natural Gas Futures 3.22 +0.23 +7.81%
Gold Futures 1,275.70 -18.30 -1.41%
S&P 500 2,582.56 +141.24 +5.79%
S&P Basic Materials 363.98 +29.20 +8.72%
S&P/TSX Global Gold Index 192.62 -6.79 -3.41%
XAU 80.60 -3.49 -4.15%
DJIA 23,422.21 +1,563.89 +7.15%
Russell 2000 1,475.51 +101.27 +7.37%
SS&P/TSX Venture Index 794.83 +32.02 +4.20%
S&P Energy 513.67 +44.12 +9.40%
Oil Futures 56.82 +8.00 +16.39%
10-Yr Treasury Bond 2.40 +0.21 +9.73%


U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission ("SEC"). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

This commentary should not be considered a solicitation or offering of any investment product.

Certain materials in this commentary may contain dated information. The information provided was current at the time of publication.

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investHoldings may change daily.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (09/30/2017):
Royal Gold
Osisko Mining
Tatneft PJSC
Sberbank of Russia PJSC
Centerra Gold Inc.
AuRico Metals Inc.
Torex Gold
Kirkland Lake Gold Ltd
Lumina Gold Corporation
AlGold Resources Ltd.
Orca Gold Inc.
Sandstorm Gold
Osisko Gold Royalties
Wheaton Precious Metals
Newmont Mining
SolarEdge Technologies


The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.
The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.
The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.
The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks.
The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500.
The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.
The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500.
The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500.
The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
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.
The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index.

The Sentix Investor Confidence Index rates the relative six-month economic outlook for the euro zone. The MSCI Russia 10/40 Index is calculated from the MSCI Russia Index, a market capitalization-weighted index designed to measure equity market performance in Russia. MSCI 10/40 Equity Indices are calculated with a base level of 100 as of December 31, 1998. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The STOXX 600 Banks (Price) Index (SX7P) is a capitalization-weighted index which includes European companies that are involved in the bank sector. There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time. The Vietnam Stock Index or VN-Index is a capitalization-weighted index of all the companies listed on the Ho Chi Minh City Stock Exchange. The Bangkok SET Index is a capitalization-weighted index of all the stocks traded on the Stock Exchange of Thailand. The Modern Wealth Index tracks how well Americans across the wealth spectrum are planning, managing and engaging with their wealth. Developed in partnership with Koski Research and the Schwab Center for Financial Research, the Modern Wealth Index is based on Schwab’s Investing Principles and composed of 60 financial behaviors and attitudes, each assigned a varying amount of points depending on their importance. The S&P 1500 Supercomposite Oil & Gas Equipment & Services Index is a capitalization-weighted index comprised of stocks whose primary function is equipment and services for natural gas and oil resources. The S&P Supercomposite Paper & Forest Products Index is a capitalization-weighted index. The index was developed with a base value of 100 as of December 30, 1994. Job Openings and Labor Turnover Survey JOLTS is a survey done by the United States Bureau of Labor Statistics to help measure job vacancies. The University of Michigan Confidence Index is a survey of consumer confidence conducted by the University of Michigan. The report, released on the tenth of each month, gives a snapshot of whether or not consumers are willing to spend money. The National Federation of Independent Business’s (NFIB) Index of business optimism is based on responses from 1221 member firms.

Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly.