That Tech Pod
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That Tech Pod
Scarcity Drives the Markets. So Which Becomes More Scarce: Gold or Bitcoin? with Frank Holmes
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This week on the pod, we talk with investor, entrepreneur and longtime market strategist Frank Holmes about gold, Bitcoin, geopolitics and one of the oldest forces in economics: scarcity. After more than four decades investing in gold and commodities, Frank was an early investor in Bitcoin and saw it as a digital store of value with some of the same characteristics that made gold valuable for centuries. We dig into what traditional investors missed about Bitcoin, whether gold and Bitcoin are really competitors, and what geopolitical conflict, sanctions, inflation and currency uncertainty can tell us about both assets. We also get into Frank’s bigger thesis: in an increasingly digital economy, the things that become scarce, whether they are gold, Bitcoin, energy or computing power, can become increasingly valuable.
Frank Holmes is an investor, entrepreneur and longtime market strategist with more than four decades of experience in gold, commodities and global markets. He is CEO and Chief Investment Officer of U.S. Global Investors, which he has led since acquiring a controlling interest in 1989. Frank was also an early investor in Bitcoin, recognizing its potential as a digital store of value alongside gold. His involvement later expanded into Bitcoin mining and digital infrastructure. Today, as Executive Chairman of HIVE Digital Technologies, he focuses on the intersection of Bitcoin, high-performance computing and AI, and the growing demand for the power and compute behind them. His career gives him a unique perspective on the evolution from traditional hard assets like gold to digital assets like Bitcoin, and what may become scarce in an increasingly digital economy.
Hello and welcome to that tech pod where we discuss all things e-discovery, data privacy, cybersecurity, and tech innovation. I'm Kevin Albert.
SPEAKER_02And I'm Laura Melstein.
SPEAKER_01And each week we are talking to heavy hitters in their industry to help us break down these topics. Laura, who are we talking to today?
SPEAKER_02Today we are talking to Frank Holmes, who is an investor, entrepreneur, and longtime market strategist with more than four decades of experience in gold, commodities, and global markets. He is CEO and Chief Investment Officer of U.S. Global Investors, which he has led since acquiring a controlling interest in 1989. Frank was also an early investor in Bitcoin, recognizing its potential as a digital store of value alongside gold. His involvement later expanded into Bitcoin mining and digital infrastructure. Today, as executive chairman of Hive Digital Technologies, he focuses on the intersection of Bitcoin, high performance computing and AI, and the growing demand for the power and compute behind them. His career gives him a unique perspective on the evolution from traditional hard assets like gold and digital assets like Bitcoin and what may become scarce in an increasingly digital economy. Frank, welcome to the show.
SPEAKER_00Great to be with y'all.
SPEAKER_02We're really excited to have you on. You have you wear many hats. And for those listening that you know you wouldn't have seen this, but he literally has like how many hats do you have over there of each company? It's like eight hats.
SPEAKER_01The B.
SPEAKER_00So it has many that we have many colors because of swag. In the AI, we're seeing Bitcoin, Ethereum, data center, that boom has now gone to AI, which is really you know fascinating on that journey. But I'm known for gold, and and and I have about 100,000 readers in 80 countries that we create, we have mutual funds, and we have the first no gold mutual fund. And we have ETFs on the New York Stock Exchange and London Stock Exchange. And most of them are based on what they call a quant model, smart smart beta 2.0, which means it rebalances and recalibrates every quarter, looking for the strongest momentum and revenue and cash flow of a basket of companies in a theme. And it would be based on a macro theme that I've done all this research on and believe is it's a sustainable trend. And so the world of gold took me into creating GoAu. But before GoAU was created, I created the first crypto mining company to go public because I couldn't launch an ETF in 2017. And so I knew the issues were worried about anti-money lover laws and KYC. But if you are a miner, then you create the virgin original coin, so then you don't have that problem. So I put up the first 5 million, immediately 30 million came behind, it went public. We started mining Ethereum with AD chips in Iceland and Sweden, and then we came to Canada, and now we're in Paraguay, and fast track that up. We're 2% of the global network of Bitcoin production. And we were the first to use mine Ethereum, and it went away, but we had bought a lot of NVIDIA chips, and we were first to go into AI. And we started was like a garage business, building up to a million dollars a month, uh learning you know what are the issues you have to deal with, where people rent your your what they call your compute power. And every week I learned something new, it keeps my brain young. It's the complexities uh from geopolitics to what's happening now with the anti-bit data center movement that's all synchronized and organized. And we saw this with Bitcoin data centers. So we've been through this journey, and and at the same time, I'm the chief investment officer of U.S. Global Investors, and that keeps my brain active about what's happening around the world. And we follow what we found, Laura, is the purchasing manufacturers index, PMI. It comes out every month, and it is one of the best leading indicators, six months out, of where commodities are going and job creation is coming. So if you are making electrical motors today and you get big orders, well, your copper price is going to go up because you're gonna start being to need the copper in six months to make all that copper wire for those motors. If it's textiles for making clothes or car parts, it doesn't really matter. It's just a great leading indicator. And everyone makes investment decisions, they always want to anticipate before they participate where that trend is going. And so we write about that every week, every sorry, every month, because the data comes out and we follow the G20. And we create a formula that is like uh pro sports, college sports. It's the swap model, which is strengths and weaknesses and opportunities and threats. So we look at last week and we comment on the three major strengths and weaknesses that impacted an asset class. And then we say, next week we know a payroll's coming out, the Fed is meeting. So these could be opportunities and threats to this industry. And we crystallize in layperson's language all that complexity because we found that the world really is these imbalances between monetary and fiscal policy. Well, what's the internet? It's zeros and ones, it's binary. What are government policies? It's binary, it's monetary or fiscal. And monetary is then binary again, it's money supply and interest rates. And over here, fiscal is tax and spend. Regulations get put in with the taxation. So you can create a dynamic model that recalibrates on a regular basis every month on these data points to allow you to see where a big trend is going. And then we look for geopolitical social elements of trends going on to stay out of an industry or go into an industry. And so that's what creates our following. But that knowledge of gold led me into knowing about Bitcoin.
SPEAKER_01Let's take us back to the moment when Bitcoin first got on your radar. What did you understand about Bitcoin early that traditional investors missed? And why were you willing to take a bet on something that was completely digital?
SPEAKER_00You know, Kevin, at first it didn't really resonate with me. And it was this ongoing education and being informed. The first thing was they had an ecosystem, and that was really significant because I was used to the gold market, gold ecosystem, which was much more institutional or it was retail. It was very bifurcated itself, but it was polarized. Bitcoin ecosystem was tighter and many younger people, and they would spend thousands of dollars to go to a conference. I never heard that with a gold conference. So I went in 2017, May to Consensus in New York, and I was really amazed by hearing Abigail Johnson, the CEO of Fidelity, giving a keynote speech. She's a technologist, besides running Fidelity, and so she understands, but she doesn't go to the tech conferences to speak. She doesn't go to MacroForce conference, she speaks at a crypto event. And I asked myself, these people, these kids are spending a thousand dollars a ticket, and you have hers as something else is going on. So I have to dig down. And and and that was the sort of the validation. I said, okay, let's go launch a hive. I'll put money into it to launch. The idea had come to me from friends in Vancouver, Tommy Humphreys in particular, who used to have a large newsletter in Canada, and so he knew about the world of gold. Well, the world of gold and Bitcoin are similar in respect, that their scarcity is the key element. And it's all about individual sovereignty. And I know from history that the boat people from Vietnam, first to get out, had gold tails. They're called grandma gold. And the Syrian families that got out of the disaster 10 years ago from Iraq and Syria and that whole region, they took off their 24 karat gold jewelry bangles. In that world, a strong Islamic world. Women can't have bank accounts. They don't have credit cards. What do they have that's portable? They have some cash from their husband, but they have gold, 24 karat gold bangles. And when you have a disaster in your family, it's your way out. So I knew that there was this love trade for gold that at the end could be a fear trade if there's a disaster. And in my research, I found 60% of people buy gold for love, 40% out of fear. And so, really, when it comes to this element of fear, it is about individual financial sovereignty and protection. That you had something that was portable. And so you can see Bitcoin was echoing what I knew from gold. Both were scarce, both were alternative. Well, Kevin, what happened was looking at the journey, it's really fascinating. It's gamers. You have to recognize it's gamers. And the evolution, the creation of Bitcoin starts with blockchain, was 91 by two Bell Lab uh PhDs from Berkeley that were creating a digital timestamp because who moves the most money in the world are banks. Well, actually, it was telecom companies. They banks use telecom equipment, so they need to have something that was the timestamp to protect when that money went and who was it between. So the blockchain was created, but it did nothing. And so a real key element was Napster. And Napster proved peer-to-peer was extremely powerful, and you could create a global ecosystem from it. And someone comes along and says, okay, let's marry the fusion of blockchain with uh scarcity, with what we see with gold, and let's marry that over here with encryption to be protected so that no bank like Chavez or the Kushners and Argentina can come in and confiscate your money. And we had it during COVID in Canada that the prime minister went in and used the banks to confiscate trucker's money and their payments for their welfare, etc. Uh, with I mean for their mortgages for the government.
SPEAKER_02I gotta jump in as you're saying this. You gave me a question here because you're talking a lot about you know gold and then Bitcoin. So if we're looking at gold and Bitcoin today, do you see them as competitors, substitutes, or two different answers to the same question? Because as we're going through this, that's kind of what I'm wondering from you.
SPEAKER_00I'm gonna get jumping that one second. I apologize if I'm so long window.
SPEAKER_02No, no, no, you're good.
SPEAKER_00I was just like stitching 10 years in 10 minutes. Yeah, do it, do it. And so what we found, I found, is that kids were going to bed and running the electricity of their parents and using their NVIDIA GPU cards to mine Ethereum. They found a way to get an account open at 10 years old at a brokerage firm, uh a crypto exchange, to convert that to dollars to upgrade their computer. They can't get a bank account, but they found a way. Well, who coded those exchanges? Gamers. NVIDIA started out now, it's the champion of the world for AI. It was gamers. And so we have to recognize that these young kids are now 30 and 40, and they're writing the infrastructure that's happening behind the Bitcoin ecosystem. So I said, you know, this is going to be important. And I can see that because I'm a gold investor going to Africa, going to Latin America. And you know what happened before Bitcoin came out? In West East Africa, they came over with a code for your telecom, which you can turn around and trade, make move money back and forth with MPESA is called M-P-E-SA. And all the Africans that couldn't read or write in villages all of a sudden were bankable. And today it is more than 15% of the GDP of these countries. It's more than 60% of all trade is through MPSA through your mobile phone because these poor Africans were not bankable to go into a bank. And so I said, Wow, look at that adoption. Well, that adoption happens there. Why can't Bitcoin adoption also expand? And then came from their stable coins. So it's scarcity and the element that you can break it down into digital smaller numbers, so therefore it can go to the masses. And I had witnessed on my journeys looking at gold mines around the world that this was was happening in East Africa. Does that help put it all together, Laura?
SPEAKER_02It does because there's so much here. So connecting it, I I feel like it's like a book on tape. I'm like, let's get crazy. And to me, it's so interesting just to see how everything ties together and changes. So 100%.
SPEAKER_00And I think the other I love to use it when I when I give speeches is start off with Steve Jobs on his famous speech at Stanford University, that you can't predict the future, but you can look back. And the better you are at connecting the dots, the better you make decisions for your future. So uh you have to go back centuries and then you have to go back decades, and you have to be really curious about different cultures and different foods. And if you deal with old, old money in Europe and America, it's very different than old money in India and very old money in China and Japan. And so how they function, and you just become curious with it. But in that whole journey, I found out in all these big cities anywhere in the world, kids had gamers, they were mining Ethereum. It's already gone. Like US dollars is a currency all over the world, and all of a sudden it's now Ethereum and Bitcoin. Said, you know what? I'm gonna invest in this business. I think it's only got more upside. Bitcoin was under 3,000, Ethereum was under 300. As you know, it's been a roller coaster ride to higher highs.
SPEAKER_01So, I mean, let's bring this into the current moment. The Iran conflict and expanded sanctions have created uncertainty around currencies and energy and trade. Gold initially benefited from the safe haven demand and then sold off as oil and uh you know inflation concerns rose. What does that tell you about gold during a geopolitical crisis? Does Iran strengthen the case for gold or for Bitcoin as a harder to sanction global asset?
SPEAKER_00Well, their currencies become worthless on a relative basis, is hyperinflation in Iran. And so what creates the stability is gold. If we look at Turkey, it sold as gold, but prior to that it was a big gold player. Though there's another dynamic that's happening, and we have to be really aware of it, is the dynamic of China. And the only person really to write about Xi Jinping, why it's important that you know Xi Jinping's history, is the former prime minister of Australia. And after he became the prime minister, he went to Oxford to do his PhD at the age of 59 because he was fluent in Chinese and had met him many times, Xi Jinping. And he became deeply worried about Xi Jinping, about how much he was dedicated to communism and the communist growth. And his father was a princeling with a mouth thrown in basically jail, and he lived in that jail, and then he got out, and it was always loyalty to the party. So you have now a person that made himself dictator for life. And he had this brilliant plan, which I thought at first was brilliant, but it's now deviously brilliant. And it was to, it was called One Road, One Belt, Marco Polo's imagery of his trade between the Silk Road and China all the way to Turkey. And it was to bring in railroads across and seaports and airports and what they had been able to do with in China. And now we see really it was to build military bases, and it was much more about anti-America. And so we're witnessing where he is uh inspired the BRIC nations to have another form of payment. And he and Putin are much behind it because froze uh all uh Putin's money and then the oligarchs' ability to travel in Europe and spend their money, etc. And now would they do that to Chinese? So they want to have a parallel way and not to trust on the dollar, and they believe that they can undermine the US government by making their currency weak. So there's a two-prong attack, and that is the debts we have that you have to buy more gold to protect yourself against it. And they have to consume a lot of gold, which they've been doing, but they'd have to consume all the gold produced every year for the next decade to get caught up to where America is. But they've been on a steady binge buying, China has. And so it's been pushing the uh the countries and what's one belt, one road is now lent. This is the shocker. It is lent to 75% of all the member nations of the United Nations. There's 1929 countries in the United Nations, and they are indebted to $1.4 trillion to Xi's China. And it's recognizing his push, especially if first having BRIC nations meeting together to do all trade in his currency, not the dollar, because they believe that the cost of capital for the US dollar's deficit would have to rise, and that would harm and bring in more inflation into the US. So he has a strategy to on a multi-polar trading system to attack the dollar's currency. That's what he has. And he's pushing that all these other countries own gold. Well, if you've let money to 75% of the set of the central banks, guess what? You have moral asuasion. And now we have now more gold in central banks than US dollars for trade. And so we saw this first time Iran gets invaded and actually gold came off, and why didn't it go up? But prior to that, it was on a tear going into that, what took place. And so I think these are really important dynamics to realize that United Nations indirectly is controlled by China. So they always vote now against America. It's just that reality. And that reality is what used to be under President Clinton really created the WTO, it was in the 90s, and it really got traction when China came in in 2002, something in that time period. And we saw this huge global growth because trade was number one, and underneath it was national security. What China has done in building with one belt, one road is to go after the dollar and at the same time build up their military spending dramatically, has made America concerned about the long-term agenda that the Xi Jinping has. And if you read the book by the former prime minister, then you start to say, you know what, you have to be concerned. It's like what Churchill tripped off the world early about Hitler. And so we're living in those dynamics right now. And so what comes out of it is Japan. And all of a sudden, Japan is becoming a significant force on trade. But that's for trade for what? They were the biggest lenders at zero cost of capital. You would borrow in America at zero cost, 10 basis points, invest, and get 3% in the US. So you got a nice positive spread. And if you bought dividend growing stocks, you even made more. The South Koreans, same thing. They were borrowers. And China's all of a sudden realized after COVID they've got inflation after three decades of no inflation and they want their money back. So you have this carry trade being unwound. And so to me, it's interesting to witness the what it does to countries and hedge funds and the new volatility that's coming into it while China continues to fight along. Japan just got announced that the US government came in and bought all their bonds. They're also the largest holder of US government securities. So uh it was to stop the free fall of the Japanese yen, because also really important to our geopolitics is Japan's military presence in Asia with the ever-growing threat of China wanting to invade Taiwan. And Japan's new leader, she is a tough, tough person. She's very much pro culture. And so we see these dynamics this year. Japan, after her being elected last fall, she's taken a much higher role in geopolitics. They're lending. Take it at financial geopolitics, and then you have these other dynamics of China and wanting to get out of gold in the trade. So they all play a role, and it's not like a big butterfly effect. You know, they've got the little butterfly effect. I'm talking about big butterflies. I try to apply Preto's law. What three big factors have the 80% influence? And it's wrecking those, I recognize those dynamics. I think the money printing is going to continue. I think the century of modern monetary theory has not gone away. The total global debt is $350 trillion. It's much more than what America's debt is. And we make such fanfare out of the 40 trillion debt, the US debt. But what happened with that debt number hitting 40 trillion, U.S. coming and supporting Japanese currency and buying their bonds. Immediately we saw a quick surge in Bitcoin and gold. It's really fascinating to watch this recalibration is happening so fast. There's signals in the capital markets that you have to look for. The quant funds call them ghost trades. You don't really see them until something else has happened. It's not obvious at the beginning. And so what I think is obvious is MMT is not going away. China under Xi Jinping's attack on the US dollar for trade is not going away. And what President Trump did at the world of uh trade uh event of there was uh what do you call it in in Switzerland this summer, this winter, he he made a big protest in a very calm way. He basically said when trade is number two now and national security is number one, he flipped the order. So you have to really see that that he flipped the order. Well, before he flipped the order, he went to NATO countries and said, if you don't keep your 2%, I'm pulling out of NATO. And Russia is only gonna go after Ukraine and then go after Poland. So there's a great concern. So all of a sudden, all the NATO countries start spending that money. So I launched a new product based on my knowledge of data centers and AI three years ago, before ChatGPT became popular, I was doing a million dollars a month of selling my compute power for my NVIDIA chips. So I learned, and like working on the garage type of model, two guys doing 12 million a year in revenue. And so now we're scaling that business. But at that time, it's to recognize okay, I got all this knowledge, I see where AI is going, chat's gone out. Over here, the US is gonna hold people accountable in Canada and the UK. And what happens is you're seeing this spending going up. Well, it's now gonna be almost $3 trillion. Okay, you have huge global economic spending by NATO to protect against the threat of North Korea, China, and Russia, and Iran. Those four axes are the axes of evil against America and against NATO countries. In some form or another, that's the pie, that's the polarization you're seeing. And so there's a big spend going on. Well, as a money manager, you follow the money. Go where the puck is going to be. You know, like it's you're gonna pass it. Well, I gotta see.
SPEAKER_02I mean, in fact, I gotta jump in. That should be everyone's rule of thumb in general. Always follow the money. Follow the money.
SPEAKER_00So now you have $2.3 trillion going in. You have deficit spending, it's not for world trade. The order is changed for military defense, national security. So that's why I wouldn't create an AI for rebuilding the military. And then I dug down the research, and President Biden was sending old equipment to Ukraine as they were rebuilding America before ChatGPT came out with AI ability. And we saw this year the significance of this when we went and got Maduro and not one American died, but 21 died going after Ortego when President Bush Sr. went after him in Panama. AI is so important. So I created a product because I believe we're in a thematic spend. I believe that the forces are going to make gold more valuable, the money printing policies of MMT, along with China being the attack. And Bitcoin is going to continue to grow because guys like Trump, like President Trump, didn't like Bitcoin his first term, gets uh thrown out, basically, and he gets debunked. And he feels the experience of like the Argentines did. They took your US dollar accounts and gave you 30 cents of the dollar worth three cents of the dollar now.
SPEAKER_02Frank, I gotta jump in here. I love I love the enthusiasm, and I know you're on a roll, but I gotta ask this one question as you're on this. If you could only choose one over the next 20 years, are you choosing Bitcoin or are you choosing gold? You can only choose one. What would you choose?
SPEAKER_00It's a great question. I I see both. I see both because gold's 5,000 years old, and you can wear the gold in beautiful 24 karat jewelry, and the culture is really important to appreciate. The biggest fire, when Costco started selling gold coins, and they put this in in their one of their documents, the biggest fires for young professional Chinese and Indian women in the tech sign. Why? Because they buy gold for love. You buy love for your family, and if something tragic happens, you always have the gold to get out. So you don't buy it out of fear, you buy that you wear beautiful 24 killer gold jewelry. And 60% of all gold demand is for jewelry. So you put that in that context, and you can see the young executives in America, where do they go buy if they come from that culture? And so I think they're both. And I also think that art, I have uh a few beautiful pieces of art, and they've gone up in value, and it's recognizing scarcity. The element of scarcity is so important. They used to be for diamonds until the beers started fighting kiberlites and flooding the market, and then you came up with synthetic diamonds and they've crashed to all-time lows. So once you take away scarcity and the population of the world is growing 6 billion, 7 billion, 8 billion, and the GDP per capita for 40% of the world is rising at 8% a year, that means that 80% if if 40% of the world's culture population is loves gold and and they're embracing gold and their GDP, and we know from GDP per capita studies we we've done, rising GDP per capita of India, China, and Vietnam and Thailand, gold consumption picks up in those countries. 24 caracology.
SPEAKER_02So I know you're you're on a roll still, you're so good. We didn't even have to interview you. We could have literally just handed you the mic. You have so much to say, and I absolutely love it. I find all of this fascinating. It's a conversation that Kevin and I have a lot, and we were sad that we didn't get to meet with you when we were at the Bitcoin conference, because I know that was on our list, and you're busy and we're busy, and it just didn't work. So I'm really glad we got to bring you on. But I think we're gonna need like four more episodes with you, Frank, because there's just so much we could do. So we are gonna pause you here because we're gonna keep going down, and I won't stop because I love it. So I'll keep passing the mic and then Kevin will be like, Laura, this isn't the you know, Joe Rogan show. But we really, really, really appreciate you coming on. Is there any last, like just a quick tip that you would want to give to our listeners before we let you go?
SPEAKER_00The most critical people in global investing I see, and they're also the biggest percentage of investors, are Americans. We gotta wake up every day and be thankful. We're alive. We woke up today. 200,000 people die every day. They just age, whatever happens. We're alive. I'm here talking to y'all. Just be thankful and grateful that we that we woke up, we talk, and we live in the greatest nation in the world. Where there is methodology to protect your private property rights and your human rights. There's at least a mechanism, and I have seen it in Europe where your human rights are taken away. And there's a high correlation of the rise in socialism, is the rise in humanitarian rights being taken away. So be grateful you're American.
SPEAKER_01I love it. That's a great way to end it. Thank you, friends, for coming on the show today.
SPEAKER_00Thank you, y'all.
SPEAKER_02If you would like to learn more about that tech pod, please reach out to us at contact at thattechpod.com. We would love to hear from you, or head on over to our website at www.thattechpod.com. Enter your email to subscribe, check out our merch, and just keep updated on the latest things with the tech pod and what we are doing. If you want to follow us on social media, head on over to LinkedIn.com slash that techpod, Instagram, or anywhere else that we may be on social media. Kevin, is there anything else our listeners can do?
SPEAKER_01Yep. Go to wherever get your pods, Apple Podcasts, Spotify, or what have you, and leave us a review, leave us a rating, let us know how we're doing. All that stuff helps us with the algorithms and is much appreciated. Thanks everybody.
SPEAKER_02Thanks everyone.