As gold quietly sets all-time highs and geopolitical tensions escalate, investors across the spectrum are taking notice. But not all gold exposure is created equal, and for financial advisors seeking a differentiated way to harness the asset class’s momentum, Frank Holmes believes the answer lies in a more selective, disciplined approach.
In an interview with The Wealth Advisor’s Scott Martin, Holmes, CEO and CIO at U.S. Global Investors, discussed the strategic case for the U.S. Global GO GOLD and Precious Metal Miners ETF (ticker: GOAU), why gold royalty companies offer a compelling edge, and how a quantitative framework separates GOAU from traditional gold funds.
“All the back testing going back a century shows having 10% weighting in gold is just prudent,” Holmes says. “Gold has done so well, and the royalty companies like Franco-Nevada have outperformed Berkshire Hathaway—that really shocks people when I show them the chart.”
The Fear Trade Is Back—and Central Banks Are Leading It
Amid deepening economic uncertainty, growing distrust in fiat currency regimes, and heightened global conflict, demand for gold is surging—and not just among retail investors seeking a hedge.
Holmes points to China’s assertive global strategy as a key driver. The country is building icebreakers, buying ports, and expanding influence through the “One Belt, One Road” initiative, all while accumulating massive gold reserves. “China continues to buy more and more gold,” notes Holmes. “And other central banks around the world are following suit. This reflects a broader fear trade, which has many dimensions.”
Unlike in past cycles, when gold’s narrative hinged primarily on inflation or interest rates, the current environment is defined by structural change. “What you’ve seen since this century is that gold has outperformed the S&P 500 80% of the time,” he explains. “It’s hard for people to believe that gold has been a phenomenal asset class and having 10% gold weighting in your portfolio has been prudent.”
The renewed central bank interest suggests something deeper is unfolding—particularly as countries seek to diversify away from the U.S. dollar. Recognizing the underlying pivot is key to anticipating continued demand for gold and gold equities, especially those positioned to deliver leverage without the operational risk of miners.
Smart Beta 2.0: A Disciplined, Quantitative Approach to Gold Exposure
GOAU doesn’t merely rely on thematic tailwinds. At its core is a sophisticated, quantitative model that Holmes refers to as “Smart Beta 2.0”—a rules-based, data-driven methodology that blends momentum, value, and quality.
“Smart Beta 2.0 is about dynamic processes and focusing on a superior business model—the royalty model being a prime example,” he says. “We also look at gold miners with the strongest growth and momentum in revenue and EBITDA, or those that offer deep value, meaning they trade at the lowest relative valuations.”
The strategy’s construction incorporates mean reversion and momentum principles, rebalancing quarterly to reflect changing fundamentals. “When we develop these strategies, we back test them for thousands of hours to assess whether the model works in both up and down cycles,” Holmes explains. “We evaluate its resilience, whether it can capture a runaway trend, and if it holds up during significant corrections.”
The result is a highly curated basket of gold-related equities, weighted by performance metrics rather than size. Unlike other bullion-backed exchange-traded funds (ETFs), GOAU aims to outperform by investing in companies positioned to thrive in both rising and consolidating markets.
Why Royalty Companies Are the Sweet Spot
Royalty companies offer structural advantages that many advisors may overlook. Unlike traditional miners, royalty firms avoid operational exposure while retaining upside through revenue-linked agreements. “They provide a royalty by offering, say, $100 million with the expectation of getting their money back in 10 years at a low coupon,” Holmes explains. “However, the key benefit for them is a ‘free ride’ on any increase in production or new reserves discovered. They get this upside for no additional cost.”
With no direct mining costs, royalty firms are less vulnerable to commodity price shocks or labor issues. Their lean models and high-margin profiles are a perfect fit for a rising gold price environment. “They’ve already done thorough analysis on these assets, and while they expect to get their money back in 10 years, the remaining 20 years are essentially all profit,” Holmes says.
GOAU includes multiple such firms with deep insider ownership and a history of dividend growth. “Many insiders are significant shareholders of companies like Franco and Wheaton,” he says. That alignment, he believes, is critical to long-term performance.
Royalty companies combine the safety of gold with the growth potential of well-managed business models, creating what Holmes considers the ideal vehicle for gold exposure in today’s market.
Expertise and Infrastructure Behind the ETF
GOAU isn’t just about theory and modeling. Holmes emphasizes the operational expertise behind the fund. “We have geologists and technical experts on staff, and we bring in consultants as needed,” he says. “We also have a special advisor—a young standout in the under-30 crowd and the only one in that group to have built a gold mine.”
Located in Toronto, the advisor provides key insight into project viability and exploration value. This technical edge allows GOAU to evaluate companies more deeply than screens can provide. “Toronto is the intellectual center for mining,” Holmes says. “Having someone on the ground there helps us stay connected to key industry developments—especially among Canada’s major banks.”
This hands-on approach is one reason Holmes believes GOAU delivers more than just passive gold exposure. “It goes to show that the Smart Beta 2.0 design does have some unique benefits, and I think it’s because it’s a disciplined process,” he explains, highlighting how their expert infrastructure supports the ETF’s methodical approach to gold stock selection.
GOAU essentially outsources the complex due diligence process to specialists with decades of sector experience, providing access to institutional-quality research that would be challenging to replicate independently.
Strategic Gold Allocation in Modern Portfolios
Balancing downside mitigation with upside participation remains a key portfolio challenge. GOAU seeks to achieve both, delivering gold exposure through businesses with resilient cash flows, dividend potential, and operational leverage—all filtered through a quantitative lens.
Holmes emphasizes that gold royalty companies in particular are still underappreciated but are well positioned for a strong bull market.
Part of that opportunity stems from the broader macro backdrop. Holmes sees parallels between today and past supercycles. “We are in a supercycle for not only AI, but on a macro basis, we are for gold,” he says. “These quality gold stocks are going to be in a beautiful bull market.”
Even within traditional growth frameworks such as Investor’s Business Daily, sentiment is shifting. “Just three months ago, there wasn’t a single gold stock in their Big 50 list,” Holmes says. “Now, several gold stocks are featured—including many royalty companies.”
That shift in recognition is a key validation of the model—and an important signal for advisors evaluating future positioning.
Gold Exposure That Works Harder
Gold is rallying, central banks are accumulating, and macroeconomic volatility isn’t slowing. For advisors seeking exposure to the asset class, Holmes makes a clear argument: not all gold strategies are created equal.
GOAU offers something more—active intelligence within a passive wrapper. Through Smart Beta 2.0, the strategy delivers gold exposure via businesses with resilient cash flows, high growth potential, and operational leverage—all while insulating from the operational risk of traditional miners.
“Something significant is unfolding,” Holmes says. “I think the gold stocks are still under-loved, underappreciated—and in a year from now, when gold hits $4,000, they’ll say: ‘Wow, I wish I knew that trade!’” Now, you do.
For advisors looking to add resilience, growth, and alpha in a single, disciplined allocation, GOAU might just be the smartest way to play the gold story right now.
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Additional Resources
For direct questions about GOAU, please email info@usfunds.com. You can also download more information at www.GOAUETF.com.
Distributed by Quasar Distributors, LLC. U.S. Global Investors is the investment adviser to GOAU.
