U.S. Global Investors CEO Frank Holmes Defends Gold

Frank Holmes, CEO and chief investment officer at U.S. Global Investors GROW, appeared on CNBC's Squawk Box to talk commodities, mostly his feelings on why he likes gold.

Holmes said that he's always preached having at least 5% exposure to gold stocks.

"And rebalance it. And there's been points where it's been extremely overvalued on a relative basis to the markets; just have these huge moves, and now we're in the correction mode," said Holmes.

According to Holmes, gold has it's own "DNA of volatility," with its annual volatility at plus or minus 15 percent.

"Anytime it's up 30 percent, take profits down 30 percent," said Holmes.

Holmes noted that gold was seasonal, saying that 50 percent of all gold demand is in jewelry. He calls it the "love trade."

"It starts it's season off at the bottom of the trough. It takes places in July and August, and it runs till Chinese New Year, and you have a sequence of one holiday after the other, that's truly impacted by demand out of Asia and the MIddle East," said Holmes.

He said he thinks gold could bounce 10 percent on the downside and 30 percent on the upside over the next 18 months. According to Holmes, the physical demand for gold is at a record high all over the world.