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At a time when plummeting gold prices have lead many long-term investors to question the metal's worth as a store of value, Jeffrey Christian, Managing Director, CPM Group tells BNN why he's turned bullish on the metal.
"Gold prices at $1,300 an ounce or lower represent relatively decent prices," he says. "From a perspective of three to five years, prices around where they are today represent relatively fair level to buy in."
Christian expects gold prices to hover between $1,300 and $1,550 over the next two years.
"It probably won't start rising out of this range until around 2016," he says. "We don't see the price of gold running away on the upside, but we also see the downside limited."
Gold is favoured by investors not just as portfolio diversifier, but also as an alternative to overpriced equities and a hedge against currency and stock market volatility.
The ongoing weakness in precious metals, especially gold, has triggered a great deal of shorting interest.
"It's worrisome because even though the prices have fallen, that short interest hasn't been liquidated significantly," he says. "That tells you that a lot of shorter term players are still expecting lower gold prices."
Christian assures that problems faced by gold producers aren't as bad as the headlines suggest.
"[There's] a lot of bad information and negativity about gold producers that far exceed the problems they are facing," he says, while chiding gold miners for not doing a better job of hedging.
"We have seen a tremendous reluctance on the part of financial managers at gold miners to do the kind of hedging they ought to be doing," says Christian. "I'm not sure when that's going to change."
Hedging is a financial transaction that's known to affect the price of gold. Christian explains how.
"Hedging does affect the price of gold, but it doesn't do so by increasing spot physical supply the way some people seem to think," he says. 'What it does is, it widens the contango [a situation where the futures price of a commodity is higher than the expected spot price], which causes opportunities to open up for arbitragers and short-term speculators to short the market."