Mike Norman, anchor, HardAssetsInvestor.com (Norman): Welcome back folks, to the second half of my interview with Jeffrey Christian, managing director of CPM Group. Jeffrey, the last interview was sort of a macro overview. I think you said that for the remainder, maybe stable prices, but then we’re looking longer term for a resumption of probably a powerful bull market again in commodities.

Let’s look at some specific commodities. I want to talk about gold. Gold has garnered a lot of attention, particularly now that we’ve seen aggressive action taken by the Fed and other central banks to support the economy – some people say a lot of money printing. What is your outlook for gold?

Jeffrey Christian, managing director, CPM Group (Christian): Gold is somewhat different from other commodities: Gold is really a financial asset. So we think gold might do very well this year, possibly make a new record high late in March or in early April, then come off a little bit, we think, in the second and third quarters. The economic outlook may be that we’re sort of bottoming out, moving toward a recovery; and in that kind of situation, gold could come off to 8 or 850 and then probably move higher.

We’re looking at gold on a long-term perspective, and you have seen more investors buy more gold for a longer period of time in more parts of the world over the last eight years than ever before in history, and we’ve been doing a lot of thinking about it, and what you’re seeing is really a rehabilitation of gold as a financial asset.

So investors have looked at not just the most recent crisis but the fact that over the last eight years, we’ve had a series of financial, economic and political crises and problems, and they’ve simply said, I no longer want to have 0.2% of my assets in gold, I’d rather have 1%. So I think you’re seeing this long-term secular increase in investment demand, which is going to be around for a long time.

Norman: Let me ask you this, because in certain countries traditionally, historically – take India for example – silver; it’s a form of money, it always has been. But as their economy evolves and becomes more like ours – more modern – won’t they move to more of sort of a credit money-based system, whereas before, it was basically silver or gold considered money? And if they do, doesn’t that diminish the role of gold as money for these nations?

Christian: A couple points. First off, they are moving to a more diversified portfolio. If you go back to India 10 years ago, it was gold and silver, and that was your foremost savings. Today they’re reducing their exposure to gold and silver, they’re increasing their exposure to other assets; and what you find is it looks like it’s a diametric move compared to what you’re seeing in Europe and the United States, where people are moving away from financial assets to go over to gold and silver.

But in fact it’s the same impulse: I want to diversify portfolio. Whereas the Americans and the Europeans are saying, I want to diversify portfolio which includes some gold and silver, the Indians are saying, I want to diversify portfolio which includes some financial assets. That’s the longer-term issue.

On a short-term basis, the financial crisis of the last two years has driven home to a lot of Indians that they were right to focus on gold and silver all along, and they’ve been very happy that they didn’t take all of their gold and silver assets and move them into stocks and bonds.

Norman: I want to move on, but first I’ve got one quick question I want to ask you: the link between the dollar and gold. The dollar – since 2002 until probably the midpoint or late last year – was in a decline, but it’s been going up. Would that change your outlook if the dollar continued to rise?

Christian: It depends on how far it continues to rise. It’s a myth that gold trade against the dollar, and if you look at past financial crises – ’73, ’74, ’79, ’80 – gold and the dollar were rising together the same way they have been since the middle of 2008; and the fact of the matter is they’re both safe havens. So the fact that the dollar is rising … and I think it’s going to strengthen further over the next year or two ...

Norman: You do?