Gold, silver have bottomed, CPM Group chief says

CPM Group is one of the leading precious-metals consultancies in the world today, publishing widely followed overviews such as the Gold Yearbook, the Silver Yearbook, and the Platinum Yearbook.

CPM managing partner Jeffrey Christian recently appeared on the Investing News Network to issue a mildly bullish forecast for precious metals in 2016.

Christian has been a source of controversy among some hardcore gold bugs who say he understates the true massive extent of gold demand in China and has been negative on the metals prospects.

Differences over Chinese demand: Respected gold blogger Koos Jansen is one of Christians critics. Jansen helped bring the Shanghai Gold Exchanges withdrawals data to the forefront for those seeking to get a handle on Chinese bullion demand, arguing that Chinese demand is much greater than is being reported by mainstream media.

In a recent presentation Jansen argued that Chinese gold demand is not what mainstream consultancy firms (GFMS, WGC, Metals Focus, CPM Group) would like you to believe. In a nutshell Mr. Christian stated Chinese gold demand was roughly 933 tonnes (30 million ounces) in 2015, while I stated it was more like 2,000 tonnes, as China has imported roughly 1,400 tonnes, mined 450 tonnes and scrap was likely more than 150 tonnes for the year.

Pendulum shifting back to bulls: Time will tell just who is correct. But the important thing to note when taking Christians analysis into account is that he probably errs on the conservative side of the picture.

Thats why Christians interview ought to be seriously considered. In it, he argues that gold and silver prices have probably bottomed not that theyre headed to the moon tomorrow.

In 2010 we told our clients and the world that we thought that gold, silver, and commodities were heading toward a cyclical downturn within a secular bull market and that the prices could fall, probably peak around 2011 and fall for three to five years, he said.

They peaked in 2011, and were four years into that downward cycle. We think that gold and silver probably have fallen pretty much as low as they will, and were looking for them to bounce along the bottom and start to rise probably later this year, perhaps in conjunction with the U.S. presidential election, and rise in investor concern about some of the economic and political factors going on at that time.

Massive declines in mine output: In other words, Christian is no blind cheerleader for precious metals, nor is he a doom-and-gloomer. Just look at his opinions on the state of the global economy.

I think we will see a recession at some point, but it may well be 2018 or 2019 before we see it, he said, dismissing concerns that 2016 could be cataclysmic.

He also thinks the dollar will remain robust. Youll probably see the dollar continue to be strong. Again, it may not rise, but I dont necessarily see it falling sharply from where it is today, he said.

But despite that, Christian sees room for gold to keep appreciating. Although he doesnt believe in peak gold, Christian said we will see massive declines in production of copper, gold, silver, and other metals because of the cutbacks in exploration and development that weve seen since 2012, and its going to continue.

Silver could beat the S&P: Christian also is positive on where poor mans gold is headed. Were looking for silver to go up about 10% this year, he said. Thats only taking it to $15, which is where it was in the middle of last year, but thats a 10% return, which is probably better than youre going to do on the S&P.

Precious metals have bottomed, gold production is in decline, and silver could beat the S&P 500 those are forecasts that should hearten anyone looking for a rebound in the bullion sector. And if Christians forecasts err on the side of caution, then the upside could be even greater.

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