Christos Doulis says the gold market remains negative and that not all miners are created equal.
[This article originally appeared on The Gold Report and is republished here with permission.]
Christos Doulis, mining analyst with PI Financial, hopes for the best but plans for reality. The bear market in precious metals is well into its fourth year and could persist into 2016. In this interview with The Gold Report, Doulis says he remains hopeful that this is the year things take a positive turn, but in case we see more of the same, he recommends a few low-cost producers with saintly management teams that keep delivering on promises.
The Gold Report: In September 2014, you told us that investors needed to own bulletproof, low-cost producers that can survive lower gold prices. What is your investment thesis for this point in the bear market?
Christos Doulis: Unfortunately, not much has changed. We certainly do not appear to be in a bull market for gold. All of us would like to see higher prices. They may come at some point in the future, but no one knows when that will be. So in the short and medium term, I would continue to recommend owning the lower-cost producers in order to protect oneself from the chances of insolvency.
TGR: What is your technical analysis of the recent performance of gold telling you about what we're headed for?
CD: I am still negative. When I look at the trend over the last year or so, there's been quite a bit of volatility, but in general, the highs keep getting lower, and the lows are getting a bit lower as well. For instance, in January 2014, we had a rally that went close to US$1,400 per ounce (US$1,400/oz) before it petered out.
Then we had another rally in January of this year when gold got closer to US$1,300/oz, not to that US$1,400/oz level, before it started to give back the gain. If you draw a channel on the gold price, it certainly looks as if we have not reversed course yet. The highs keep getting a bit lower on the volatility, and the lows have been lower. Then again, gold popped US$20/oz in early April. If gold could sustain a rally to US$1,250/oz, I would start feeling a little more enthusiastic about the space.
TGR: What is your prognosis for this bear market?
CD: I'm hoping for higher gold prices in the second half of 2015, and hope to see a return to an upward trend in the metal's price. My view is that we are still in a long-term bull market for gold but that after a 10-year bull run, we needed some pullback. This pullback has been particularly vicious, but what else is one to expect after gold went from US$300/oz to US$1,800/oz in a decade?