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By Jason Stipp | 05-04-2010 04:12 AM

Why Some Smart Investors Hold Gold

Khaner Capital's Lloyd Khaner outlines the major drivers behind gold's rise and the warning signs that may foretell a bubble burst.

Jason Stipp: I'm Jason Stipp with Morningstar. We're here at the Value Investing Congress in Pasadena, and I'm here with Lloyd Khaner. He gave an interesting presentation about why some very smart value investors are buying gold. He did some research into gold, and he's here to tell us a little bit about what he found.

Thanks for joining me, Lloyd.

Lloyd Khaner: Sure, my pleasure.

Stipp: So first question for you: Can you just give us a quick recent history of what you've seen in gold prices--where we are now compared to where we've been in recent history?

Khaner: Sure. You could certainly say that since 2000 you've seen a sharp move up in gold. Not exactly a bubble, but a move from roughly $250 per ounce to $1,100 per ounce. So it's been a pretty sharp move. The question is, is the bubble over or not? And there are a lot of people who believe that we have a lot higher to go.

Stipp: Sure, and I think an interesting question from a value investor's perspective is that as value investors you like to look and see what is the true intrinsic value of an asset. Then you buy it when it's cheap and when it has good prospects and when the market will eventually come around to your way of thinking.

How do you get comfortable with a valuation on something like gold?

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