HSBC's Chief Precious Metals Analyst talks about the current themes in the gold market
(Kitco News) - James Steel, chief precious metals analyst at HSBC, said that gold's move lower has been due to the vaccine rollout and safe-haven demand dipping due to the post-pandemic economic recovery. Although he added the jewelry, bars and coin market have been doing pretty well.
"Many people attribute gold's rally to the response after the COVID-19 pandemic, but gold was already rallying prior to that. It was up 18%," he said in a webcast hosted by the World Gold Council. "There are well-founded fundamental reasons that caused gold to move higher."
He was asked how do you approach information that comes from Inda or China? Steel said he looks at mine supply, jewelry sales and recycling as bedrock drivers of the gold market. He then noted that you must marry these drivers with economic issues, interest rates and currency movements. The key to analyzing these factors is being able to weigh these things in terms of importance for a certain duration.
When asked about what he is hearing and being asked by gold investors, Steel said: "We have come off a red hot year of investment demand and that is cooling off. But now safe-haven demand and portfolio diversification is still there".
Steel highlighted how investment in demand has changed since before the 2008 financial crisis. He explained that before 2008 some money managers had never seen a bull market in gold. Now precious metal is at the forefront of people's minds and is very relevant. On the subject of cryptocurrencies, Steel said he would not characterize cryptos as being a rival to gold.
Finally, Steel was asked if this is a good time to invest in gold? He said he is an analyst rather than a strategist (and cannot give specific buy/sell recommendations) but having said that in HSBC's published views, the bank are looking for gold to move up in the second half of the year as they are expected a drop in the dollar and nominal yields.