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HSBC’s Steel Says Gold Market Still Intact

February 20, 2013 - The market is digesting data that indicates a possible global recovery, which is driving some investors to riskier assets. The German business sentiment, for example, reached its greatest level in three years on the optimism.

The price of gold is also coping with Asian bargain hunting as China, the world’s largest gold-buying population, returns from the weeklong Lunar New Year holiday.

James Steel, analyst with HSBC, recently spoke with Bloomberg about gold and silver, giving a forecast for silver.

Steel is looking beyond the current and rather temporary influences on the market by looking at influences that have ceased to affect the market. Included in his analysis, the gold market is no longer being affected by the disruptions of the fiscal cliff, worries of a hard landing in China, which have not materialized, and the withdrawal of Greece from the EU.

These items, in Steel’s view have helped to support the gold market in their time, though their influence have diminished. However, the yield on gold is still supportive of bull market, even if the support derives from the negative yield on other investments. Negative real interest rates are supportive of gold bullion moving forward. Additionally, uncertainty in currency markets will make gold a very good investment.

Even at today’s price dynamics, Steel indicates that it was only a few years ago that President Obama took office and the price of gold was at $900 per troy ounce.

As such, he is moderately bullish on all the precious metals with adjustments up for the price of silver.

The rapid rise in investment of the precious metals, which was derided just a few years ago as the market prepared for unprecedented gains, may have leveled off somewhat in the current market dynamics as investors work to make sense of the market influences, but the vast potential of gold an silver to future markets is still there.

Indeed, the fundamental indicators point more toward gold and silver achieving real value in the future than to other investments such as equities which are currently at multi-year nominal highs yet barely breaking even with 2007 values.

The price disruptions of changing dynamics in the markets should be viewed as temporary in a fundamentally bullish environment.

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Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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