Gold prices being dictated by Fed policy and rumor, says HSBC's James Steel...
GOLD PRICE trading in 2014 will see prices move in a range between $1220 and $1390 per ounce reckons bullion bank HSBC's chief commodities analyst, James Steel.
"The investment side of gold is fairly bearish," said Steel, a 30-year veteran of precious metals and other hard assets, on my New York Markets Live podcast this week, "with a relatively positive outlook on global equities, while the counterbalance, the physical demand is bullish."
"There is still good demand in China, remarkably high, sluggish mine output, reduced scrap supplies, good coin and bar demand."
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Previously running the New York research department for Refco, a large US commodities brokerage house, James Steel in 2006 joined HSBC (ticker: HSBC), now the world's largest bank by assets.
Holding some $2.7 trillion in assets, HSBC is a market-making member of the London bullion market, and a major commercial vault operator – building a dedicated vault last decade to house the gold needed to back shares in the giant SPDR Gold Trust fund ETF (ticker: GLD).
Steel has also worked for The Economist in the Economist Intelligence Unit, covering commodity producing nations.
This week, he and I discussed a broad range of topics around the future of gold prices, including the impact of Fed announcements, how silver compares to gold investment, the status of China as a large gold consumer, the health of the precious metals mining industry, and the historic role of gold as an alternative asset and recognized global currency.
"Gold prices are extremely sensitive to Fed policy and shifts in Fed policy," says James.
"Rumors and market chatter about what the Fed would do last year in April and then in June led to the two biggest sell-offs in recent history in the gold price."
Turning to silver, that market "has a larger retail component than gold," HSBC's chief commodities analyst explains. "Fifty per cent of the silver market is used for manufacturing or industrial processes. And the silver market is much smaller than gold in terms of capital size."
You can download and hear the full 29-minute show here...
