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Cannot stop talking about the precious metals right So we're seeing some signs of moderating here this morning. But the size of the losses that we have seen in precious metals and silver, gold, copper is one really for the history books. So let's talk more about it and where things might be headed with James Steele, chief Precious Metals analyst at HSBC. He joins us live in our Bloomberg Studios. James, good to see you, Happy Monday morning to.
You, Thank you, good morning.
So is this just really about this gold and silver trade being too crowded and people were just trying to try to get at or is there something else going on here?
Well, I think you've effectively hit the head on the
nail for the immediate reason. I mean, any commodity that has this parabolic rally that gold and silver had and the new entrance into the market which they were flooding in and have been for many many months now, it really does invite a volatility and be profit taking stroke liquidation on any news or developments that run counter to gold, and we had a couple of them within a few days, and it really did give us a big and deserved, I think correction in both gold and silver.
James, you've been at this precious metal game for decades now. Just put into context the volatility both on the upside and then the downside. On Friday, there's a handful of days just extraordinary volatility. Just put that into context.
Well, yes, you're right, and it's extraordinary.
And so was a rally. Yep, you know we were talking about you. Gold made a fifty four.
I think new highs last week, right, and people were talking about a new high and new high, and I always cautioned everybody. I said, look, it's not a new high until we go above in real terms what it was in nineteen eighty. In January of nineteen eighty, gold hit eight hundred and fifty dollars an ounce, and that's about thirty four hundred dollars in today's There you go, And they did that in April last year. And then I said, Okay, now we can genuinely talk about a
new high. We can genuinely talk about a real rally. And the difference between now and seventy nine was a limited number of buyers at that time. A Hunt Brothers especially in silver, but also a much more broad based church this time, a lot of a lot in it. But the volatility nonetheless, and to look at it this way, we had a swing in a couple of days that was equal to the absolute number that gold was trading at when I started covering it.
Wow, that put it in perspective, right, So you know, it's just when you look at where we've come. I mean, gold top fifty five hundred dollars announced last week, it's now at about forty seven to fifty. I guess spot gold. Silver wiped out thirty percent of its value in just three days. Do you have a target for gold by the end of this year, because for many who had their target at fifty five hundred, well, it already blew past that in just the first month.
Yeah, are high for the rest of the year is fifty five. We have an average which is almost where it is now, and we're expecting a very wide range. A good news could take us down closer to the four thousand dollars level, but what we think will likely the research view is that we have a moderately softer dollar this year. According to our FS people who've been pretty bang on on that and also we would I think very likely see a resumption in a greater central
bank buying. I mean, they are the ones that kicked off the genesis of this rally back in twenty twenty two. If you look at it this way, in twenty two, twenty three, twenty four, almost one out of every three ounces of gold that came out of the ground went into a central bank vault, double or triple the average for the previous ten years.
That's incredible.
Yeah, truly.
So I think about a commodity, just take oil prices spike up, they start drilling holes in Texas. What happens when you see gold just spike up? I mean they don't start digging more mind.
No, well not in the near term. You know.
Again, when I first started covering the market, by the time a group of geologists said I think there's some gold here, to the time when it went round your finger or your neck, it was about ten years exploration, permitting, et cetera, et cetera. It's closer to twenty now. Really, it takes a very long time. You know, it's highly capital intensive, and the low hanging fruit has been picked.
So we're going into different regions and areas. What is flexible is is recycling, because gold, unlike oil and grain, is never consumed.
It's stoically somewhere.
It's either around your neck or on your neck in a central bank vault and a vault some other place, and a bar and a coin, and that's what can be mobilized at fairly short Now. What we've noticed is that we haven't seen the response on the recycling side. It is higher, there's not as high as I would
have expected. And it's rather like owning a home. If the market keeps going up, you may refrain from putting your flat on the market, but when it comes down a bit, you might then say, okay, maybe we've hit the high. I should sell now, so we may see a pickup and recycling.
You know, I just wonder, I mean, outside of just of investors, what is the larger impact on the economy, the fact that we have gold prices and we do use gold in different ways every day, gold and silver prices being as high as they are, even despite the pullback so recently, they're still relatively high. What is that impact on the broader economy.
Well, it has been good for jewelry. Simply put.
A jewelry is often about fifty percent of physical gold demand. We calculate that last year it was only thirty five percent. It's been down double digit. Also there's a reduction in coin demand. But generally speaking, gold does not have huge macroeconomic impacts. It reacts to macroecertnomics. It doesn't set It's not like oil. It doesn't set the stage. It reacts
to the stage. And that's why you know, you've got to pay attention because the gold price does tell you that there are geopolitical or economic risks.
It doesn't.
They may not materialize, but you know, the geopolitical risk index is fairly high and persistently high.
All right, folks.
GLCO that is the function of the day. Gives you all the global commodities. You click on the metals and then breaks it down between base metals, ferris metals, and precious metals. So there you go. That's the function you need to be on top of what's happening in the world of commodities. James Steel, thank you so much. We
appreciate it. James's chief precious metals analysts at HSBC. Whatever we see big moves in precious metals by far The first phone call we go out to is to James Steele, and he's kind of to give us some of his time there