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Steel said gold’s rapid rise has pulled in many momentum traders, which increases the likelihood of a sharper downward correction. “I think that's where we have to be somewhat concerned, that if we get some days where things are static, we could easily get a pullback in the price,” he said, adding that he’s seeing a lot of demand destruction in the physical markets. “It's getting very expensive for price sensitive economies to keep buying the underlying physical.
Asked whether nominal all-time high gold prices will spur central banks to become sellers, Steel said that for the most part he expected the opposite. “This is not usually a good sign,” he said, adding that there’s a fundamental economic argument “that gold is the world's supreme hard asset, the dollar is the world's supreme paper asset. They should be inverse, and they usually are.”
While they believe gold could come under some selling pressure in the coming months, HSBC does see a limit to the downside. The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc.