HSBC Private Bank is moving its position from positive to neutral on gold and precious metals. H...
HSBC Private Bank is moving its position from positive to neutral on gold and precious metals.
Head of global strategy Fredrik Nerbrand said gold’s position as a safe haven is quickly being eroded, declining 16.6% since 15 July and signalling the exit of speculative long positions.
He said gold, without the restrictions of the supply/demand constraints some precious metals have, has formed a bubble, which is now deflating.
He said: “Historically speculative bubbles in gold have burst with a decline of 35%, suggesting gold could move down to the $630 level from its recent peak of $976.
“It is worth noting however that the size of the declines after a speculative bubble have gradually been getting smaller since the 1960s, a more conservative measure would suggest gold moving to $735.”
He added if gold moves below this level there would be risk for further downside negating the bull run seen since 2000.
Nerbrand said if the US economy improved it would be negative for gold, with investors reallocating their assets away from gold back into equities.
Meanwhile, platinum has returned to strength after Q1 supply fears, caused by the crisis in Africa.
“The combined effect of a normalisation on the supply side, coupled with a fear of demand destruction stemming from the auto sector has led to further declines.
“Platinum however is likely to be in short supply this year without including the possibility of power shortage in South Africa which produces 70% of the world supply, as a consequence we move from positive to neutral on precious metals, rather than an outright negative.”
HSBC Private Bank said it was seeing similar stories across industrial metals, where declines in production continue to hit demand and remain negative in the commodity class.
