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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Cannot stop talking about the precious metals right So we're

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Speaker 2: seeing some signs of moderating here this morning. But the

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Speaker 2: size of the losses that we have seen in precious

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Speaker 2: metals and silver, gold, copper is one really for the

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Speaker 2: history books. So let's talk more about it and where

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Speaker 2: things might be headed with James Steele, chief Precious Metals

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Speaker 2: analyst at HSBC. He joins us live in our Bloomberg Studios. James,

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Speaker 2: good to see you, Happy Monday morning to.

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Speaker 1: You, Thank you, good morning.

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Speaker 2: So is this just really about this gold and silver

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Speaker 2: trade being too crowded and people were just trying to

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Speaker 2: try to get at or is there something else going

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Speaker 2: on here?

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Speaker 3: Well, I think you've effectively hit the head on the

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Speaker 3: nail for the immediate reason. I mean, any commodity that

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Speaker 3: has this parabolic rally that gold and silver had and

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Speaker 3: the new entrance into the market which they were flooding

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Speaker 3: in and have been for many many months now, it

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Speaker 3: really does invite a volatility and be profit taking stroke

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Speaker 3: liquidation on any news or developments that run counter to gold,

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Speaker 3: and we had a couple of them within a few days,

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Speaker 3: and it really did give us a big and deserved,

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Speaker 3: I think correction in both gold and silver.

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Speaker 4: James, you've been at this precious metal game for decades now.

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Speaker 4: Just put into context the volatility both on the upside

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Speaker 4: and then the downside. On Friday, there's a handful of

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Speaker 4: days just extraordinary volatility. Just put that into context.

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Speaker 3: Well, yes, you're right, and it's extraordinary.

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Speaker 1: And so was a rally. Yep, you know we were

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Speaker 1: talking about you. Gold made a fifty four.

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Speaker 3: I think new highs last week, right, and people were

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Speaker 3: talking about a new high and new high, and I

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Speaker 3: always cautioned everybody. I said, look, it's not a new

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Speaker 3: high until we go above in real terms what it

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Speaker 3: was in nineteen eighty. In January of nineteen eighty, gold

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Speaker 3: hit eight hundred and fifty dollars an ounce, and that's

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Speaker 3: about thirty four hundred dollars in today's There you go,

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Speaker 3: And they did that in April last year. And then

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Speaker 3: I said, Okay, now we can genuinely talk about a

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Speaker 3: new high. We can genuinely talk about a real rally.

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Speaker 3: And the difference between now and seventy nine was a

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Speaker 3: limited number of buyers at that time. A Hunt Brothers

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Speaker 3: especially in silver, but also a much more broad based

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Speaker 3: church this time, a lot of a lot in it.

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Speaker 3: But the volatility nonetheless, and to look at it this way,

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Speaker 3: we had a swing in a couple of days that

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Speaker 3: was equal to the absolute number that gold was trading

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Speaker 3: at when I started covering it.

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Speaker 2: Wow, that put it in perspective, right, So you know,

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Speaker 2: it's just when you look at where we've come. I mean,

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Speaker 2: gold top fifty five hundred dollars announced last week, it's

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Speaker 2: now at about forty seven to fifty. I guess spot gold.

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Speaker 2: Silver wiped out thirty percent of its value in just

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Speaker 2: three days. Do you have a target for gold by

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Speaker 2: the end of this year, because for many who had

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Speaker 2: their target at fifty five hundred, well, it already blew

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Speaker 2: past that in just the first month.

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Speaker 3: Yeah, are high for the rest of the year is

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Speaker 3: fifty five. We have an average which is almost where

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Speaker 3: it is now, and we're expecting a very wide range.

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Speaker 3: A good news could take us down closer to the

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Speaker 3: four thousand dollars level, but what we think will likely

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Speaker 3: the research view is that we have a moderately softer

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Speaker 3: dollar this year. According to our FS people who've been

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Speaker 3: pretty bang on on that and also we would I

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Speaker 3: think very likely see a resumption in a greater central

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Speaker 3: bank buying. I mean, they are the ones that kicked

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Speaker 3: off the genesis of this rally back in twenty twenty two.

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Speaker 3: If you look at it this way, in twenty two,

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Speaker 3: twenty three, twenty four, almost one out of every three

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Speaker 3: ounces of gold that came out of the ground went

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Speaker 3: into a central bank vault, double or triple the average

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Speaker 3: for the previous ten years.

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Speaker 2: That's incredible.

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Speaker 1: Yeah, truly.

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Speaker 4: So I think about a commodity, just take oil prices

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Speaker 4: spike up, they start drilling holes in Texas. What happens

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Speaker 4: when you see gold just spike up? I mean they

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Speaker 4: don't start digging more mind.

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Speaker 1: No, well not in the near term. You know.

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Speaker 3: Again, when I first started covering the market, by the

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Speaker 3: time a group of geologists said I think there's some

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Speaker 3: gold here, to the time when it went round your

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Speaker 3: finger or your neck, it was about ten years exploration, permitting,

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Speaker 3: et cetera, et cetera. It's closer to twenty now. Really,

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Speaker 3: it takes a very long time. You know, it's highly

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Speaker 3: capital intensive, and the low hanging fruit has been picked.

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Speaker 3: So we're going into different regions and areas. What is

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Speaker 3: flexible is is recycling, because gold, unlike oil and grain,

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Speaker 3: is never consumed.

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Speaker 1: It's stoically somewhere.

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Speaker 3: It's either around your neck or on your neck in

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Speaker 3: a central bank vault and a vault some other place,

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Speaker 3: and a bar and a coin, and that's what can

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Speaker 3: be mobilized at fairly short Now. What we've noticed is

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Speaker 3: that we haven't seen the response on the recycling side.

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Speaker 3: It is higher, there's not as high as I would

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Speaker 3: have expected. And it's rather like owning a home. If

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Speaker 3: the market keeps going up, you may refrain from putting

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Speaker 3: your flat on the market, but when it comes down

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Speaker 3: a bit, you might then say, okay, maybe we've hit

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Speaker 3: the high. I should sell now, so we may see

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Speaker 3: a pickup and recycling.

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Speaker 2: You know, I just wonder, I mean, outside of just

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Speaker 2: of investors, what is the larger impact on the economy,

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Speaker 2: the fact that we have gold prices and we do

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Speaker 2: use gold in different ways every day, gold and silver

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Speaker 2: prices being as high as they are, even despite the

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Speaker 2: pullback so recently, they're still relatively high. What is that

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Speaker 2: impact on the broader economy.

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Speaker 1: Well, it has been good for jewelry. Simply put.

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Speaker 3: A jewelry is often about fifty percent of physical gold demand.

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Speaker 3: We calculate that last year it was only thirty five percent.

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Speaker 3: It's been down double digit. Also there's a reduction in

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Speaker 3: coin demand. But generally speaking, gold does not have huge

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Speaker 3: macroeconomic impacts. It reacts to macroecertnomics. It doesn't set It's

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Speaker 3: not like oil. It doesn't set the stage. It reacts

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Speaker 3: to the stage. And that's why you know, you've got

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Speaker 3: to pay attention because the gold price does tell you

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Speaker 3: that there are geopolitical or economic risks.

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Speaker 1: It doesn't.

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Speaker 3: They may not materialize, but you know, the geopolitical risk

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Speaker 3: index is fairly high and persistently high.

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Speaker 1: All right, folks.

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Speaker 4: GLCO that is the function of the day. Gives you

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Speaker 4: all the global commodities. You click on the metals and

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Speaker 4: then breaks it down between base metals, ferris metals, and

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Speaker 4: precious metals. So there you go. That's the function you

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Speaker 4: need to be on top of what's happening in the

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Speaker 4: world of commodities. James Steel, thank you so much. We

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Speaker 4: appreciate it. James's chief precious metals analysts at HSBC. Whatever

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Speaker 4: we see big moves in precious metals by far The

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Speaker 4: first phone call we go out to is to James Steele,

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Speaker 4: and he's kind of to give us some of his

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Speaker 4: time there