Gold prices are extending their recent climb higher, said Jim Steel, chief commodities analyst at HSBC.
“[Gold] is a safety play,” Steel told CNBC. “Although I suspect the rally earlier this year might also have been associated with inflationary worries...Inflation is not a threat longer-term, but I think the dollar issue is a long-term, determining factor in gold going higher.”
Steel said gold prices have been on the rise despite a stronger dollar and it also seems to be decoupling itself from the equity markets.
“I think we will get over $1000, but the issue is how long we will stay above that,” he said. “The actual physical demand for gold is very low.”
He said there is a decline in demand for physical gold in countries such as Turkey and India—two of the largest gold consuming countries.
“So this is freeing up a lot of gold precisely for the investment markets and we have increases in the scrap supply so we could see a balancing out of the physical versus the investment-led,” he said.
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No immediate information was available for Steel or his firm.