A projected recovery by the hard-hit U.S. dollar in the second half of 2008 will temper the record-breaking rise in gold, which has been boosted by inflation more than any other factor, HSBC's chief commodities analyst said on Sunday. ( Reuters )
"We're still looking for strong (gold) prices certainly for the remainder of this year, but perhaps not to average the current levels where we are now," Jim Steel of HSBC Securities told an international mining convention in Toronto.
Gold futures are up about 17 percent this year and up 50 percent since last summer, surging as the U.S. Federal Reserve continues to chop interest rates in an effort to boost a slowing economy.
Uncertainty over supply is also playing a role, but gold's historic function as a hedge against a declining currency has taken center-stage in the latest rush, Steel said on the opening day of the annual Prospectors and Developers Association of Canada convention.
"We do see the trajectory of the (gold) market going up significantly higher," he said.
However he added: "We are looking for a ( U.S.) dollar recovery from about the second quarter onward. We believe the dollar is getting oversold."
Bullion slated for delivery in April GCJ8 on the COMEX division of the New York Mercantile Exchange settled at $975 an ounce in New York after surging to a record $978.50 last week.