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HSBC bullish over gold

May 20, 2015
Comments (18)

This article from SMM (Shanghai Metals Market) outlines HSBC chief economist Stephen King’s recent comments regarding the next recession and how gold plays into this. Overall the focus is on general weakness in the overall system but they do think gold will benefit in the long run. While it is nice to see a bank supporting the notion that gold is a good investment the narrative of a weak economic system is nothing new to gold bugs.

(Kitco News) – The U.S. economy hasn’t completely recovered from its last recession – what some have called the biggest since the Great Depression – but another one could be just around the corner, according to one economist.
In an opinion piece in the Financial Times, Monday, HSBC chief economist Stephen King said that historical trends shows that recessions hit every eight or nine years and the last one in the U.S. ended six years ago. If history is any indication, the U.S. could be facing another recession in the next three years. What’s worse, he said, is that policy makers don’t appear to have the ammunition needed to fight another one.
King noted that there could be several triggers for the next recession; a collapse in “overvalued equity markets,” leading to an “implosion of demand;” a sizeable slowdown in the Chinese economy; systemic failures across the pension fund and life-insurance industries; even a premature tightening of interest rates from the Federal Reserve.
“Whatever the likely cause of the next recession, the recovery seen so far has not enabled policymakers to replenish their ammunition; growth has returned but policy has not “normalized,” he said in his op-ed. “The U.S. economy is like a ship sailing across the ocean without lifeboats. Other nations are following in convoy behind. For all their sakes, we must hope to avoid recessionary icebergs.”
King did note that the government and the Federal Reserve are not without options; however, none seemed very appealing.
He said the Federal Reserve would have to restart its quantitative easing program. “That, however, might lead to yet another unsustainable asset price bubble and, thereafter, to an even bigger bust,” he said.
The government could introduce bigger budget deficits and create “Roosevelt-esque stimulus measures.” However, he added that in the 1930’s the government didn’t have to worry about pre-existing spending commitments and increased government spending now could create a pension and healthcare-fuelled debt spiral.
Another option would be for the Federal Reserve to start hiking interest rates as soon as possible to “replenish” its ammunition. But King added “[s]ustainably higher interest rates are only possible if the underlying economic forces — beyond the control of central banks — will let them go higher.”
Finally another option would be to raise the age of retirement.
“This would, at a stroke, reduce the need for high retirement savings because people would expect to work longer and, thus, live off wage income for longer. Lower savings would mean higher levels of consumption, stronger demand and, hence, higher levels of investment,” he said.
However, he added that this is not likely to happen as senior would probably push back against this type of proposal.
So with no clear solution to a looming problem King concluded that “We will, therefore, carry on sailing across the ocean in a ship with a serious shortage of lifeboats.”
In reaction to King’s op-ed piece, HSBC precious metals analysts said, that any of these scenarios would be positive for the gold market.
Courtesy: Kitco News
Discussion
18 Comments
    original jj
    May 20, 2015 20:10 PM

    For Dick Tracy, I’ll post BOA’s CDN$ outlook after the chart

    Last time CDN$ was .74 oil was $40, you can see the Petro$ in action flowing with the price of oil = perfection

    http://stockcharts.com/h-sc/ui?s=%24CDW&p=D&yr=0&mn=11&dy=0&id=p18579688209&listNum=1&a=409053066

    Peter R.
    May 20, 2015 20:28 PM

    If you think ratios are timeless you need to stop sniffing glue.

      original jj
      May 20, 2015 20:30 PM

      Peter, what the heck are you saying, spell it out man, you can do it

        Peter R.
        May 20, 2015 20:43 PM

        what I am saying is ratio between the price of oil and the CDN$ is not fixed (ie oil is not always at $40 when the CDN$ goes to 74-78). If you extend your timeline backwards you will clearly see it. Maybe I am misinterpreting your post and if so I apologize.

          original jj
          May 20, 2015 20:55 PM

          Wow this place is full of very uptight individuals, perhaps you could have said are you suggesting with the CDN$ and Oil trading together perfectly for the last year that if BOA’s forecast for a 74 cent Cdn$ means oil will be $40?

          There is a very old saying a trend is a trend is a trend is a trend until its not!

          At a min one would think that a 74 cent Cdn$ would not suggest an $80 oil price. Anyone who has been short off last July’s breakdown of oil and the Canadian currency into Jan has made a lot of money, and that is the whole point.

          This can all be done without any clue sniffing

            Peter R.
            May 20, 2015 20:08 PM

            Sorry for the glue sniffing comment. But the ratio has not even been steady over your time line. My point is, a trend has not been established yet for you to make your projection. Your $40 oil and mid 70CDN$ need to meet multiple times over more time than a few weeks to establish this trend you are speaking of. Trends are established over months and years not weeks.

            original jj
            May 20, 2015 20:40 PM

            Obviously you can’t see the chart I provided, is 11 months a good enough trend timeframe for “your liking” heck the trend off the bottom trading UWTI produced a 40% gain in 7 weeks for me,(without nailing the bottom or top) thats 3 times more than Chris Temple produced in 2014 over a full year, that trend turn off the bottom produced nice gains for those long oil and the CDN$, I was only long oil 3x etf, now short using DWTI as the trend is rolling over again in oil and the cdn$ perhaps only to $54 but I’ll take it

    original jj
    May 20, 2015 20:31 PM

    Follow up to Tuesday’s action, this years seasonal trends going to be very interesting

    http://www.goldtrends.net/FreeBlog/3348547

    original jj
    May 20, 2015 20:27 PM

    I see GSac’s Tuesday is calling for $45 oil by Oct, ties in with Boa’s 78-74 CDN$, a strong US$ will certainly be a factor as well

    original jj
    May 20, 2015 20:47 PM

    I wouldn’t give the bastard banksters ANY of my gold, ever! no matter what I got in return.

    http://www.zerohedge.com/news/2015-05-20/india-gold-not-only-money-now-pays-interest

    Matt
    May 21, 2015 21:23 AM

    HSBC: Organized crime at the top:
    http://real-economics.blogspot.ca/2015/02/repeating-history-dirty-money-at-hong.html

    Brian
    May 21, 2015 21:53 AM

    Grade Geeks ….13.5 opt (3.5 meters)

    Klondex Drilling at Fire Creek Intercepts 13.5 opt (461.6 g/T) Over 11.5 Feet (3.5 Metres); Begins Development for Long Hole Stoping on Hui Wu Vein

    VANCOUVER, BC–(Marketwired – May 21, 2015) –

    Highlights of Hui Wu Vein:

    — 13.5 opt (461.6 g/T) AuEq over 11.5 ft (3.5 metres) – FCU-0214

    — 5.1 opt (174.3 g/T) AuEq over 3.2 ft (1.0 metres) – FCU-0328

    — 64.0 opt (2,194.7 g/T) AuEq over 1.1 ft (0.3 metres) – FCU-0357

    — 1.5 opt (52.7 g/T) AuEq over 12.3 ft (3.7 metres) – FCU-0213

    — 2.1 opt (72.0 g/T) AuEq over 4.4 ft (1.3 metres)- FCU-0360

    CFS
    May 21, 2015 21:32 AM

    OFF TOPIC:
    Police agencies across the nation are increasingly using drones to improve public safety, but need clear operations policies and limits to win public trust, experts said at a law enforcement conference in San Diego.

    To that end, a model policy on use of drones – or “small unmanned aircraft systems” – was rolled out Wednesday by the International Association of Chiefs of Police.

    The policy, which could be adopted or revised by any law agency, sets out specific procedures for deploying a drone, lists restrictions on its use, details how data would be retained or deleted and how operators should be trained.

    Meanwhile, Obama’s minions are now trying to destabilize Macedonia.,…..Victoria Nuland is at it again; just like in Ukraine, stirring up unrest, leading to revolt