HSBC: Gold Market Will Remain Strong

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Interestingly, although fund managers cut their dollar short, SBC metals analyst Jim Steel's research revealed that they have kept their long-term gold positions.

SBC metals analyst Jim Steel suggested Sunday that the gold market will remain strong throughout the duration of a weak U.S. dollar, credit problems and easy monetary policies." Nevertheless, in a speech to analysts, mining professionals and other attendees at the Prospectors and Developers Convention in Toronto, Steel warned that a turn to financial normalcy in the second half of this year "could weaken gold."

Steele asserted that although the U.S. dollar is remains under severe pressure, the possibility of a new Plaza Accord could help the dollar. Nonetheless, Steele still believes gold remains "on an upward trend within stabbing distance of $1,000/oz."

The current gold rally is supported by commodity price strength and monetary inflation-and even, rising good prices that boost emerging market gold demand, he suggested. Gold prices are also being reinforced by a sub prime mortgage crisis that has spread into a wider credit crisis, which is causing investment funds to engage in "financial safe-haven buying."

Interestingly, although fund managers cut their dollar short, Steel's research revealed that they have kept their long-term gold positions.

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