Market Nuggets: HSBC: Gold Has Room For More Upside As China Tightens Policy

(Kitco News) -- Gold would seem to have room for more gains despite further Chinese monetary tightening, says HSBC. The metal initially dipped Friday after China announced a 50-basis-point hike in the reserve ratio for banks, the eighth hike of the cycle. Yet, gold finished higher on Friday. “The ability of gold to bounce back after the sell-off in the aftermath of the China rate announcement is impressive, in our view,” HSBC says. “It displays underlying strong demand that is not necessarily dependent on China.” HSBC’s economist on China looks for at least an additional 100 basis points in reserve-ratio hikes by the People’s Bank of China within the next six months. “The gold market is unlikely to cool significantly in response to further Chinese tightening until that tightening is seen to be effective, we believe," HSBC says. "This leaves further room to the upside, as Chinese bullion demand remains strong.”
By Allen Sykora of Kitco News; asykora@kitco.com