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00:00WE HAVE NOW BROKEN OUT WELL OVER TWO STANDARD DEVIATIONS. WHY HAVE WE SEEN THE MOVE IN GOLD? JAMES: A NUMBER OF THINGS. YOU HAVE HAD STRONG EMERGING MARKET DEMAND LEADING UP TO THIS YEAR. ALTHOUGH THAT HAS DIMINISHED SOMEWHAT. AND REALLY, WHAT HAS TAKEN AS UP TO THESE HIGHER LEVELS HAS BEEN THE RISK FACTOR. HE SAFE HAVEN DEMAND FOR GOLD HAS BEEN VERY GOOD. AS WE HAVE SEEN MONEY GOING TO TREASURIES, IT HASN'T SUPPORTED THE DOLLAR IN THE WAY IT HAS THE PAST COUPLE OF YEARS AND CONSEQUENTLY, THAT SAFE HAVEN FLOW, INSTEAD OF PUSHING OF THE DOLLAR, HAS ACTUALLY BEEN NOW TO GOLD'S BENEFIT. TOM: YOU HAVE A NICE MOVE HERE. DO YOU GET A GOLD BUTTON MOVE? OR IS IT A MORE MEASURED MOVE? JAMES: A MORE MEASURED LONG MOVE. A FORGET THAT WHEN YOU GET SUDDEN AND QUICK MOVES IN GOLD, PARTICULARLY IF THEY ARE SHARP, YOU GET A STICKER SHOCK ELEMENT WHERE THE PHYSICAL CONSUMPTION IS. SOMETHING LIKE TWO THIRDS OF ALL GOLD PHYSICAL DEMAND IS BETWEEN CHINA AND INDIA. THESE ARE PRICE-SENSITIVE ECONOMIES WHERE IF THE MARKET GOES UP TO SHARPLY, PEOPLE ON THE GROUND, MERCHANTS, THEY PULL BACK FROM BUYING AND THAT IS WHAT WE ARE SEEING. TOM: SEND THAT MESSAGE TO MY HOUSE. FRANCINE: GOLD GAINED ALMOST 20% THIS YEAR ON THE BACKS OF EXACTLY WHAT YOU HAVE BEEN EXPLAINING. WHAT DOES IT DO FROM HERE? IS THIS SIX MONTHS DOWN THE LINE, IS THERE A PRICE WHERE WE START TO SEE REAL DEMAND TRADING ? JAMES: RIGHT NOW WE HAVE A STEEP DISCOUNT IN INDIA BETWEEN $25-$30 AN OUNCE. INDIA IS TRADITIONALLY THE LARGEST IMPORTER. SO RIGHT NOW, WE ARE SEEING VERY LITTLE IMPORT DEMAND INTO INDIA. THEY ARE HOLDING BACK THE CACERES A BUDGET NEXT WEEK AND THEY CURRENTLY HAVE A 10% TARIFF ON GOLD. THEY MIGHT REDUCE THAT TARIFFS. UP TO 3000 IS WHERE WE BEGIN TO SEE -- UP TO 1300 IS WHERE WE SEE THE DEMAND DIMINISHED A BIT. THAT DOESN'T MEAN IT WILL ENTIRELY ERODE. FRANCINE: AT SOME POINT, DO WE TALK ABOUT A -- TERRITORY? ARE WE A LONG WAY OFF? JAMES: WE ARE A LONG WAY OFF. THE 1500-1800 LEVEL WOULD BE MORE LIKE A BUBBLE TERRITORY. TOM: JAMES SWEENEY FROM THE CREDIT SUISSE AND STEVE FROM HSBC, SWEENEY SAYS INFLATION FEARS ARE WAY OVERDONE AND STEVE MAJOR'S HISTORICAL ON A LOWER TERMINAL RATE. HELP ME WITH HOW GOLD REACTS TO THE DYNAMICS IN THE ECONOMY? IT SEEMS OUT OF KILTER. SHAHAB: THAT IS THE REASON FOR GOLD'S DECLINE LAST YEAR AND THE YEAR BEFORE. IT BEGAN TO GO DOWN IN 2013 WHEN WE HEARD QE WAS ENDING. WE WERE ASSUMING THAT THE FED WAS GOING TO INCREASE RATES AND WE THOUGHT LAST YEAR AT ONE POINT, -- WHEN I SAY WE, I MEAN THE MARKET, NOT HSBC. THE MARKET HAS FACTORED IN SEVERAL RATE RISES. IF THEY DO NOT MATERIALIZE THEN IT MEANS THAT THE GOLD MARKET HAS FALLEN TO SHARPLY. -- FALLEN TO O SHARPLY. TOM: HELP ME WITH THIS. FILTER THIS IN TO A FINANCIAL DEPTH LIKE YOU HAVE GUARDED AT CREDIT SUISSE? SHAHAB: THE FIRST INSTINCT IS TO LOOK AT GOLD AS AN INFLATION. TOM: IS THAT BROKEN RIGHT NOW? SHAHAB: THINK ABOUT CENTRAL BANKS HAVING TO DO THINGS THEY HAVE NEVER DONE BEFORE. POLICYMAKERS AGREE TO DO THINGS THAT HAVEN'T DONE -- THAT THEY HAVEN'T DONE BEFORE. OLD IS SOMETHING THAT PROTECTS THEM FROM THE MISHAPS THAT MAY ARISE FROM THAT BEHAVIOR. FRANCINE: WE TALKED ABOUT DEMAND AND WE HAVE TALKED ABOUT THE ROLE OF GOLD AS A SAFE HAVEN. WHAT DO YOU SEE A SUPPLY CRUNCH COMING? JAMES: WE ARE LOOKING FOR THE GOLD MINE PRODUCTION, THE PRINCIPAL SOURCE OF SUPPLY, TO BEGIN TO MODERATE AND EDGE LOWER. TOM HAS HEARD THIS BEFORE. THERE IS NO SAUDI ARABIA OF GOLD. THERE ARE NO GIGANTIC FINDS ON THE HORIZON. HAVING SAID THAT, THERE IS A LOT ABOVE GROUND. IT IS NOT OIL, IT IS NOT WHEAT AND IT IS NOT CONSUMED. SO IT CAN BE MOBILIZED AND BROUGHT ONTO THE MARKET. EVEN IF MIND SUPPLY AGAINST TO PLATEAU OR TOP OUT OR EDGE SLIGHTLY SLOWER. FRANCINE: IS THERE ANOTHER WAY OF PLAYING THE RALLY IN GOLD RIGHT NOW? EITHER THROUGH CURRENCY OR EVEN THROUGH MINING COMPANIES? THERE ARE VARIOUS WAYS WHERE YOU CAN GET INTO THIS. SHAHAB: WITHIN CURRENCY SPACE, WHAT WE HAVE SEEN IS A BETTER NEED FOR CURRENCIES LIKE THE CANADIAN, THE AUSTRALIAN DOLLAR AND TO SOME EXTENT, THEY REFLECT GOALS. OTHER COMMODITIES LIKE COPPER AND IRON ORE . PERHAPS WHAT WE ARE SEEING IS A RESURGENCE OF INTEREST MORE BROADLY -- EVEN OIL , SOME BELIEVE, IS BOTTOMING OUT. TOM: YOU AND I HAVE TO GET INTO

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Why Have Are We Seeing the Move in Gold?

HSBC Precious Metals Analyst James Steel discusses the price of gold. Credit Suisse Global Head of FX Strategy Shahab Jalinoos also speaks on "Bloomberg Surveillance." (Source: Bloomberg)

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