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Analysts Comment On European Summit and Gold

Release Date: 
Wednesday, December 7, 2011

Gold prices were steady in trading on Wednesday as investors awaited a European Central Bank meeting on Thursday and a key European Union summit on Friday. Hopes are high the European leaders and central bank will make progress in addressing the euro-zone debt problems. Several analysts discussed the potential impact of the meetings and the euro zone crisis overall on the price of gold, which was trading today at $1735.20 per ounce as of 6:26 a.m. PDT on the New York Spot Market.

"For the moment gold is likely to trade with the rest of the commodity sector and the short-term outlook depends on what we hear from the summit," said Eugen Weinberg, head of commodity research at Commerzbank.

"I don't think [European leaders] are going to get through this without throwing a lot of money on this problem," said Adam Klopfenstein, a market strategist with Archer Financial Services, a development he said could likely boost gold's appeal as an alternative asset.

"On balance, we believe that the [European Union] summit will boost gold prices, unless ratings agencies further downgrade euro-zone nations' credit ratings," said HSBC Securities analyst James Steel in a note to clients.

"If European leaders manage to come up with a plan, we will likely see a relief rally in the euro which will take gold higher with it," ANZ analysts said in a note."

(Sources: "PRECIOUS-Gold steady, cautious ahead of EU summit ECB meeting," Reuters, December 6, 2011; "Gold moves sideways after two days of losses," MarketWatch, December 6, 2011; "Gold Ticks Lower as Downgrade Worries Weigh," Wall Street Journal, December 6, 2011)

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