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Analysts Comment on Europe's Currency Focus

Release Date: 
Wednesday, February 13, 2013

Gold prices fell after data showed little growth in U.S. retail sales in January.  Gold was $8.90 lower at 1:03 p.m. Pacific Time on the New York Spot Market, at $1,643.40 per ounce.  Spot silver was $0.34 lower at $30.88 per ounce.  (Click here for the most current spot prices.)

Howard Wen, a metals analyst at HSBC, said uncertainty over a series of U.S. automatic spending cuts and resurgent physical demand should support gold prices.

A G20 meeting later this week is expected to influence the gold market.  At the G7 meeting on Tuesday, member nations stated they would not not set target exchange rates.  Recently, several industrialized nations have allowed their currencies to depreciate to stimulate their economies.  In the statement, the G-7 said members agreed “that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability” and said members would continue to “consult closely” on exchange markets and cooperate “as appropriate.”

"Although people are not expecting anything dramatic to be said at the G20 meeting, there is still some uncertainty, which may see short-term investors cover their short positions in coming sessions," Societe Generale analyst Robin Bahr commented.

David Morgan, publisher of the Morgan Report, noted, “no one can rock the boat as all currencies sink together into the ocean void. Gold will endure — it always has and it always will.”

Traders at TD Securities noted that, while physical sales of gold to India remain low, the trend may reverse in the coming months with the rupee poised to strengthen.  India is one of the world's largest gold importers, but its weak domestic currency has hurt gold buying over the last 12 months.

Currently, “the gold market is obsessing with technical levels,” said Ross Norman, CEO of Sharps Pixley.  However, his firm sees gold potentially rising in 2013.

(Sources: “Gold Prices Wobble Near Unchanged, Look To Euro For Support,” Wall Street Journal, February 13, 2013; “PRECIOUS-Gold drops below $1,650, focus shifts to equities,” Reuters, February 13, 2013;  “Gold logs slight gain, but stays below $1,650,” Marketwatch, February 13, 2013)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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