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Analysts Discuss Positive Drivers for Gold

Release Date: 
Thursday, January 19, 2012

Gold traded near one-month highs after closing higher for three consecutive sessions, supported by expectations of funding from the International Monetary Fund (IMF) to help resolve Europe's debt problems. The price of gold was steady at $1659.10 per ounce at 7:20 a.m. Pacific Time on the New York Spot Market with silver at $30.67 per ounce.

The Group of 20 nations are set to discuss European funding at a meeting in Mexico on Thursday and Friday, with expectations of a $600 billion increase. "The IMF funding talk is giving some support to metals," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. "The market is also supported by fresh buying of some funds and physical demand."

The dollar fell 0.5 percent against the euro after falling 1 percent yesterday (the largest drop since November 11), which helped to support gold. "There is some impact from the euro strengthening," said John Meyer, an analyst at Fairfax IS in London. "With countries looking to print money for the IMF, gold gains in relative value against paper money."

"Rising risk appetite, a weak U.S. dollar and the breach of key resistances is giving gold the momentum to head towards the $1,700 an ounce level in the near term," said Pradeep Unni, senior analyst at Richcomm Global Services.

Gold's key pillars of support remain intact, ranging from central bank buying to negative interest rates and rising longer-term inflationary pressures supporting investment demand," Barclays Capital said in a research note.

Markets continue to monitor European debt auctions following solid bond sales in Spain and France. "Gold could receive additional buoyancy if the market responds positively to today's auctions of Spanish government bonds," Commerzbank wrote in a note.

(Sources: "Gold Up For Fourth Day on IMF Funding Hopes," CNBC, January 19, 2012; "PRECIOUS-Gold up for 4th day on IMF funding hopes," Reuters, January 19, 2012; "PRECIOUS-Gold climbs as rising risk appetite lifts euro," Reuters, January 19, 2012; "Gold Advances to a One-Month High as Euro Rallies, Demand Gains," Bloomberg, January 19, 2012)

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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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