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Analysts Expect Gold Buyers; German GDP Data Lifts Eur

Release Date: 
Tuesday, May 15, 2012

Gold prices were up modestly on a stronger euro after German GDP data beat expectations. Gold was up $0.90 as of 6:28 a.m. Pacific Time on the New York Spot market, trading at $1,558.40 per ounce. Spot silver was $0.05 lower, trading at $28.23 per ounce. (Click here for the most current spot prices.)

"When German GDP came in at 0.5 percent, a lot higher than expected, the subsequent rally in the euro gave rise to a quick $10 short covering rally in gold," Marex Spectron said in a note. "This may deter the sellers from attempting another push lower for the time being and the fact that $1,550 has basically held will probably spur a little bit of buying interest."

"It's like everybody's forgetting what gold actually is—a hedge against uncertainty and fiat money," said Bob Haberkorn, senior commodities broker at RJO Futures. He expects gold prices to test $1,550 before traders on the sidelines return to the market in search of bargains. "I've talked with several people and they're waiting to pounce on this," he said.

Richcomm Global Services senior analyst Pradeep Unni said "in a very short term, bargain hunting and pent-up demand will emerge taking [gold] higher." Physical buying in Asian markets has improved with lower gold prices.

In Greece, President Karolos Papoulias is meeting with all major parties to discuss the formation of a technocratic government following the recent failed effort to form a political coalition. If the nation does not form a new government by Thursday, another round of elections will be held in June, extending political instability and increasing chances of Greece leaving the eurozone.

(Source: "PRECIOUS-Gold lifts from 4-1/2 month low as euro recovers," Reuters, May 15, 2012; "Spot gold steadies, but still seen vulnerable," MarketWatch, May 15, 2012; "Gold Prices Tumble 1.5%," Wall Street Journal, May 15, 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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