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Analysts Expect Indian Demand to Support Gold

Release Date: 
Thursday, October 18, 2012

The price of gold moved lower as the euro fell on uncertainty over a European Union (EU) summit to aid debt plagued countries. Gold was $6.70 lower at 7:21 a.m. Pacific Time on the New York Spot Market, trading at $1,744.20 per ounce. Spot silver was $.26 lower, trading at $33.04 per ounce. (Click here for the most current spot prices.)

Germany and France clashed at the summit underway in Brussels over control of national budgets and moves towards a single banking supervisor. French President Francois Hollande said efforts to stem the turmoil that began in Greece could unravel if the EU fails to deliver on its promises. Greek Prime Minister Antonis Samaras was also expected to argue for a two-year extension to meet the country’s bailout targets.

China’s economy grew 7.4% in the third quarter, the slowest pace in almost four years. That data met expectations, while other September data came in higher than anticipated by economists. Retail sales in China rose 14.2% in September while industrial production increased 9.2%.

Analysts are noting a rise in demand for gold in India with the festival season now underway. Bullion and jewelry demand for both gold and silver "is good in India this week," Chintan Karnani, a director at Insignia Consultants, said in a report.

HSBC said that gold could resume its upward trend on buying from India. "We see bullion demand as likely to improve ahead of Diwali, a festive gold-buying period," it said, adding that further strength in the Indian rupee would also help to support demand for gold from India.

"As the fundamentals behind the higher gold have not changed, it is reasonable to assume that the prices should edge up higher despite periods of consolidation," said David Levenstein, an independent expert and career metals trader. "I think these dips should be used to accumulate more of the physical metal." 

(Sources: "PRECIOUS METALS: Gold Rangebound in Asia; Physical Demand Helps," Wall Street Journal, October 18, 2012; "PRECIOUS-Gold softens in line with euro ahead of EU summit," Reuters, October 18, 2012; "Gold futures slip after China GDP data," Marketwatch, October 18, 2012; "Gold Declines First Time in Three Days Before EU Summit," Bloomberg, October 18, 2012; "Gold price dips should be a cause for buying, not concern – Levenstein," Mineweb, October 18, 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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