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Analysts Note Positive Factors for Gold

Release Date: 
Wednesday, February 27, 2013

Gold fell in trading today but held above the key $1,600 per ounce level.  "Metals are taking a breather following the last two days of gains," said Matt Zeman, head of trading with Kingsview Financial.  Gold was $12.60 lower at 9:23 a.m. Pacific Time on the New York Spot Market, at $1,603.10 per ounce.  Spot silver was $0.36 lower at $29.17 per ounce.  (Click le here for the most current spot prices.)

Yesterday’s congressional testimony from Federal Reserve chairman Ben Bernanke suggested the Fed will continue its bond buying program, which analysts believe supports gold prices. "The market is a little less concerned about a premature exit of quantitative easing," said Nick Trevethan, senior commodity strategist at ANZ in Singapore.  "Don't forget that the Fed's focus is on jobs and inflation. The job market has stabilized, but we are not seeing efficient job growth to make the exit of QE look imminent. There is still a long way to go.”

Fiscal issues involving U.S. debt are also helping gold.  The U.S. government’s “likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline is added to a nervous and uncertain atmosphere in the world market place this week,” said Jim Wyckoff, senior analyst at Kitco.com. “That’s also a mildly supportive factor for the safe-haven investment assets this week.”

Silvio Berlusconi's center-right coalition has taken an anti-austerity stance that has drawn voter support from the left-wing coalition led by the Democratic Party's Pier Luigi Bersani. "The prospect of a Berlusconi win is positive for gold and silver," noted Mr. Zeman.  Investors have become increasingly worried that Italy's debt load may destabilize the euro and endanger euro-denominated assets and are likely to stockpile precious metals as a hedge, he said.  “Rising uncertainty in Europe prompted safe-haven buying," ANZ concurred.

"Investment demand in gold is picking up," said Ronald Leung, a director at Lee Cheong Gold Dealers in Hong Kong.  Investors are anticipating another round of crisis in Europe, he said.  Mr. Leung expects gold to move toward the range of $1,625 to $1,630 in the near term.

(Sources:  “Comex Gold Prices Retreat From One-Week High,” Wall Street Journal, February 27, 2013; “Gold Slips on Profit-Taking in Asia; Precious Metals Mixed,” Wall Street Journal, February 27, 2013; ; “PRECIOUS-Gold holds near 1-1/2-week high as Bernanke backs stimulus,” Reuters, February 27, 2013 “Gold pulls back but holds above $1,600,” Marketwatch, February 27, 2013; Gold Reclaims $1,600,” Wall Street Journal, February 26, 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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