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Analysts Say Gold May Rise on President's Reelection, Fiscal Cliff

Release Date: 
Wednesday, November 7, 2012

The price of gold was slightly lower on a stronger dollar on Wednesday after closing significantly higher on Election Day. Gold was $4.60 lower at the same time on the New York Spot Market, trading at $1,713.30 per ounce.  Spot silver was $.37 lower, trading at $31.75 per ounce.  (Click here for the most current spot prices.)

The Dow Jones Industrial Average was down more than 300 points at 9:30 a.m. Pacific Time on post-election concerns about the economy, including the fiscal cliff. 

Analysts weighed the prospects for gold in light of the election. Gold could rise by as much as $100 over the next few days as investors conclude the United States will continue with its loose monetary policy, Jeffrey Sica, president and chief investment officer of Sica Wealth Management, said.  "There's going to be a pretty significant move. There's going to be a lot of momentum in the market."

"The outcome of the U.S. election increases the probability that ultra-expansionary monetary and fiscal policy will continue," analysts with Commerzbank said in a note.

Bayram Dincer of LGT Capital Management said gold may reach around $1,800 per ounce by the end of 2012 and $1,900 per ounce by the end of the first half of 2013, supported by a continuing relaxed U.S. monetary policy and possible further quantitative easing.

“People are relieved that the stimulus measures in U.S. will continue,” said David Meger, the director of metal trading at Vision Financial Markets in Chicago. “We may see more announcements to boost growth as global slowdown problems remain, especially in Europe.”

David Govett, head of precious metals at Marex Spectron, commented on the fiscal cliff, noting, "I personally believe this will get sorted, but not after a lot of haggling and negotiating and this will create a lot of uncertainty and volatility in the markets.”  Govett added, "we will see a continuation of the loose monetary policies pursued by the Fed and Chairman Bernanke, for the foreseeable future. Low interest rates and more quantitative easing all add up to favorable metal prices.”

(Sources: “Gold Set for Longest Winning Run in 2 Months on Obama Win,” Bloomberg, November 7, 2012; “PRECIOUS METALS: Gold Rises in Asia as Obama Wins Second Term,” Wall Street Journal, November 7, 2012; “PRECIOUS METALS: Gold Erases Election Boost as Dollar Gains,” Wall Street Journal, November 7, 2012; “Post-Election: Live Blogging the Market Reaction,” Wall Street Journal, November 7, 2012; “PRECIOUS-Gold at 2-wk high on Obama win; focus on ‘fiscal cliff’,” Reuters, November 7, 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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