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Analysts See Global Liquidity Continuing in 2013

Release Date: 
Monday, January 7, 2013

The price of gold fell as investors continued to evaluate recent Federal Reserve minutes regarding in the future of monetary easing in 2013.  Gold was $17.20 lower at 7:37 a.m. Pacific Time on the New York Spot Market, trading at $1,647.60 per ounce.  Spot silver was 0.28 lower at $29.92 per ounce.  (Click here for the most current spot prices.)

"The current discussion in the gold market is when the Fed would end quantitative easing," said Peter Fertig, analyst with Quantitative Commodity Research.

INTL FCStone analyst Edward Meir said gold "should regain its footing" this year. "We do not see the Fed engaging in any meaningful balance sheet 'pruning' this year, and easing by other central banks would likely prop up demand for the metal as an alternative to paper currencies…”

Martin Arnold, senior research analyst at ETF Securities, sees an upturn for gold in the longer term.  "With other central banks also flooding financial markets with cheap liquidity (ECB, Bank of Japan, and potentially more from the Bank of England with new governor in 2013), the global monetary stance continues to be supportive of gold in particular," he said.  "While cyclical growth pick-ups may cause short-term pauses in debasement policies and the gold price rally, until real debt burdens are reduced, gold should remain in a structural bull market."

"We're in a very good situation," said Eugen Weinberg, head of commodity research at Commerzbank. He noted that quantitative easing from the Fed will continue for six to twelve months which means about $500 billion to $1 trillion more in the financial system.  "So a very positive environment for gold…longer term we forecast the prices to rise above $2,000,” Mr. Weinberg said.

Weaker gold prices at the beginning of 2013 sparked buying in Asia's physical bullion market as customers prepared for upcoming Lunar New Year holiday demand.

(Sources: “Comex Gold Near Steady as Traders Weigh Fed Outlook,” Wall Street Journal, January 7, 2013; “Gold Can Still Break Through $2,000: Analysts,” CNBC, January 7, 2013; “PRECIOUS-Gold slips below $1,650 as stock markets retreat,” Reuters, January 7, 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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