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Analysts See Gold Higher on Increased Demand

Release Date: 
Thursday, February 2, 2012

The price of gold moved higher on the New York Spot Market on continued investor demand with the precious metal trading near the $1750 mark at 5:35 a.m. Pacific Time with silver at $33.85 per ounce. Gold has been maintaining its gains from January and is up almost 12% on the year.

The euro fell against the dollar after a report that Eurogroup head Jean-Claude Juncker commented about the slow pace in debt swap talks with Greece. Greece's prime minister is seeking the support of the country's political leaders for increased austerity measures after the International Monetary Fund said these policies were critical to securing additional bailout funds for the nation.

"We have a new short-term uptrend," said Andrey Kryuchenkov, an analyst at VTB Capital. "There is enough investor appetite as it seems many who fear missing the next leg up in gold are ready to move in," he added. "Small-scale buying is supportive."

"Our near-term upside target is $1,780. We think that's going to be taken out within the next six weeks or so," said Nick Trevethan, a senior commodity strategist at ANZ in Singapore.

Gold may rise above $2,000 per ounce this year with new investors entering the gold market for the first time in three months, according to UBS AG analyst Edel Tully. Potential for quantitative easing could give gold "explosive ingredients" for 2012, she said at a London conference.

Demand for physical gold from India has been "significantly above average" so far this year, despite higher import duties, Tully said. A stronger rupee made the precious metal attractive to local buyers purchasing for the wedding season that cointinues until May.

China, the world's largest gold producing nation, said production of the gold increased to a record 360.95 tons last year. As one of the world's largest gold consuming markets, the nation's domestic demand still significantly exceeds production.

The chief executive of Newcrest Mining, the world's third largest gold producer, said he expects gold to trade between $1,500 and $2,500 per ounce in the next five years and maintain its safe haven status for as long as the world's financial system remains in crisis mode.

(Sources: "PRECIOUS-Gold rises to 8-week high, firm euro supports,"Reuters, February 2, 2012; "PRECIOUS-Gold retreats from 8-week high as dollar strengthens," Reuters, February 2, 2012; "Gold May Drop as Stronger Dollar Prompts Investors to Sell; Silver Falls," Bloomberg, February 2, 2012 "Gold Is Getting New Investors First Time in 3 Months, UBS Says," Bloomberg, February 2, 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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