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April 12, 2013

Release Date: 
Friday, April 12, 2013

Gold and silver prices tumbled sharply today on the New York Spot Market. Gold fell more than $60, at one point dipping below $1500 before moving above this threshold. The sharp selloff was largely due to stop-loss selling: “Heavy stop-loss orders were triggered when June gold dropped below what was strong technical support at last week’s low of $1,539.40…. There has been no major, fresh fundamental news development to spark this latest drop in gold prices Friday.” (“Gold Hammered to 15-Month Low on Heavy Technical Selling, Weak Long Liquidation,” Kitco News, 4/12/13.)

Precious metals analysts Ross Norman wrote that “attractive fundamentals” are expected to support gold: “Underpinning gold are attractive fundamentals with the price floor in the form of mine costs rising sharply (gold prices rose 6% last year and costs 12%)... Meanwhile the total US national debt rises in 2013 from 16.8 to 17.8 trillion dollars - before number blindness creeps in a translation is perhaps in order - that is equivalent to more than 330,000 tonnes of gold, or over twice all of the gold ever produced in history or total gold mine production for the next 120 years - fat chance that is going to be paid down through the fruits of economic labour. Gold will remain on the ropes until it engenders higher levels of investment demand - for that it will require more sales channels, more product innovation and more education. It is a tiny lifeboat in a sea of economic trouble - this boat ain't sunk yet !” (“Bloodbath in the GOLD Markets - Key Levels Collapse,” Sharps Pixley, 4/12/13.)

Investors continue to choose physical gold for its “security.” Commerzbank commented that "[s]ome of the outflows [from the largest gold EFT] are likely to have been due to physical deliveries rather than solely to shares being sold. This is suggested by the fact that we have also seen a significant reduction in COMEX stocks recently, meaning that gold has been physically delivered on the futures market too. This would point to investors displaying an increased preference for security…" (“Commerzbank: Gold Deliveries Suggest 'Preference For Security',” (Kitco News, 4/12/13.)

Consumer sentiment dropped in to its lowest level in nine months. “If confidence continues to decline, economic growth could slow from current estimates, wrote a macro strategist at TD Securities. “This report adds to the emerging narrative of a sharper and earlier slowdown in economic activity than is currently being factored into the market expectation…” (“Consumer sentiment hits nine-month low,” MarketWatch, 4/12/13.)

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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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