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April 15, 2013

Release Date: 
Monday, April 15, 2013

Gold fell sharply in morning trading on the New York Spot Market falling below $1400 per ounce. News that China’s economic recovery had stalled sent prices for several key commodities, including gold, downward.

"The growth numbers out of China are absolutely crucial for commodities and the numbers that came out are significantly worse than people were expecting," the head of commodities research at Natixis told Reuters. (“Gold, commodities slump as China data stir recovery fears,” Reuters, 4/15/13.) You can see the most current spot prices here.

Investors also appear concerned that central banks may sell gold reserves. Last week, news reports stating the European Central Bank had pressured Cyprus to sell its gold reserves as part of its bailout. A market strategist at IG Markets observed, “This is after ECB President Mario Draghi put pressure on Cyprus to sell its excess gold reserves to help fund the bailout and plug a €6 billion gap. Although Cyprus is yet to decide how it’ll fund the gap, these comments have rattled investors and caused the selloff.” (“Gold slumps more than $85 to two-year low,” MarketWatch, 4/15/13.)

Silver prices also fell, losing more than 12%. You can see the most current spot prices here.

The stock markets also saw a considerable selloff with the S&P seeing its most significant drop since November. “The weaker-than-expected China data threw some cold water on the global growth story,” a manager at BB&T Wealth Management told Bloomberg. “There’s been a lot of concern of what the growth trajectory of China would be. Most market watchers have dismissed a hard landing scenario but if the growth rate is below what the current expectations are, that’s a drag on global growth.” (“S&P 500 Falls Most Since November as Chinese Growth Slows,” 4/15/13.)

The publisher of the Morgan Report, a financial newsletter, believes the fundamentals supporting gold and silver remain: “’Institutional investors will continue to unload their positions until a bottom is achieved’ [but the fundamentals for both gold and silver are] ‘still strong’ against a backdrop of financial woes in Cyprus, geopolitical tensions surrounding North Korea, ‘and the silver retail market is showing high premiums with shipping delays.’” (“Gold suffers biggest one-day drop since 1980s,” MarketWatch, 4/15/13.)

Julian Philips, contributor to GoldForecaster, agreed: “Panic selling on the back of a bear raid is a traditional sign of the bottom. I personally would make myself ready to buy.” (“Gold suffers biggest one-day drop since 1980s,” MarketWatch, 4/15/13.)

PIMCO’s Bill Gross tweeted the same advice: “Gross: OK, sBILL GROSS: I Would Buy Gold Hereo I made a bad call at the Barron’s Roundtable. I would still buy gold here. World reflating.” Business Insider, 4/15/13.)

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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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