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April 16, 2013

Release Date: 
Tuesday, April 16, 2013

Gold prices gained more than $25 during morning trading on the New York Spot Market following yesterday’s panicked sell off. Silver increased by more than 3.5%. You can see the most current spot prices here.

A number of analysts see the recent consolidation as a buying opportunity. Commerzbank wrote: “The low prices are clearly being viewed as an attractive opportunity to buy gold, above all in Asia. What is more, the central banks of emerging economies are also likely to take advantage of the low price level to buy additional gold to diversify their currency reserves…" (“Gold Makes Tentative Recovery,” WSJ, 4/16/13.)

Financial newsletter editor Peter Grandich believes his target forecast of $2,000 remains intact. ““It won’t happen in a day or week or month, but after a few weeks and a couple of months of consolidation it will be viewed as a correction and an opportunity for people to get back on board…” (“A ‘classic opportunity’ to buy: Gold bugs refuse to be squashed,” Financial Post, 4/15/13.)

“Everything isn’t looking that rosy, so gold should hold up,” said the regional head of portfolio-management solutions at Societe Generale Private Banking. “This tumbling over the past few days is overdone. We think a good time to accumulate is at the US$1,300 level.” (“Gold Advances as Plunge Seen as Overdone, Central Banks May Buy,” Bloomberg, 4/16/13.)

The president and gold analyst at Maison Placements Canada reaffirmed his gold forecast of $2,500 per ounce. “I remain steadfast, bullish…It’s going to take a little bit longer, given the technical damage done to it.” (“A ‘classic opportunity’ to buy: Gold bugs refuse to be squashed,” Financial Post, 4/15/13.)

The president of Adrian Day Asset Management observed the recent consolidation is comparable to previous corrections in the gold bull market. “One might recall, however, that the mid-cycle correction of the 1970s bull market was followed the second dramatic move that saw gold up eight-fold before topping out. Second, the fundamentals are still very positive for gold, in my view, particularly the ongoing global monetary ease.’” (“Adrian Day: Gold Weakness May Be Long-Awaited Correction,” Kitco News, 4/16/13.)

Nick Barisheff, the president and CEO of Bullion Management Group Inc., stated the fundamental continue to support gold prices. ““The price of gold is generally, perfectly correlated to U.S. debt. The last time I looked, the U.S. debt didn’t stop growing, it’s accelerating… Now is not the time to bail. You don’t bail at the bottom. If you still own gold today, you sit on it… During conditions like this, you should be buying, not selling.” (“A ‘classic opportunity’ to buy: Gold bugs refuse to be squashed,” Financial Post, 4/15/13.)

Bloomberg reports that central banks are expected to buy gold at these lower prices. “The decline would give central banks an opportunity to buy, Central Bank of Sri Lanka Governor Ajith Nivard Cabraal said in an interview on Bloomberg Television. The Bank of Korea said bullion’s drop isn’t a big concern as the bank’s holdings are part of a long-term strategy for foreign-exchange reserves.” (“Gold Advances as Plunge Seen as Overdone, Central Banks May Buy,” Bloomberg, 4/16/13.)

"While the recent moves in the gold price are unsettling, we remain positive on the fundamentals," Investec Global Natural Resources research analyst Hunter Hillcoat told the Wall Street Journal. "Cypriot gold sales will only be a small factor. While the threat of sales from other distressed nations is not to be ignored, Central Bank Gold Agreements limit this….” (“Gold Makes Tentative Recovery,” WSJ, 4/16/13.)

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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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