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April 19, 2013

Release Date: 
Friday, April 19, 2013

Gold prices rose again in morning trading on the New York Spot Market while silver appeared to be range bound. “The gold price is finally reacting to the physical demand,” a managing director at TD Securities Inc. wrote. “Reports of record demand keep coming in from around the globe with retailers in North America, Europe and Asia-Pacific all out or running out of stock as buying interest overwhelms supply.” (“Gold Tops $1,400 as Demand for Jewelry, Coins Surge,” Bloomberg, 4/29/20.) You can see the most current spot prices here.

National mints continue to report significantly higher sales. “’Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets,’ said Shane Bissett, the Royal Mint's director of bullion and commemorative coins… In the United States, sales of American Eagle gold for two days this week topped the volumes for the whole of March.” (“Slump in gold price releases years of pent-up retail demand,” Reuters, 4/18/13.)

The Chairman of India’s Kaylan Jewellers wrote that he expects gold prices to climb to $1800 per ounce. (“Gold Tops $1,400 as Demand for Jewelry, Coins Surge,” Bloomberg, 4/29/20.)

The World Gold Council reports the recent selloff was triggered by “speculative trading.” “It has become increasingly clear over the course of the past week that the fall in the gold price was triggered by speculative traders operating in the futures markets. Their short-term view of generating a trading profit is in stark contrast to the views of long term investors in gold, as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Monday's further decline. The surge in gold purchases is spanning markets from India and China to the US, Japan and Europe. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years.” (“Shortage of gold bars and coins in Dubai, says World Gold Council,” The Economic Times, 4/19/13.)

The reasons why investors are rushing to acquire physical gold was explained by Peter August, the chief executive of the Melbourne Mint. “'People are becoming a lot more savvy with prices going down, seeing this as being a buying opportunity. If this was a bubble as some people suggest, then you'd have people rushing out trying to sell at the same time. People remain concerned about counter-party risk in owning shares or bonds or even currencies, whereas gold has no counter-party risk. Gold is scarce and remains a safe haven…” (“Meltdown turns gold rush into a stampede,” The Sydney Morning Herald, 4/20/13.)

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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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