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April 2, 2013

Release Date: 
Tuesday, April 2, 2013

Gold and silver prices fell significantly in morning trading on the New York Spot Market with gold shedding more than $20 and silver down $0.70, or 2.5%. Analysts point to technical selling, higher equities and a strong dollar as the principal reasons for the drop. (“Gold Drops to 2-Week Low on Technical Selling, Bearish Outside Markets,” Kitco, 4/2/13.) You can see the most current spot prices here.

"Going forward into the second quarter, there seems to be a much better balance for gold to react to economic data after speculative positions have been much reduced and exchange-traded products saw record outflows" said a Saxo Bank senior manager.  (“Gold holds near $1,600 as euro zone data lifts stocks,” The Economic Times, 4/2/13.)

One of the principal drivers for higher gold prices may be the growing conflict between North and South Korea. North Korea announced today it would restart its nuclear reactor to provide plutonium for its weapons program. "I have to say this is one of the most dangerous moments since 1953 [the end of the Korean War]," a professor of international relations at Beijing’s Renmin University explained to the Los Angeles Times. (“North Korea analyst: 'One of the most dangerous moments',” Los Angeles Times, 4/2/13.)

"If tensions on the Korean peninsula remain high we expect gold to benefit more than in previous periods of tensions, due to enhanced geopolitical uncertainty," HSBC said in a note. (“Gold holds near $1,600 as euro zone data lifts stocks,” The Economic Times, 4/2/13.)

The City of Stockton, California, became the most populous city to declare bankruptcy. The city owes the California Public Employees Retirement System approximately $900 million in pension obligations, its largest debt.

If the bankruptcy court permits Stockton to avoid its pension obligations, the effects could be felt across the nation as other municipalities seek bankruptcy protection. The Congressional Joint Economic Committee reported last year that unfunded pension obligations exceed $2.8 trillion and may be as high as $4.4 trillion.  (“Pension issue looms over Stockton, Calif., bankruptcy as state and nation watch,” The Washington Post, 4/2/13.)

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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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