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Asian Buyers Act on Lower Prices

Release Date: 
Friday, March 2, 2012

Gold prices saw continued pressure in response to this week's statements from Fed Chairman Ben Bernanke and a stronger dollar. Gold was priced at $1711.80 per ounce at 6:10 a.m. Pacific Time on the New York Spot Market with silver at $35.05 per ounce.

Several metals analysts reiterated their positive forecasts for gold. "The broader macro backdrop remains gold-favorable, given the negative interest rate environment, longer-term inflationary concerns, and lingering sovereign debt uncertainties," said Barclays Capital in a research note.

The recent pullback in gold seems overdone, according to Julian Jessop at Capital Economics. He noted that gold's appeal is likely to outweigh the reduced prospect of U.S. quantitative easing, saying "it is the risk of a renewed escalation of the euro-zone crisis that underpins our forecasts."

Demand for gold from China and India, the largest gold consuming nations, has helped soften the recent price decline. "At these price levels we've seen an interest in the physical market pick up, particularly from Asian buyers," said Marc Ground, an analyst with Standard Bank, in a research note.

"The monetary and physical supply (and) demand fundamentals point to a very hefty upside in the second half of the year," said Bart Melek, an analyst with TD Securities, in a note. "We continue to see gold at over $2,000/oz late in the year."

(Sources: "PRECIOUS METALS: Comex Gold, Silver Wilt As Dollar Climbs," Wall Street Journal, March 2, 2012; "Gold Eases on Dollar Gains, Heads for Weekly Fall," CNBC, March 1, 2012;  "Gold gains; silver rallies nearly 3%," MarketWatch, March 2, 2012)

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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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