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Barclays, Standard Bank Watch Middle East

Release Date: 
Wednesday, March 16, 2011

Gold prices gained on Wednesday morning, trading at $1403.00 per ounce at 7:02 a.m. Pacific Time on the New York Spot Market. Analysts at Barclays Capital and Standard Bank Plc in London commented that prices have the potential to rise given the current geopolitical environment, a recent price pullback and a long-term outlook.

Japan’s nuclear crisis remains a major humanitarian and economic concern as the country tries to recover from the devastating effects of earthquake and tsunami. Tensions continued in the Middle East and North Africa, spreading to Bahrain, where riot police cleared anti-government protesters from a central square in the country’s capital. Bahrain had declared a state of emergency as Saudi Arabia-led military intervention failed to end demonstrations.

"There was a lot of panic-selling yesterday as people wanted to raise cash and there’s concern that yesterday’s selling was a bit overdone," said Walter de Wet, an analyst at Standard Bank Plc in London. "If you’re looking at the safe haven side, the Middle East and North Africa region dominates," while the crisis in Japan may also support prices, he said.

"Geopolitical tensions are likely to continue to set the tone of trading in the near term," Barclays Capital analysts including Gayle Berry wrote in a report yesterday. "We retain a positive view on gold as many of the long-term investment drivers remain intact amid low interest rates."

The Barclays Capital note commented on gold as a safe haven asset in an inflationary environment. "Until there is more clarity on these events and how policymakers will respond to inflationary pressures, prices of growth-sensitive assets...will likely struggle, while safe havens, such as gold, should outperform."

(Sources: "Gold Gains on Decline to a One-Month Low, Concern About Bahrain and Japan" Bloomberg, March 16, 2011; "Gold Firms as Markets Steady; 'All Eyes' on Japan," CNBC, March 15, 2011)

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