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Bargain Hunters in China and India are Drawn to Gold

Release Date: 
Friday, February 22, 2013

Gold was slightly lower in morning trading on technical selling although some analysts noted positive fundamentals that may buoy gold, including increased demand in Asia with prices at attractive entry levels.  Gold was $2.00 lower at 11:58 a.m. Pacific Time on the New York Spot Market, at $1,576.00 per ounce.  Spot silver was $0.08 lower at $28.70 per ounce.  (Click here for the most current spot prices.)

“The reason for the fall in the precious metals was primarily the technical picture, with traders and speculators breaking support,” said Julian Phillips of GoldForecaster.com.  “Interpretations of the Fed minutes [released earlier this week] were said to be the reason by some,” he said.

Despite the concern the Fed will alter its current policies, St. Louis Fed president James Bullard said on Friday the Fed will maintain its loose monetary policy despite increasing signs of concern among policymakers about the potential costs of asset buying.

Bargain hunters acquired physical gold in Asia lent providing support for prices.  Gold's recent declines have lured opportunistic buyers from India and China, the world's top bullion consumers, back into the market, said Barclays' metals analyst Suki Cooper.  Gold buyers in India are benefiting from a stronger rupee, which has made gold prices attractive for Indian jewelers and consumers.  "Buying in China has also returned to the market in force," Ms. Cooper said in a note to clients.

Despite gold’s recent pullback, “…there are still plenty of people who are bullish long term,” said Mitsui Precious Metals analyst David Jollie.

(Sources:  “Gold, Silver Creep Lower Amid Investor Trepidation,” Wall Street Journal, February 22, 2013; “PRECIOUS-Gold pares gains, stays on track for second weekly loss,” CNBC, February 22, 2013; “Gold ends at seven-month low, down 2.3% on week,” Marketwatch, February 22, 2013)

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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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