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Bloomberg Survey: Analysts and Traders Bullish

Release Date: 
Friday, October 14, 2011

Gold moved higher on Friday, on track to see its largest weekly gain in more than a month. The trend may continue according to 22 of 25 gold traders and analysts surveyed by Bloomberg who say gold is expected rise in the week ahead, reflecting the highest level of optimism in the weekly survey in three months. The last time traders and analysts were this bullish, the price of gold increased 21 percent to an all-time high within eight weeks, Bloomberg notes.

Thailand, Bolivia and Tajikistan bought a combined 18.2 tons of gold for reserves in August,. Lower prices means more central bank buying is "very likely," according to Edel Tully, the London-based analyst at UBS AG. Nations are adding to their gold holdings for a third consecutive year, the longest buying streak in almost four decades.

Ratings agency Standard and Poor's downgraded the long-term credit rating of Spain by one notch as policymakers convene at a weekend planning meeting ahead of a key a European Union summit on October 23 where debt resolution proposals have been promised.

"Our core view is that ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, and low business, consumer and investor confidence will lead to gold being increasingly used as the line of defense against negative market outcomes," UBS said in a research note.

"The big picture remains positive for gold. The supply-demand fundamentals are very much in place and there has been an augmentation in that rally by economic fears," said Ross Norman of Sharps Pixley. "Presently gold sits toward the top end of its trading range... and awaits fresh impetus - physical demand is robust and there is good support below this market."

UBS said its physical gold sales to India so far this year rose 10 percent on the year, suggesting resilient demand in the world's biggest gold consuming nation amid recently higher prices.

"Physical gold buying should continue to dominate in India in future, because it is an established part of the country's culture. And it is by no means certain whether total demand will rise or whether there will merely be shifts from jewelry to ETF demand," Commerzbank analysts said in a note.

(Sources: "Gold Traders Turn Most Bullish in Three Months After 20% Rout: Commodities," Bloomberg, October 14, 2011; "Gold gains, eyes biggest weekly rise since September," Reuters, October 14, 2011)

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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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