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Brazil Adds to Gold Reserves for First Time Since 2008

Release Date: 
Monday, October 29, 2012

The gold prices moved higher Monday after recent disappointing corporate earnings reports and Hurricane Sandy bore down on the east coast.  Gold was $2.20 higher at 7:03 a.m. Pacific Time on the New York Spot Market, trading at $1,714.30 per ounce.  Spot silver was $.12 lower, trading at $32.07 per ounce.  (Click here for the most current spot prices.)

"Gold is holding up well due to a higher risk perception, because gold is often perceived as a safe haven," said Eugen Weinberg, global head of commodities research at Commerzbank, who marks a key support level at $1,700 per ounce.  "People are more negative on the economy and so are looking for somewhere to park funds."

According to a Bloomberg survey, gold traders are the most bullish they’ve been in three weeks as investors’ gold holdings rose to a record amount on speculation of further central bank stimulus to increase economic growth.  Fourteen of 26 analysts surveyed by Bloomberg expect prices to rise this week, with nine bearish and three neutral.

Brazil increased its gold reserves for the first time since December 2008, adding 1.7 tons last month to 35.3 tons.  "If a central bank like Brazil decides to enter the gold market, it will keep buying for a longer time horizon until an optimal share of gold holdings to total asset is reached," said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. "This constant demand is price supportive."

“We expect strong buying by central banks to continue,” said Dan Smith, commodities analyst at Standard Chartered.  “They will be encouraged by lower prices and continued worries about inflation and currency risks.”

Central banks globally bought 254.2 tons of gold in the first half of this year and purchases could reach 500 tons for the year, the World Gold Council has said.

(Sources: “PRECIOUS-Gold holds near $1,710 on global growth concerns,” Reuters, October 29, 2012 “Gold Traders More Bullish as ETP Hoard Sets Record: Commodities,” Bloomberg, October 26, 2012; “Brazil's gold reserves rise for first time since Dec 2008,” Mineweb, October 25, 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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