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China Adds Liquidity to Financial System

Release Date: 
Tuesday, October 9, 2012

The dollar gained against the euro over concerns about the eurozone economy. Gold prices were essentially flat with gold $0.20 lower at 7:24 a.m. Pacific Time on the New York Spot Market, trading at $1,776.30 per ounce.  Spot silver was $.06 higher, trading at $34.14 per ounce.  (Click here for the most current spot prices.)

A meeting of eurozone finance ministers on Monday dampened hopes of a Spanish bailout with ministers insisting the nation could obtain funding via capital markets. Greece's international lenders may extend the time Greece must meet its deficit reduction targets as economic tension over the country's fiscal issues remain high.

China's central bank China, the world's second largest gold buyer, made its second largest gross cash injection into domestic money markets on record.  The move follows monetary stimulus from the U.S., U.K. Europe and Japan.

The International Monetary Fund cut its 2012 global growth forecast to 3.3 percent and warned U.S. and European policymakers that failure to solve their respective economic problems would hurt growth.

Commerzbank analysts said that gold may rise towards $1,800 per ounce on “unlimited, cheap central bank liquidity” and strong investment inflows.

On the charts, "gold has reclaimed the multi-year uptrend that it broke below in May, and this could act as support if we see a pullback," said IG Markets chief markets strategist Chris Weston in a note.  He expects gold may target $2,050 per ounce in a few months.

OCBC Bank analyst Barnabas Gan maintained his year-end target forecast for gold at $1,850 per ounce, noting "sustained bullish sentiment."

(Sources:  “PRECIOUS-Gold steadies as dollar strengthens,” Reuters, October 9, 2012; “Gold seesaws, vies to extend losses a third day,” Marketwatch, October 9, 2012;  “PRECIOUS METALS: Gold Rises in Asia; Likely to Be Rangebound,” Reuters, October 9, 2012; “PRECIOUS METALS: Gold Higher in Asia; US Jobs Data Eyed,” Reuters, October 5, 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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