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Chinese Lunar New Year Demand Supports Gold

Release Date: 
Monday, February 4, 2013

p> Gold rose with increased physical demand from the upcoming Chinese Lunar New Year, a major holiday in one of the world’s largest gold buying nations.  The metal was $6.80 higher at 2:15 a.m. Pacific Time at the New York Spot Market close, at $1,675.40 per ounce.  Spot silver was $0.08 lower at $31.86 per ounce.  (Click here for the most current spot prices.)

The week-long Lunar New Year holiday starts on February 10. "Physical demand is reasonably good because the Chinese New Year is round the corner and will continue to hold the market this week," said Bernard Sin, senior vice president at MKS SA, said.

HSBC metal analysts also saw some support for gold prices from increased demand for gold ahead of the start of Chinese New Year.  “We remain positive on bullion but see resistance near the psychological $1,700 an ounce level,” the analysts said.

The euro fell, weighing on gold, but the underlying political turmoil in Europe is considered positive for gold, as “investors get nervous about another bout of European political drama,” said Tom Essaye, editor of the 7:00’s Report, a daily commentary on equities, commodities and  the economy.  In Italy, former Prime Minister Silvio Berlusconi polled favorably in opinion polls ahead of elections this month, increasing fears the country will diverge from its current economic reforms.

"People are trying to understand whether we're in a recovery scenario, or whether there is another speed bump out there," Clive Burstow, a fund manager at Baring Asset Management, said.  "I think you have to have an exposure to gold, because there are still headwinds ... but you don't need as big an exposure as you did when you thought the world was ending."

(Sources:  “Gold scores second straight session gain,” Marketwatch, February 4, 2013; “Gold Futures End Up at $1,676; Platinum Rises,” CNBC, February 4, 2013; “Fund managers' ardour for gold cools as economic fears recede,”February 4, 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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