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Commerzbank: Asset Losses Covered By Gold Profits

Release Date: 
Thursday, May 12, 2011

Gold priced were lower on Thursday following a broad-based commodity sell-off on Wednesday linked to concerns over whether China could continue its robust economic growth.  A rise in the value of the dollar and worries about the end of easy monetary policy in Europe also weighed on metals in today’s trading. Analysts at Commerzbank indicated that investors have sold gold to cover losses elsewhere while Citigroup commented on the commodities pressure.

The dollar traded at its highest level in more than three weeks against six other major currencies, after yesterday climbing 1 percent. Gold typically moves inversely to the U.S. currency. Precious metals are "under pressure from the rising U.S. dollar," Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report to clients. "Investors are taking profits with gold to compensate for losses with other assets."

However, an analyst at Pioneer Futures pointed at the longer term case for owning gold. "The asset allocations are still looking at gold," said Scott Meyers, senior trading analyst at Pioneer Futures. "Gold… hasn't lost that underlying safe-haven feeling."

(Sources:  "Gold, Silver Decline as Dollar Gain Reduces Alternative Investment Demand," Bloomberg, May 12, 2011; "Commodities Decline for 2nd Day After China Raises Banking Reserve Ratios," Bloomberg, May 12, 2011  "PRECIOUS-Silver, gold fall as economic woes crunch early gains," Reuters, May 12, 2011; "PRECIOUS-Gold off highs but still firm after China data," Reuters, May 11, 2011; "Gold, Silver Tumble As Investors Cash Out," Wall Street Journal, May 11, 2011)

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