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Commerzbank, UBS Say Gold May Rise in 2012

Release Date: 
Tuesday, August 14, 2012

Gold moved lower as U.S. retail sales were stronger than expected in July. Gold was $8.10 lower at 7:15 a.m. Pacific Time on the New York Spot Market, trading at $1,602.80 per ounce. Spot silver was $.02 higher, trading at $27.95 per ounce.  (Click here for the most current spot prices.)

U.S retail sales rose in July for the first time in four months, pressuring gold markets as investor hopes for the U.S. economy improved. "Now we need to see what the response is. The last few sell-offs have been met by instant buying," Saxo Bank gold analyst Ole Hansen said.

“Forthcoming monetary easing measures to be taken by central banks are likely to spark higher inflation rates, which should benefit gold as a store of value,” Commerzbank wrote in a note to clients. “What is more, the escalation of tensions in the Near and Middle East is causing the geopolitical risks to increase,”

hey added. “We are therefore confident that the remainder of the year will bring considerable price rises, and would put the gold price at above $1,900 per troy ounce by year’s end.” More specifically, Commerzbank expects that the gold price may move higher towards the end of the third quarter and during the fourth quarter.

"Macro direction and policy expectations will determine the bulk of gold's performance, with the constant reassessment of expectations for policy easing from the Fed being a key driver," UBS said in a report on Tuesday. "We expect a (second-half) price recovery as our underlying core view remains constructive," it said. "Gold needs a 'big bang' to reignite investor interest, the likely culprit to be policy response from central banks, with U.S. action the key."

James Bianco, president of Bianco Research LLC, believes that gold is the best investment buy among all asset classes. “What’s been attractive to me for the last couple of years has been gold,” he said. “In a period of crisis and in a period of uncertainty, and with central banks doing unprecedented things, gold has performed very well.”  He added, “as long as we’re in this era of ‘whatever it takes’ from the ECB, and extensive rumors of QE3 from the Fed, eventually gold will prove to be a winner like it has been for the last several years.”

Douglas Ramsey, chief investment officer at Leuthold Group, said his firm has a “core position in physical gold on which we are pretty bullish.” He said, “we’ve had the best 12-year run in the history of precious metals,” but “I still think there’s probably one more exciting phase ahead of us that will probably be stimulated by the sort of monetary debasement moves we continue to see in this country. It looks like the European central bank is going to concoct something that is going to be ‘creative’… so we’ve got five percent gold in each of our tactical strategies, currently.”

 (Sources:  “PRECIOUS-Gold firms in line with euro; stimulus news awaited,” Reuters, August 14, 2012; “PRECIOUS-Gold drops below $1,600/oz after U.S. data,” Reuters, August 14, 2012; “Gold inches higher on weak dollar, easing hopes,” Marketwatch, August 14, 2012; “Leuthold's Ramsey Is `Bullish' on Gold Prices,” Bloomberg, August 13, 2012; “Bianco on Treasuries, Gold, Investment Strategy,” Bloomberg, August 9, 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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