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ECB President Expects Continued Weakness in Europe

Release Date: 
Thursday, January 10, 2013

Gold prices rose to a one week high on statements from the European Central Bank (ECB) suggesting further monetary easing.  Gold was $18.20 higher at 8:18 a.m. Pacific Time on the New York Spot Market, trading at $1,677.20 per ounce.  Spot silver was $0.38 higher at $30.84 per ounce.  (Click here for the most current spot prices.)

ECB President Mario Draghi said economic weakness will likely continue, boosting speculation that policy makers will implement policies to revive growth.  “The economic weakness in the euro area is expected to extend into 2013,” Draghi said at a press conference in Frankfurt today.  “A gradual recovery should start” later this year as ECB measures work their way through the economy, he added. Draghi also announced a unanimous ECB decision to keep the interest rate at its current level.

“Draghi made it clear that Europe is still on the weaker side, and they will continue to lean towards accommodative policy,” said Bill O’Neill of Logic Advisors.

Hon Cheung, Regional Director, State Street Global Advisors, said gold is still a useful hedge against financial stresses and inflation risks. “I still think there’s still room for gold as a hedge.  Don’t forget, there are still significant financial stresses out there.  I think the fiscal cliff [agreement] was a relief for the market, but we still have a U.S. debt ceiling coming up [and] the euro situation is an ongoing concern for investors.”

“Over the long term, inflation certainly will be a concern.  We’re seeing interest from investors thinking of ways to hedge inflation…gold has been quite an effective hedge,” Hon said.  “Gold is more useful as a hedge against these uncertainties.” 

(Sources: “Gold Climbs to One-Week High as Draghi Sees Weakness,” Bloomberg, January 10, 2013; “Gold futures rise on China exports, softer dollar,” Marketwatch, January 10, 2013; “

Has Gold Lost Its Luster?CNBC, January 6, 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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