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ECB Rate Cut, U.S. Jobs, Greece Support Gold Price

Release Date: 
Friday, November 4, 2011

Gold remained near six-week highs as markets reacted to U.S. jobs data, interest rate developments and the continuing euro zone crisis. In the U.S., October payroll data fell below estimates by 15,000 jobs. The Fed hinted that it may engage in further monetary easing to reduce unemployment.

The European Central Bank announced a surprise interest rate cut to help spur growth. This rate cut, coupled with the possibility of Fed action, weakened the dollar and the euro and supported gold as an alternative asset, according to Societe Generale analyst Sebastien Galy.

The Greek Prime Minister’s call for a referendum on the country’s bailout package caused turmoil in the markets, but intense European pressure forced Greece to seek consensus on a new bailout plan. According to reports, EU leaders considered a Greek exit from the euro common currency in an effort to preserve the currency.

"Whether Greece will break free from the euro zone, we don't know. I think gold is really supported by the euro zone (crisis)," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "I think sentiment is more or less still bullish because of the Greek problem and the banking sector is also not good. People are still packing their money into safe-haven assets."

Gold traders are the most bullish in three weeks, according to a Bloomberg survey. Twenty-eight of thirty-two people surveyed by Bloomberg expect gold to rise in New York next week, the most since Oct. 14 and the second weekly increase in a row.

(Sources: "Gold edges up after U.S. jobs data," Reuters, November 4, 2011; "PRECIOUS-Gold eases after rally, holds near 6-wk top," Reuters, November 4, 2011; "Gold dips but stays close to 6-week highs," MarketWatch, November 4, 2011; "Gold Traders More Bullish as Debt Crisis, U.S. Economy Spur Bets on Gains," Bloomberg, November 4, 2011)

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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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