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The Economist Editor Says Gold May Reach $3,000/oz.

Release Date: 
Tuesday, May 1, 2012

The price of gold reached a two-week high on Tuesday after five straight days of gains. The precious metal traded at $1,669.50 per ounce at 9:42 a.m. Pacific Time on the New York Spot Market, with silver at $31.44 per ounce.

"Gold posted a bullish outside week last week, adding further fuel to our belief that a base is being formed for the next rally higher," said Tom Fitzpatrick, a strategist at Citigroup's technical research unit CitiFX. Fitzpatrick said that gold's next target could be $1,790 an ounce.

The dollar fell after data lifted expectations the Federal Reserve would stimulate the economy through a third round of quantitative easing. "We would expect the most likely trigger for more private sector involvement in the gold market would be from a deterioration in the U.S. labor market alongside a weakening in the U.S. dollar," Deutsche Bank wrote in a research note.

Matthew Bishop, author of "In Gold We Trust" and U.S. business editor and NYC bureau chief for The Economist, recently explained why gold prices may move higher. "The reason we wrote 'In Gold We Trust' was that my co-author and I saw that the long run trend in gold was really dramatic…I think gold has been rising because of a fundamental lack of confidence, by some of the best long-term investors, in paper money like the euro and the dollar. We are only half way or maybe a third of the way through where that trend could go with gold…that vote out of paper currency into gold. As people see how badly [governments] are doing in managing the kind of economic risk we face, gold is going to go higher. I don't see any reason you couldn't see it at $3,000 unless governments really dramatically change how they behave. I just don't see that happening."

(Source: "PRECIOUS-Gold hits 2-week high as US data weighs on dollar," Reuters, May 1, 2012; "PRECIOUS-Gold nudges at two-week highs as dollar retreats," Reuters, May 1, 2012; "PRECIOUS METALS: Gold Ticks Higher, Awaits Data, " Wall Street Journal, May 1, 2012; "Gold Settles Near $1664, Down Slightly in April," CNBC, April 30, 2012; "Gold Ready to Break Out?" CNBC, April 27, 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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