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Erste Group Report Says Gold May Reach $2,300

Release Date: 
Tuesday, July 17, 2012

Gold prices fell on a rising dollar and Fed Chairman Bernanke's failure to provide details of potential quantitative easing during his Congressional testimony yesterday. Gold was $5.70 lower at 7:41 a.m. Pacific Time on the New York Spot market, trading at $1,577.70 per ounce. Spot silver was $.10 lower, trading at $27.31 per ounce. (Click here for the most current spot prices.)

BNP Paribas analyst Anne-Laure Tremblay said. "The next potential important data, pending no development in the euro zone, are the non farm payrolls at the start of August. "We expect Mr. Bernanke to announce QE3 at the Jackson Hole speech on 31 August," she added.

Despite few clues from Bernanke, market participants still expect the Fed to implement further easing measures as Congress remains gridlocked, said Bart Melek, head commodity strategist for TD Securities. "There's a general belief out there that the Fed will take necessary steps" to add liquidity in a bid to spur economic activity, he said. He believes gold may hold its price in the short term, recovering from yesterday's session lows in reaction to the Bernanke testimony. "These recent gains probably are going to be maintained," he noted.

Erste Group's Ronald Stoeferle released the 2012 edition of his gold report entitled "In Gold We Trust." The report describes how perceptions of gold have slowly shifted in recent years away from that of a commodity and toward the view that gold is money of the highest quality.  Stoeferle suggests this return to a "traditionally approved monetary status for gold" is indicative of a new phase in the bull market for gold, one where it is becoming "politically correct" once again.

The report notes, "As far as sentiment is concerned, we definitely see no euphoria with respect to gold. Skepticism, fear, and panic are never the final stop of a bull market. Therefore we believe that our long-term price target of $2,300 per ounce could be on the conservative side...We believe that the parabolic trend phase is still ahead of us, at the end of which our long-term target of $2,300 should be reached."

(Sources: "PRECIOUS-Gold slips as euro falls, and after Fed disappoints," Reuters, July 18, 2012; "PRECIOUS METALS: Gold Almost Erases All Losses; Investors Take Long-Term View," Wall Street Journal, July 17, 2012; "Gold back in fashion, next stop $2,300," Mineweb, July 12, 2012)

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