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European Debt, Mid East, Japan, Lift Gold Prices

Release Date: 
Wednesday, March 23, 2011

Analysts for NS futures, MF Global and Philips Futures see higher prices ahead for gold, due to Middle East violence, worries over European debt, concerns over the stability of Portugal's government, and new cost estimates of the Japanese earthquake and tsunami. Gold prices traded at $1440.70 per ounce at 7:34 a.m. Pacific Time on the New York Spot Market.

The initial wave of allied airstrikes against Libyan air defenses has not ended attacks on civilians by Qaddafi's fighters, said U.S. Admiral Samuel Locklear, tactical commander for the allied attacks on Libya. Further U.N. Coalition attacks against Muammar Qaddafi's ground forces in Libya are planned. "Gold is still taking its cue from the situation in the Middle East," said Ong Yi Ling, an analyst at Phillip Futures, adding that it could increase safe-haven flows into the metal.

"Gold prices could remain supported in the near-term by Middle East tensions," said Tom Pawlicki, an analyst in Chicago at MF Global Holdings Ltd., in a report today. He added, "Support could come from sovereign debt worries in the euro zone. Worries over the safety of the euro could resume the push into commodities and hard assets as safe havens." Fears of Portugal's parliament rejecting the government's latest austerity measures in a key budget vote on Wednesday led to concerns of the collapse of the minority Socialist administration a day before a European summit.

The economic weight of the Japanese tsunami also continues to support gold prices. "Gold seems to be catching some lift off news that the Japanese disaster might end up costing as much as $300 billion," analysts at NS Futures said in a note.


(Sources: "Gold Inches Up, Vies for Sixth Straight Win Day," MarketWatch, March 23, 2011; "Gold's Appeal Boosted by Portugal Vote," CNBC, March 23, 2011; "Gold Climbs as Middle East Turbulence and European Debt Crisis Fuel Demand," Bloomberg, March 23, 2011; "PRECIOUS-Gold steady on Middle East crisis; Japan fear eases," Reuters, March 23, 2011)

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