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Falling Dollar and Middle East Riots Support Gold

Release Date: 
Monday, May 9, 2011

A weak U.S. dollar and political unrest in the Middle East and North Africa supported gold prices in Monday's trading, as precious metals began the week with a recovery from last week's instability in the commodity markets. Gold prices were up over $14 to $1,510 per ounce as of 9:19 AM Pacific Time on the New York Spot Market. Analysts at IG Markets, Tongyang Futures Co. and Quantitative Commodity Research commented on the metals markets noting several positive forces at play.

The dollar fell 0.4 percent against a basket of currencies in the U.S. Dollar Index after hitting a 2-1/2-week high on Friday following unexpectedly strong U.S. employment numbers and a media report on the possibility of Greece quitting the euro zone. In the Middle East, several protestors were reportedly killed in Syria over the weekend in clashes with government forces, while the Los Angeles Times reported 12 deaths in Egypt in the wake of violent riots between Muslims and Christians.

"Precious metals will likely remain in focus following last week's volatility," said Ben Potter, markets strategist at IG Markets in Melbourne. "The precious-metals complex may also be boosted by the political unrest over the weekend in Syria, Egypt and Bahrain," Potter said.

"Gold and silver may regain strength as traders perceive last week's commodities washout to be excessive and it isn't viewed as a trend reversal," said Park Jong Beom, Seoul-based trader with Tongyang Futures Co. "There's no change in the outlook for a weaker dollar as well."

"It might be a buying opportunity," said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. "The dollar has weakened and this is positive for precious metals."

(Sources: "PRECIOUS-Gold extends gains on weak dollar; US silver up 3 pct," Reuters, May 9, 2011; "Silver Futures Rally From Worst Weekly Loss Since 1975 as Investors Return," Bloomberg, May 9, 2011; "Silver leads precious metals' rebound in Asia," MarketWatch, May 9, 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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