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Global Fears on Growth and Supply Lift Metals

Release Date: 
Monday, June 6, 2011

Gold prices rose on Monday as investors acquired precious metals on fears about the global recovery. Recent employment data in the U.S. and a weaker dollar also provided support for metals. The price of gold was $1553.20 per ounce at 8:20 a.m. Pacific Time on the New York Spot Market.

"Weak U.S. economic data last week are strengthening expectations that the Federal Reserve will maintain key interest rates at the current very low level for even longer, which will keep the opportunity costs for precious metals low," analysts at Commerzbank said in a note to clients Monday.

"The weak U.S. data has increased the possibility of a third round of quantitative easing," said Ong Yi Ling, a metals analyst at Phillip Futures. "I think it is premature to say we will see a third round. But if the Fed (U.S. Federal Reserve) signals that there may be, it will be the catalyst pushing gold to $1,550 and beyond."

Sunday elections in Peru, a top exporter of silver and other metals, may result in greater control of natural resources, including mining. Also weighing on the supply outlook, the Standard & Poor's GSCI Spot Index, which tracks commodities, rose for a fourth straight week as Chinese metal inventories plunged.

(Sources: "Gold moves higher on economic jitters,"MarketWatch, June 6, 2011;"Funds Boost Bullish Commodity Bets Amid Improving Global Growth Prospects," Bloomberg, June 6, 2011; "PRECIOUS-Gold firms on weak dollar, soft U.S. jobs data,"Reuters, June 6, 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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