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Gold Analysts Positive After Broad Asset Pullback

Release Date: 
Tuesday, November 22, 2011

The price of gold rose on Tuesday following a pullback across asset classes which included a selloff of precious metal to cover losses in other markets. Buyers in China took advantage of lower prices as panic over sovereign debt eased in the broad financial markets. "There was a lot more activity in the Asian market this morning and (there's) the less aggressive selling across all asset classes, including gold," said Credit Suisse analyst Tom Kendall. "Running up to today gold's been suffering because it's a source of cash, of U.S. dollars. When balance sheets are under stress if you need to raise dollars and you're holding gold it's an easy instrument to use."

"We're seeing a bit of physical buying" after yesterday's drop, Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by phone. "I remain positive on gold because of all the mess going on in the world."

"We expect inflows into both gold bars and coins and ETFs to continue as Europe and the U.S. are still not free from the sovereign-debt issues," Samsung Securities Co. analysts led by Simon Francis wrote in a note today. "The global economic growth outlook continues to deteriorate and U.S. interest rates should remain low for longer."

Ratings agencies Standard & Poor's and Moody's Investors Service maintained the current U.S. credit rating after the Congressional supercommittee failed to reach an agreement to cut $1.2 trillion from the U.S. deficit.

(Sources: "Gold Rebounds From One-Month Low as Fund Holdings Gain to Record on Demand," Bloomberg, November 22, 2011; "PRECIOUS-Gold rallies but debt woes dominate, cap gains," Reuters, November 22, 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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