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Gold and Silver Reach New Records

Release Date: 
Monday, April 25, 2011

The price of gold rose on Monday as investors looked for a safe haven asset against a falling U.S. dollar, rising inflation and tensions in North Africa and the Middle East. Silver prices also reached new 31-year highs.

"We do look at quite quick appreciation of gold in the coming months and it's really driven by dollar weakness," said Dominic Schnider, director for wealth management research at UBS AG. In April, the dollar fell 2.2 percent against its benchmark basket of six currencies. It reached a 16-month low against the euro on expectations that the U.S. Federal Reserve will keep interest rates near zero while European Central Bank officials have indicated further rate increases. Gold has climbed 5.6 percent this month in large part due to the drop in the dollar.

Silver prices surged more than 5 percent on Monday, helped by the weak dollar and strong physical demand in Asia. The metal crossing the $48 mark led to automatic purchases. "As the market edged higher, a series of stop-loss buying was triggered, especially after silver rose above $48," said Yuichi Ikemizu, Tokyo branch manager of Standard Bank.

At the retail level, buying interest in physical silver has increased in China, India and the Middle East. "Everyone wants a piece of silver, right from a cab driver to a professional," said Harshad Ajmera, proprietor of Kolkata-based JJ Gold House in India, "It looks like the whole of one billion population is chasing silver."

Precious metal markets also reacted to increased uncertainty in the Middle East, after reports of a NATO air strike that damaged buildings in Col Muammar Gaddafi's compound in the Libyan capital and anti-government protests in Yemen on Sunday.

(Sources: "PRECIOUS-Silver surges 5 pct on dollar, gold at record," Reuters, April 25, 2011;

"Silver near $50-ounce; spot gold hits record," MarketWatch, April 25, 2011; "Gold Climbs to Record, Silver Rallies as Investors Flee Weakening Dollar," Bloomberg, April 25, 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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