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Gold and Silver Rise on Stronger Euro

Release Date: 
Tuesday, February 7, 2012

Gold and silver rose on Monday, driven by weakness in the dollar and increased optimism about Greece's prospects of avoiding a default. Gold closed at $1745.90 per ounce on the New York Spot Market, up $25 per ounce, and silver closed at $34.25 per ounce, up $0.47.

Gold found support from a stronger euro after Greece announced it had sold over 812 million euros in lower yield bonds over the last six months. The euro was also bolstered by renewed hopes that the Greek government might agree on austerity measures needed to secure a second bailout.

"If we do get a resolution of the current standoff, then gold will likely benefit," said Anne-Laure Tremblay, an analyst at BNP Paribas.

Risks about Greece and the euro zone remain, according to analysts at Commerzbank. But these risks would still be beneficial for gold, as the "debt-ridden country (would not) receive any further bail-out package which would inevitably lead to Greece's bankruptcy. Gold should therefore remain well supported," the analysts wrote.

Federal Reserve chairman Ben Bernanke warned the Senate Budget Committee, of a possible fiscal crisis despite recent positive U.S. economic data. Bernanke explained the labor market was from a full recovery and affirmed the Fed's decision to leave interest rates low for an extended period of time.

"We are showing a quite strong rally in the gold market" as Bernanke's statements continued to indicate more monetary easing "and also on hopes for Greece," said Jim Steel, a precious metals analyst with HSBC in New York.

(Sources: "Gold rises 1 pct on Greece rescue deal optimism," Reuters, February 7, 2012; "Gold Prices Rebound After Two-Day Dip," TheStreet.com, February 7, 2012; "Gold futures gain on Bernanke, Greece," MarketWatch, February 7, 2012)

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