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Gold Breaks $1500 As Analysts See Support

Release Date: 
Wednesday, April 20, 2011

The price of gold crossed the $1500 level to a record, hitting $1502.90 per ounce at 7:07 a.m. Pacific Time on the New York Spot Market. A drop in the value of the dollar, concerns about European and U.S. debt, faster inflation and Middle East tensions combined to increase demand for the precious metal as a safe haven asset.

The dollar slipped approximately 1 percent against six major currencies, trading at a 16-month low, while a U.S. gauge of trader inflation expectations approached the highest level since 2008.

"The dollar has lost ground to its major counterparts," James Moore, an analyst at TheBullionDesk.com in London, said in a report to clients. "The mix of inflation, currency debasement, euro zone debt and Middle East and North African unrest continues to fuel investment demand."

"Gold has been acting as a currency in its own right, and that is why we are up at $1,500," said Simon Weeks, head of precious metals at the Bank of Nova Scotia.

European rate policy has been generally accommodative, which benefits gold prices. "With interest rates remaining low in most countries, there is little reason not to own gold, as the metal currently offers the best returns around," said Gavin Wendt, founding director with MineLife Pty. Coupled with the debt turmoil in Europe and violence in the Middle East, "it's a perfect storm for precious metals, including gold and silver."

"The theme of longer term higher inflation than we have seen in the last 10 years in China is a pretty solid view, so gold is going to be an asset class that is probably going to be more in favor in China than it has been in the past," said Macquarie analyst Hayden Atkins. China is the world's second-biggest gold consumer behind India, as well as being the biggest producer.

(Sources: "Gold Breaks $1,500 as Investors Seek Security," CNBC, April 20, 2011; "PRECIOUS-Spot gold breaches $1,500, silver at 31-year high," Reuters, April 20, 2011; "Gold Rises Above $1,500 to a Record on Slumping Dollar, Inflation Concern," Bloomberg, April 20, 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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