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Gold Climbs for Six Days Ahead of Greek Vote

Release Date: 
Friday, June 15, 2012

Gold prices moved higher on Friday, its sixth consecutive daily increase ahead of the closely watched election in Greece this weekend. Gold was $6.30 higher at 7:43 a.m. Pacific Time on the New York Spot market, trading at $1,630.60 per ounce. Spot silver was $0.06 higher at the same time, trading at $28.80 per ounce. (Click here for the most current spot prices.)

European Central Bank (ECB) President Mario Draghi said today the central bank "will continue" to provide liquidity ahead of the Greek elections. "Any chance of monetary easing is in the medium term positive (for gold)," said Credit Suisse analyst Tobias Merath. Expectations of additional liquidity in the U.S. are also rising based on recent weak economic data.

U.S. Consumer sentiment fell to a six-month low on worries about deterioration in the jobs market and Europe's debt crisis, a Thomson Reuters/University of Michigan survey showed. Americans lost some of the optimism shown in the May survey, which showed confidence improving to its highest level since October 2007. The survey index fell sharply to 74.1 in June from to 79.3 in May.

"Income losses were reported by nearly one-third of all households in early June and the news reaching consumers about job prospects turned negative for the first time since late 2011," survey director Richard Curtin said in a statement. "In addition, a small but rising number of consumers reported their concerns about the fallout from Europe..." Consumer sentiment is seen as a predictor of consumer spending, which comprises approximately two-thirds of U.S. economic activity.

The U.S. current-account deficit also increased in the first quarter to its highest in three years and jobless claims have been higher than anticipated. "The expectations of the Fed doing something grew after the current-account data and the jobless data point toward some slowdown," said Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago. "People are looking to position themselves in gold as the uncertainties around are growing."

"The weak U.S. initial [jobless] claims data is keeping hopes alive for more stimulus from the U.S., and the bleak outlook from Europe is also fuelling hopes for ECB support," ANZ said in a note.

"We feel the market is positioning itself ahead of more stimulus programs from the U.S. and more aid into Europe...we continue to hold our core [long] positions and remain supportive of higher prices," Jonathan Barratt, chief economist at Barratt's Bulletin, said in a note.

(Source: "Gold up, could extend gains to a sixth session," MarketWatch, June 15, 2012;  "PRECIOUS METALS: Gold In Tight Range In Asia; Prices Supported On Stimulus Hopes," Wall Street Journal, June 15, 2012; "PRECIOUS-Gold steady, cenbanks pledge action on Greece," Reuters, June 15, 2012; "June consumer sentiment sinks to six-month low," Reuters, June 15, 2012; "Gold Records Longest Rally Since October On Stimulus Bets," Bloomberg, June 14, 2012)

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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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