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Gold Demand Rises 3.8 Percent in Fourth Quarter

Release Date: 
Thursday, February 14, 2013

Gold fell on news the euro zone economy shrank more than expected in the final quarter of 2012 after its largest economies, Germany and France, contracted.   The news pressured the euro lower against the dollar.  Gold was $8.90 lower at 1:03 p.m. Pacific Time on the New York Spot Market, at $1,643.40 per ounce.  Spot silver was $0.34 lower at $30.88 per ounce.  (Click here for the most current spot prices.)

The World Gold Council (WGC) reported gold demand rose 3.8 percent in the fourth quarter as purchases increased in India, which remains the largest gold consuming nation.  Global demand rose to 1,195.9 tons during the final quarter of 2012, the most ever for the period.

“The real driver was the rise in jewelry, and within that you saw India being key” in the fourth quarter, said Marcus Grubb, managing director of investment research at the World Gold Council. “China’s economy is now re- accelerating quite strongly into January and February. Both Indian and Chinese demand will be higher in 2013.”

James Steel, analyst at HSBC, said for now, “gold is likely to benefit from tensions stemming from the ongoing currency war, we believe,” said James Steel, a bullion analyst at HSBC.  According to the Mr. Steel, countries are increasingly weakening their currencies to boost exports and stimulate economic growth.  A stronger currency tends to hurt a country’s exports, making them more expensive for buyers elsewhere.  HSBC sees the number of participants engaging in foreign-exchange “activism is rising,” which in turn pointed to policies from countries including Japan and Switzerland to try to ease the strengthening of their respective currencies.

“Gold may be supported by concerns over the upcoming automatic spending cuts set to begin” in the U.S. on March 1, Mr. Steel added.

(Sources:  “Gold Demand Rose 3.8% in Fourth Quarter, Narrowing Annual Drop,” Bloomberg, February 14, 2013; “Gold falls on dollar strength; market mulls demand,” Marketwatch, February 14, 2013; “PRECIOUS-Gold drops to 6-week low on euro recession fears,” Reuters, February 14, 2013)

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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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