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Gold at Five-Week High on Europe, China

Release Date: 
Tuesday, January 17, 2012

The price of gold reached its highest level in five weeks, up $17.50 per ounce on the New York Spot Market today. The metal traded at $1661.30 per ounce at 6:35 a.m. Pacific Time with silver also up more than 1% at $30.40 per ounce.

German economic data showing improved business sentiment while a successful auction of Spanish bonds (following yesterday's successful sale in France) boosted the euro higher, helping gold. Better-than-expected data on the Chinese economy also supported gold prices as risk sentiment improved.

"Interest came back in really at the start of the year," said Macquarie analyst Hayden Atkins. "That rally, from where it was looking pretty dicey into year-end, has been a reinvigoration of interest. Now (it is taking) any excuse to trade up. The interest is already there."

China's GDP slowed less than analysts projected for the fourth quarter, allaying some concerns that China's economy would experience a hard landing. Although China's growth was the slowest in 2-1/2 years, "the data showed that China's economic growth was not as bad as feared and there was too much panic in the market," said Bonnie Liu, an analyst at Macquarie in Shanghai. The data is expected to be grounds for a gentle easing of monetary policy that may help support gold prices.

(Sources: "PRECIOUS-Gold hits 5-week high as euro, commodities rise," Reuters, January 17, 2012; "PRECIOUS-Gold rallies 1.5 pct as China data lifts markets," Reuters, January 17, 2012; "Gold tops $1,660 as dollar slides on China data," MarketWatch, January 17, 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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