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Gold Gains 10% in 2011; Iran Fear Supports in 2012

Release Date: 
Tuesday, January 3, 2012

Gold ended 2011 with its 11th consecutive annual gain, up 10.2 percent for the year. The new year started with a promising start as gold moved up more than $35 on the New York Spot Market as of 9:00 a.m. PDT. Silver was also higher, up $1.80.

Investors acquired gold on safe haven buying following reports that Iran has produced its first nuclear fuel rod. Western nations are pressuring Iran to cease what is believed to be a nuclear weapons program. Iran denies any intent to develop atomic weapons.

The U.S. recently imposed sanctions against Iran and the EU is considering a ban on Iranian oil imports. Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt. in Mumbai said "more sanctions are expected from the U.S. and other nations. This will have a positive impact on gold prices as ideally people would try to buy gold."

A number of central banks have increased their gold reserves including Turkey and Morocco, according to the International Monetary Fund.

The euro moved higher after better-than-expected manufacturing data from Chinese data, boosting investor appetite for risk. The euro may rebound in the near-term despite the problems affecting continental Europe, as investors are overly bearish on the currency, investor Jim Rogers said on Tuesday.

(Sources: "Gold Climbs to One-Week High as Iran Makes Nuclear Rod," Bloomberg, January 3, 2012; "PRECIOUS-Gold rises in line with euro recovery," Reuters, January 3, 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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