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Gold Gains 6.6% in First Quarter

Release Date: 
Monday, April 2, 2012

Gold moved higher today following a positive manufacturing survey from the Institute for Supply Management and portfolio adjustments by money managers for the new quarter. Longer term, analysts expect an upward trend in gold prices due to factors including slowing U.S. economic growth and central bank liquidity. Gold traded at $1680.60 per ounce at 7:18 a.m. Pacific Time on the New York Spot Market with silver at $33.06 per ounce.

"Money is coming into gold and [the] metals complex in anticipation of the next quarter asset allocations," said George Gero, a precious metals strategist at RBC Capital Markets.

Euro-zone finance ministers added more than 700 billion euros ($934 billion) in liquidity to the region's debt rescue fund, punctuating a persistent trend of loose monetary policy from the world's central banks.

Gold prices rose 6.6% during the first quarter of 2012. Looking ahead, continued high levels of liquidity in the markets may support the precious metal. "We think that actually gold will tend to rally in the months ahead on the back of a wider improvement in liquidity which we're seeing across the macrospace," said Standard Chartered analyst Daniel Smith.

Commerzbank analyst Eugen Weinberg said that "in the longer term, we still stay very confident that the upward trend in gold is still very constructive."

Bank of America Merrill Lynch said that "U.S. growth is set to slow in (the second quarter). A cyclical slowdown is typically supportive to gold prices for a host of reasons, including a reduction in the upside to prices of cyclical asset classes," the bank noted in a report. "The impact of a renewed slowdown in U.S. growth on gold prices may be even more pronounced this time around because discussions around QE3 will in all likelihood re-emerge, as the Fed may not stand by idle as activity slows."

(Source: "Gold turns higher; copper adds to gains," MarketWatch, April 2, 2012; "Gold Pushes Higher with Oil, Stocks on Data," CNBC, April 2, 2012,";"PRECIOUS-Gold prices ease as equities, oil retreat," Reuters, April 2, 2012; "Gold Closes Quarter With 6.6% Gain," Wall Street Journal, March 30, 2012)

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