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Gold Higher on Greek Aid Optimism, China Easing

Release Date: 
Monday, February 20, 2012

Gold prices moved higher Monday on a higher euro and optimism that European leaders will approve a second bailout rescue the Greek economy. China's decision to ease monetary policy to promote growth also helped gold prices. Gold traded at $1735.00 per ounce at 6:34 a.m. Pacific Time on the New York Spot Market with silver higher at $33.65 per ounce.

"The market's attention is to remain fixated on developments in the euro zone as finance ministers gather in Brussels to finalize the details of the second bailout for Greece," VTB Capital wrote in a note. "It seems today that euro zone finance ministers will approve the 130 billion euro bailout package for Greece, and that should reduce fear in the financial markets and have a positive impact on the euro in particular," said Peter Fertig, consultant at Quantitative Commodity Research. "The outlook (for gold) remains positive if we get a solution to the Greek crisis."

The People's Bank of China reduced its reserve ratio in order to promote economic growth, cutting it by half a percentage point. "Certainly, in China, there is a growing acceptance that the government will step in to support growth," said Deutsche Bank analyst Daniel Brebner. "There is the expectation that everyone is going to relax monetary policy, which will be good for stocks and commodities," said Ronald Leung, a physical dealer with Lee Cheong Precious Metals in Hong Kong.

"Globally, it looks like risk assets are being accumulated by investors, and in that kind of environment, gold should perform reasonably well," said Brebner. "Gold is searching for its next catalyst and has been caught between healthy, albeit slower, investment demand and some support from the physical market," Barclays Capital commented in a research note.

(Sources: "PRECIOUS-Gold advances on Greece optimism, China easing," Reuters, February 20, 2012; "Gold Climbs Along With Euro on Hopes for Greek Deal," CNBC, February 20, 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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