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Gold Higher as IMF Seeks to Expand Rescue Fund

Release Date: 
Friday, April 20, 2012

Gold prices were higher today along with the euro on the expectation that G20 leaders will increase liquidity for Europe during their meeting this weekend. The precious metal traded at $1646.20 per ounce at 5:22 AM Pacific Time on the New York Spot Market with silver at $31.99 per ounce.

The Group of 20 countries is holding semiannual meetings of the International Monetary Fund (IMF) and World Bank in Washington D.C. this weekend. The IMF will seek increased funding to handle the euro zone debt crisis. Christine Lagarde, the managing director of the International Monetary Fund, said she expects the resources of the IMF to be "significantly increased."

Russia said G20 countries would be ready to commit enough funds to meet the request for at least $400 billion to draw a line under the euro-zone crisis. A Sharps Pixley report stated that "IMF director Christine Lagarde... today believed she could reach her $400 billion goal of additional IMF lending capacity, while the World Bank president Robert Zoellick stated that the ECB needed to do more for Europe in addition to (liquidity injection) LTRO." The report added, "the expectation of more liquidity coming into the system may have given the gold price a reprieve."

"This is supportive news for gold, as we're seeing the euro strengthen now," Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. "This means more free money, and gold likes that."

Demand for gold could rise in India as the government's postal department is offering a rebate on gold coins during the Akshaya Tritiya festival, one of the nation's largest gold buying festivals.
"The consumer mood is upbeat...We expect sales to be 25% higher [in India]," said Bachhraj Bamalwa, chairman of the All India Gems and Jewelery Trade Federation.

(Source: "PRECIOUS-Gold edges towards $1,645/oz as euro firms," Reuters, April 20, 2012; "Gold May Fall as Slowdown in Europe Curbs Investor Demand," Bloomberg, April 20, 2012; "India's post offices to sell discounted gold coins as festival nears," MineWeb, April 18, 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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