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Gold Higher as Optimism For Spain's Bailout Fades

Release Date: 
Tuesday, June 12, 2012

Gold prices moved higher on Tuesday as yesterday's euphoria over a $125 billion aid package for Spanish banks faded ahead of the Greek elections this weekend. Gold was $12.40 higher at 7:27 a.m. Pacific Time on the New York Spot market, trading at $1,609.50 per ounce. Spot silver was $0.26 higher at the same time, trading at $28.94 per ounce. (Click here for the most current spot prices.)

Phil Streible, Sr., commodities broker at RJO Futures, said the real catalyst for gold will be the Greek election and upcoming Federal Reserve meeting, rather than the Spanish bank bailout. He noted that analysts were expecting a more substantial bailout package for Spain's financial institutions.

Research from Barclays Capital noted that " has an opportunity to re-establish its 'safe haven' status...particularly as concerns over sovereign debt, flat currency, counter-party risk and the desire to hold a hard asset have supported gold in the past."

"Gold is sitting waiting for something to happen, but I would argue it is waiting for something to happen in the United States, rather than Europe," Natixis analyst Nic Brown said. "(We need) more clarity in the United States over whether the economic data is going to improve again... or whether the weakening data is a sign of slower economic growth, and that therefore the Fed will have to do something."

Jeff Kilburg, managing partner at Kilburg Capital, said the Fed is likely in conjunction with other central banks. "Coordinated Central action is going to put a price in gold," he said. "In the big picture gold is going higher." Kilburg suggests that the 12-year bull market will continue, driven by central bank purchases, currency destruction and its own momentum. "I see gold at $2,000—yes, $2,000—by this fall," he said.

(Source: "Greek Vote and Fed Driving Gold, Not Spain," The Street, June 12, 2012; "PRECIOUS-Gold inches down as Spain bailout boost fades," Reuters, June 12, 2012; "PRECIOUS-Gold edges lower as worries over Europe simmer," Reuters, June 12, 2012; "Central Banks Will Fuel Gold to $2,000 This Year Says Kilburg," Yahoo Finance, June 8, 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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