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Gold Market Sees Profit-Taking Amid Middle East Unrest

Release Date: 
Tuesday, March 8, 2011

The price of gold pulled back slightly on profit-taking even as pitched fighting continued in Libya and inflation concerns loomed globally. Gold prices traded at $1428.50 an ounce at 7:10 AM Pacific Time on the New York Spot Market. The price of oil also fell slightly from its 29-month high.

"There are healthy sales that allow the market to take a break after a recent bull run," said Chae Un Soo, a Seoul-based trader with KEB Futures Co. "There's great buying interest in the metal, unless the picture in the Middle East gets better." Gold prices rallied 30 percent last year due to factors such as the prospect of rising inflation and fears of currency debasement.

Libyan opposition forces continued their coastal advance towards Tripoli as loyalists of Muammar Qaddafi escalated their use of force. In other Middle East countries, rising food and commodity prices led to protests in Iran, Yemen and Oman. The general level of popular unrest follows the cases of Tunisia and Egypt before their leaders were ousted by rebellion.

"As long as uncertainty persists on markets and the situation remains unclear, the price of gold should remain well supported. The dip ... is therefore likely to be of a temporary nature," analysts with Commerzbank said in a note to clients.

(Sources: "Gold Retreats as Rally to Record Prompts Some Investors to Lock in Gains"

Bloomberg, March 8, 2011; "PRECIOUS-Gold falls from record on oil; ETF holdings inch up," Reuters, March 8, 2011; "Gold retreats as Gadhafi said to be exiting," MarketWatch, March 8, 2011)

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