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Gold Moves Higher as 3Q GDP and Inflation Rise

Release Date: 
Friday, October 26, 2012

The price of gold moved higher Friday after reported inflation numbers were higher than expected.  Gold was $7.50 higher at 7:17 a.m. Pacific Time on the New York Spot Market, trading at $1,718.80 per ounce.  Spot silver was $.19 higher, trading at $32.40 per ounce.  (Click here for the most current spot prices.)

The U.S. economy grew a better-than-expected 2% in the third quarter, Commerce Department data showed.  “On the inflation side of things, there was a bit of a jump in the headline price index, up to 2.8% from 1.6% in the prior quarter,” wrote Dan Greenhaus, chief global strategist at BTIG LLC in New York.  Gold traditionally is viewed as a potential hedge against inflation.

The Bank of Japan will hold a policy meeting Oct. 30 in which they will consider increasing its asset-purchase program by 10 trillion yen ($125 billion) to 90 trillion yen, a Japanese newspaper reported.

Commerzbank said "we envisage a renewed rally over the coming weeks, given the central bank's ultra-expansionary monetary policies and the likely post-election problems in the U.S. with the looming fiscal cliff and the debt ceiling."

"The major thing to look out for is what central banks are doing," said Christin Tuxen, analyst with Danske Bank.  "With interest rates set to be low over a period of time, gold is set to perform well in the near term," she commented.

“The whole economic situation is going to get worse rather than better,” said Thorsten Polleit, chief economist at Degussa Goldhandel GmbH, a German precious metal trading and investment company.  “Paper currencies have already lost their function as a store of value and it’s getting worse. People are increasingly putting their savings into precious metals.” 

(Sources: “Gold turns higher after U.S. GDP report,” Marketwatch, October 26, 2012; “Gold Traders More Bullish as ETP Hoard Sets Record: Commodities,” Bloomberg, October 26, 2012 “PRECIOUS-Gold bounces from 7 week low, eyes Bank of Japan,” Reuters, October 25, 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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