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Gold Moves Higher on European Weakness

Release Date: 
Wednesday, November 2, 2011

Gold traded higher amid continued debt concerns and economic weakness in Europe. As of 7:16 a.m. PT, the price of gold rose more than one percent, up more than $20, on the New York Spot Market. The yellow metal saw support from a weaker dollar as the euro rose from three-week lows.

The downturn in euro zone manufacturing in October was deeper than previously reported, according to surveys of European businesses. The Greek Prime Minister’s call for a referendum on the country’s 130 billion euro bailout package continued to rattle markets.

"There is more of a risk aversion type dynamic developing because of all the complications around Europe and with the Greek referendum on the cards," Standard Chartered head of metals research Dan Smith said. "All these things will bring some doubts about the political and macro outlook."

"[Gold and silver] have been trending up for the last week or so. Investors are coming back in to those two because of the weaker macro environment," Smith said. "It's also a good time of the year for physical demand for gold as well as we head into the end of the year because of the Indian wedding season."

"Over the next few days, we think gold prices are likely to remain more resilient as the market should benefit from safe haven demand and its reasonable valuation," Barclays Capital said in a note.

Investors are expected to watch interest rate news this week in the U.S. and Europe. The U.S. Federal Reserve is scheduled to have a press conference following a two-day policy meeting and the European Central will announce its decision regarding interest rates on Thursday.

(Sources: "Gold Eases as Greek Vote, MF Global Rattle Markets," CNBC, November 1, 2011; "Gold slumps as euro-zone uncertainty lifts dollar," MarketWatch, November 1, 2011)

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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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