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Gold Moving Higher on Greece Austerity Agreement

Release Date: 
Monday, February 13, 2012

Gold traded slightly higher on Monday as a weaker dollar bolstered demand for the precious metal. As of 11:20 AM Pacific Time, gold was trading at $1,725.50 per ounce on the New York Spot Market, up $2.40 per ounce, while silver was trading at $33.87 per ounce, up $0.18 per ounce.

The dollar declined against a basket of currencies as Greek lawmakers approved long-negotiated austerity measures, clearing the way for another bailout. "The dollar’s weakness is supporting gold," Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview.

Greece must now negotiate a deal with private bondholders on a bond swap and interest payments on new bonds. It is unclear how many bondholders will agree to the deal which could require significant pressure from Greece officials to win their support. Euro zone finance ministers are slated to sign off on Greece's bailout on Wednesday.

Analysts expect sentiment on gold to remain bullish in the longer term, as central banks around the world consider adopting further monetary easing measures to offset the impact from Europe's woes. This could lead to higher inflation resulting in higher gold prices as the precious metal is acquired as a potential inflation hedge.

(Sources: "Gold May Climb in New York as Weak Dollar Boosts Investor Demand," BusinessWeek, February 13, 2012; "Gold rises on Greek austerity bill, off 2-week low," Reuters, February 13, 2012; "Gold Prices Waver on Greek Debt Deal," TheStreet, February 13, 2012)

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