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Gold Price in Striking Distance of $1,400

Release Date: 
Monday, December 20, 2010

GOLD PRICE NEWS – The gold price surged $10.00 to $1,385 per ounce Monday morning, bouncing back after last week’s 1% decline. The price of gold began to move higher overnight as tensions escalated between North and South Korea. An uncertain geo-political outlook and strong physical demand have combined to drive the gold price back near $1,400 per ounce.

A 15 ton increase in exchange-traded fund inventories, led by strong flows into the SPDR Gold Trust (GLD), has helped prevent a deeper correction in the gold price. COMEX gold futures, per the February contract, are now unchanged in December. Gold’s sister precious metal, silver, is also stronger this morning – rising $0.07 to $29.22 per ounce. Silver prices have gained 4% in December and a huge 73.1% thus far in 2010.

Investors had a rare opportunity to get high level executives’ views with the release of the annual PricewaterhouseCoopers (PwC) 2010 Global Gold Price Survey Report. While predictions on the future direction of the gold price are often espoused on a regular basis by analysts, it is rare for gold industry executives to proffer their internal outlooks.

The survey revealed that 75% of industry respondents predicted the gold price will continue to advance until the fourth quarter of 2011. Gold price predictions for next year’s peak ranged from $1,400 to $3,000 per ounce. The most popular forecast, given by 40% of respondents, was $1,500. Survey participants cited the weak U.S. dollar – driven by the Fed’s quantitative easing initiatives – as the primary catalyst for their bullish outlook for the gold price.

Other noteworthy findings from the survey included responses that 82% of gold producers expect to produce more gold in 2011 than in 2010; 70% plan to use additional cash flow from the rising gold price to fund new projects or increase mine reserves; 78% said their top strategy in 2011 will be the expansion of existing gold deposits to increase production; and 37% will look to increase reserves through merger and acquisition activities.

Commenting on the survey results, John Gravelle, head of PwC’s Canadian mining group, stated that “I think gold prices are looking pretty good…What you see with gold is you’ve seen the price going up quite a bit, and you also see people not having any faith in paper currencies. So where are people going to put their money?”

Another key factor behind the gold price’s ascent has been mounting debt levels and deficits in many developed economies, according to Gravelle, which has put added pressure on the U.S. dollar and euro currencies. As for merger and acquisition activity in the gold sector, Gravelle described the increasing trend as reminiscent of 1980, when the gold price reached its previous record high of $850 per ounce.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article 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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†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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