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Gold Rises to 2-1/2 Month Highs on Stimulus Hopes

Release Date: 
Tuesday, August 21, 2012

Gold rose to 2-1/2 month highs on a lower dollar and expected monetary easing from the European Central Bank (ECB) and other central banks.  Gold was $18.40 higher at 7:05 a.m. Pacific Time on the New York Spot Market, trading at $1,640.60 per ounce.  Spot silver was $.57 higher, trading at $29.48 per ounce.  (Click here for the most current spot prices.)

"A break above $1,630 is very significant, as we breach the June-July and early August range," VTB Captial analyst Andrey Kryuchenkov said. "Buy orders were triggered, with the dollar index also slipping below support at 82, or early July lows."

"This is on speculation that the ECB will act," the VTB Capital analyst said. "Peripheral bond purchases by the ECB are almost a done deal according to the broader market, which is euro supportive in the short run... bullion as ever follows the cause, trading against the greenback."

The prime minister of Greece will meet German Chancellor Angela Merkel, French President Francois Hollande and Eurogroup chief Jean-Claude Juncker this week in an effort to secure additional funding from the European Union, ECB and International Monetary Fund.

"Ongoing expectations for further monetary easing globally are keeping gold lifted," said Li Ning, an analyst at Shanghai CIFCO Futures.  "Physical demand is likely to pick up in September, and that gives hope to gold bugs too."  Reports from China’s state-run Xinhua news agency indicated that Beijing is planning new stimulus measures this year.

(Sources: “PRECIOUS-Gold prices jump to 2-1/2 month highs,” Reuters, August 21, 2012; “PRECIOUS-Platinum stays near 2-month high, gold firm,” Reuters, August 21, 2012; “Gold futures rise on stimulus hints, weak dollar,” Marketwatch, August 21, 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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