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Gold Rises as ECB Official Signals Continued Accommodative Policy

Release Date: 
Tuesday, March 12, 2013

p> Gold prices moved higher today on comments from a European Central Bank (ECB) official indicating the bank may continue its accommodative monetary policies.  Gold traded $11.30 higher at 10:39 a.m. Pacific Time on the New York Spot Market, at $1,594.10 per ounce.  Spot silver was $0.22 higher at $29.31 per ounce.  (Click here for the most current spot prices.)

ECB council member Jens Weidmann, head of Germany’s Bundesbank, said that euro zone inflation pressures were abating, suggesting the ECB will maintain its accommodative monetary-policy stance “for as long as necessary…”

“Speculation about new announcements on easing in Europe is supporting gold,” said Phil Streible, a senior commodity broker at R.J. O’Brien & Associates. “Physical demand out of Asia is also bullish.”

U.K. industrial production unexpectedly fell in January from a month earlier.  In February, Bank of England policy makers said they “stand ready” to increase stimulus action to support the recovery. The weaker-than-anticipated data is supportive of higher gold prices as it reinforced the ongoing need for loose monetary policies from the world's central banks, traders at TD Securities said.

 “There’s very aggressive buying into dips,” said Dave Meger, director of metals trading with Vision Financial Markets. “With the Fed stimulus still in place, the market feels the physical demand will pick up,” he added.

Howard Wen, an analyst at HSBC in New York, said Chinese demand is a factor supporting gold prices.  “China has been relatively strong since prices had fallen below $1,600. Physical buying has been active over there,” Wen said. “It has slowed a bit, but it’s still positive for the bullion market.”

(Sources:  Gold Heads for Longest Rally in Six Months on Easing Speculation,” Bloomberg, March 12, 2013; “Gold Futures Climb 1% on Weaker Economic Data, Dollar,” Wall Street Journal, March 12, 2013; “Gold futures climb toward $1,600 an ounce,” Marketwatch, March 12, 2013; “PRECIOUS-Gold above $1,590 as continued euro zone easing seen,” Reuters, March 12, 2013)

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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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