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Gold Rises on ECB Rate Stance

Release Date: 
Thursday, October 4, 2012

The price of gold rose after the European Central Bank (ECB) left its benchmark interest rate at 75 basis points, a historic low.  The Bank of England also maintained its current rates and quantitative easing program.  Gold was $12.00 higher at 7:13 a.m. Pacific Time on the New York Spot Market, trading at $1,792.30 per ounce.  Spot silver was $.28 higher, trading at $35.02 per ounce.  (Click here for the most current spot prices.)

ECB President Mario Draghi said the central bank will begin purchasing government bonds “once all the prerequisites are in place.”  He expects growth in the euro zone to remain weak, with the economy expected to recover “gradually.”

“A global accommodative stance will continue to support gold,” said William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey.  "Although we don't expect any further major policy announcements, all the world's central banks are in an easing mode," said Matthew Turner, analyst at Mitsubishi Corp, noting that this was supportive to gold.

"With the Fed now focusing more intensely on US employment data, a poor result would sufficiently re-energize the gold market's attempts to push higher and help get past the $1,800 psychological mark," UBS analyst Edel Tully said in a note to clients.

UBS said in a report that its physical gold sales to India yesterday were the highest since April as the rupee strengthened against the dollar.

The technical outlook suggested gold could make a quick move if it could break out of the range of $1,760 to $1,785, Reuters market analyst Wang Tao said.


(Sources:  “Gold pushes higher after data, as Draghi speaks,” MarketWatch, October 4, 2012; “PRECIOUS-Gold closes in on 11-month high; ECB, BoE in focus,” Reuters, October 4, 2012; “Gold Jumps to Highest Since November on ECB’s Bond Plan,” Bloomberg, October 4, 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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