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Gold Rises on Inflation Fears

Release Date: 
Friday, March 15, 2013

Gold rose on inflation concerns as U.S. consumer prices rose to their highest monthly rate since June 2009, , keeping this metal on track for its second consecutive week of price gains.  Gold traded $5.70 higher at 7:43 a.m. Pacific Time on the New York Spot Market, at $1,597.00 per ounce.  Spot silver was $0.14 higher at $29.05 per ounce.  (Click here for the most current spot prices.)

U.S. consumer prices, a measure of inflation, rose 0.7% in February according to government data.  A sharp rise in gasoline prices fueled the higher monthly inflation rate. Core prices, which exclude food and energy, rose 0.2%. 

"It is a global trend that the value of paper money is diminishing, which attracts investors to gold, a hard asset," said Li Ning, an analyst at Shanghai CIFCO Futures.  "That's why gold has been resilient recently even though we have seen good data from the United States, strength in equities and a firm dollar."

"I think there is a feeling that the risk appetite is gone too far and I wouldn't be surprised to see equities pulling back and gold coming back into favor a bit in coming days," Standard Chartered analyst Dan Smith said.  "Obviously, the euro strength is helping gold prices to hold above $1,590 and it seems to me that there is more upside risk than downside risk for the time being."

Afshin Nabavi, senior vice president at bullion refiner MKS (Switzerland) SA in Geneva, said “physical demand still remains strong, from the Far East mainly. There seems to be bargain hunting every time around the $1,570 an ounce area.”

(Sources:  “Gold Futures Inch Higher On Inflation Data, Dollar,” Wall Street Journal, March 15, 2014; “PRECIOUS-Gold heads for second week of gains,” Reuters, March 15, 2013; “PRECIOUS-Gold lingers around $1,590, heads for 2nd weekly gain,” Reuters, March 15, 2013; “Gold rises a little, taking cues from dollar,” Marketwatch, March 15, 2013; Gold Set for Weekly Gain Amid Signs of Physical Demand, Recovery,” Bloomberg, March 15, 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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