News Header

 

Gold Rises as Uncertainty, Debt Weighs on Policy

Release Date: 
Wednesday, April 13, 2011

The price of gold rose on Wednesday, retaking ground after the prior day's profit taking. Investors have had their eyes on the dollar's slide and expectations for near-term accommodative monetary policy in the U.S. and other nations even as inflation concerns linger. Gold traded at $1459.20 per ounce at 6:48 a.m. Pacific Time on the New York Spot Market. Analysts at UBS, ANZ Bank and GFMS Ltd. commented on the market environment for gold focusing on inflation, monetary policy and government debt.

"The direction of U.S. monetary policy is the key theme this quarter, and the uncertainty surrounding this includes both the timing of any tightening decision as well as its implementation," said UBS analyst Edel Tully in a research note. "This means that gold's movements in the coming weeks will be highly sensitive to the debates among Fed members."

"While any shift in rhetoric in favor of the hawks would likely push gold notably lower in the short term, as long as the probability of further quantitative easing remains in investors' minds, gold will be well-supported on pullbacks," she said.

Worries over unrest in North Africa, euro zone debt, and expectations the Fed would lag other central banks in tightening monetary policy, have supported gold prices. "At the moment, gold is where the money is being attracted to," said Peter Hillyard, an analyst at ANZ Bank who made a case for rising commodity prices. "For every one of those factors, like the tightening coming and other non-friendly (factors) for commodities, there are many other commodity-friendly risks out there that make people very nervous."

Precious metals research firm GFMS issued a survey showing that gold investment demand continued to drive gold prices higher at an annual rate of nearly 26% in 2010. "The prospects for gold prices this year remain bright," GFMS Chairman Philip Klapwijk said in a statement. "Investors continue to be concerned about the outlook for inflation, with governments in general showing little appetite to tighten monetary policy significantly."

Earlier this year, GFMS projected $1600 gold by year-end. Klapwijk said the firm is sticking to that forecast. "With the spotlight also shining on the state of government finances, there is every reason to believe that investors will remain focused on the gold market," he said.

Sources: "Gold May Rise to $1,600 an Ounce This Year on Investor Demand," GFMS Says"

Bloomberg, April 13, 2011; "GFMS sticks to $1600 Gold for 2011, further growth seen in investment demand," Commodity Online, April 13, 2011; "Gold recovers as dollar eases, haven buying up," Reuters, April 13, 2011)

News Footer

 

†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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.