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Gold is a Safe Haven, Says Commerzbank Analyst

Release Date: 
Thursday, March 24, 2011

Gold prices pushed toward record highs on Thursday with continued violence in Libya, euro zone debt crises and the Japanese disaster recovery dominated news headlines.  The precious metal traded at $1441.00 per ounce at 6:47 a.m. Pacific Time on the New York Spot Market. Geopolitical and economic conditions have generated expectations for further gains among analysts at Commerzbank and UBS.  Silver has also reached 31-year highs.

As U.S. and allied air strikes against Muammar Qaddafi's ground forces continue, Portuguese Prime Minister Jose Socrates stepped down as PM after parliament rejected his government's latest budget reducing measures aimed at avoiding EU financial assistance. Lisbon needs to refinance 4.5 billion euros of sovereign debt in April.

"Gold and silver are justifying their reputation as safe havens," Carsten Fritsch, an analyst at Commerzbank AG (CBK) in Frankfurt, said in a report. "In addition to the war in Libya, the unrest in the Arab region and the disaster in Japan, the debt crisis in euro zone periphery countries has also returned with a vengeance. Gold and silver are likely to profit further."

Eugen Weinberg, also an analyst at Commerzbank, said, "Given the geopolitical environment, concerns about Portugal and other peripheral countries, euro zone debt concerns and the still extremely low interest rate environment, it is not surprising the trend is your friend."

UBS analyst Edel Tully also stressed European debt as a driver of gold prices.  "The return of European sovereign issues to the spotlight, with expectations high for an imminent Portuguese bailout, has pushed gold to within a couple of dollars of its March 7 record high of $1,444," she said in a note.

 

(Sources: "Gold Climbs Towards Record on Euro Zone Jitters," CNBC, March 24, 2011; "Gold Trades Near Record on Europe Debt Risk; Silver Reaches 31-Year Peak," Bloomberg, March 24, 2011)

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