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Gold on Track for 11th Consecutive Quarterly Rise

Release Date: 
Thursday, June 30, 2011

The price of gold is on target for an 11th quarterly increase as worries over the European debt crisis eased when Greece passed austerity measures on Wednesday as a required step to secure international aid and avoid default on the nation's debt. The U.S. dollar fell a quarter of a percent against a basket of currencies as the euro rallied on the optimism for Greece.

Luxembourg Prime Minister Jean-Claude Juncker, head of the euro zone finance ministers, said the Greek parliament's vote paves the way for payment of the next aid installment from euro-area governments and the International Monetary Fund.

"Risk sentiment improved after the Greek parliament approved the austerity measures," Stefan Graber, an analyst with Credit Suisse Group AG, said in a report today. "This helped the euro to strengthen against the dollar, which in turn attracted fresh investor interest into precious metals."

"Gold has got to stay supported, however this plays out," said said Credit Agricole analyst Robin Bhar, commenting on the crisis. "The fact is Greece is bankrupt and some restructuring is inevitable."

Greece's parliament was expected Thursday to approve the necessary legislation to implement budget cuts and asset sales after the plan approval vote on Wednesday. The country will likely secure another round of financing from the European Union and International Monetary Fund with passage of both required votes likely.

Interest rates and monetary policy are still factors for the gold market. "We need to see if fund buying is coming back, which will largely depend on whether there will be more stimulus plans in the United States after the current round of quantitative easing ends," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers. ECB President Jean-Claude Trichet said June 28 that European monetary policy makers are in "strong vigilance mode," supporting expectations for a euro zone interest-rate increase at the bank's meeting on July 7.

(Sources:  "Gold Dips as Greek Progress Offsets Dollar Lift," CNBC, June 30, 2011; "Gold May Decline, Set for Second Monthly Drop, as Euro Advances on Rates," Bloomberg, June 30, 2011; "Gold Steady As Refuge Demand Cools," Wall Street Journal, June 30, 2011)

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