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Greek Debt Fears Push Gold to Three Week Highs

Release Date: 
Friday, May 27, 2011

The price of gold rose on Friday to trade near a three week high as a weaker U.S. dollar and increased concerns about a Greece debt default prompted buying.  Gold's appeal has been boosted in recent weeks by worries about contagion from Greece to Ireland, Portugal and Spain.  The precious metal reached $1534.10 per ounce at 7:46 a.m. Pacific Time on the New York Spot Market.

"It's still the expectation that there's a possibility for a Greece default and greater safe-haven buying coming to the precious metals such as gold and silver," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore, noting that gold prices were close to a three-week high.

The head of euro zone finance ministers Jean-Claude Juncker said the International Monetary Fund could withhold the next slice of aid to Greece due next month, a new development in the Greek financial crisis that adds to the mounting concern.

The dollar fell to session lows against the euro after European Central Bank Governing Council member George Provopoulos said Greece can handle its debt if it sticks to its aid program.  "The dollar is weaker, boosting commodities," said Peter Fertig, a consultant at Quantitative Commodity Research. "Also don't forget the situation in the eu ro zone, especially the latest comments from an EU official." 

"Market sentiment toward gold has become more positive over the past few days," BNP Paribas analyst Anne-Laure Tremblay said in a research note.  "I believe that the gold price will trend higher from its current levels in 2011," she said.

(Sources: "PRECIOUS-Gold rises on Greece debt fears, silver gains 2 pct,"

Reuters, May 27, 2011; "Weak dollar, Greek debt propel gold to 3-week high," Reuters, May 27, 2011; "Gold: The Bulls and the Bears," CNBC, May 27, 2011)

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