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Greek Default Fears Bolster Case For Gold

Release Date: 
Tuesday, May 31, 2011

The price of Gold held near its highest in almost four weeks in trading on Tuesday as lingering fears about a Greek debt default overshadowed a slight rebound in the euro. "It's crucial for markets to see whether Greece is actually sustainable and whether it can actually obtain the next 12 billion euros that is required for them to meet their funding needs in July," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"Gold's uptrend remains in place, with people being fidgety about Europe's debt crisis," said Chae Un Soo, Seoul-based trader with KEB Futures Co. Seventeen of 19 traders, investors and analysts surveyed by Bloomberg said that the price of gold will rise this week.

Debt fears are spreading to Asia, as well. Credit rating agency Moody's placed Japan's sovereign debt ratings on review for possible downgrade, citing concerns about a weak policy response to faltering economic growth prospects.

The President of China National Gold Group Corp., the company that controls China's largest gold deposits, said "gold prices will foreseeably fluctuate at historically high levels for another three years." The state-run mining concern is intending to invest in projects in Africa as it expects bullion to trade near record levels during that period of time. "We aim at large-scale mines with good potential in countries that have close ties with China and domestic stability," Sun said in an interview in Shanghai.

Commodities, as measured by the Standard & Poor's GSCI Index of 24 futures, rallied for a third week last week. Gold is generally supported by higher commodity prices.

 

(Sources: "Silver Futures Climb, Gold May Advance on Europe Debt, Inflation Concerns," Bloomberg, May 31, 2011; "PRECIOUS-Gold near 4-week high; Greek crisis on focus," Reuters, May 31, 2011; "PRECIOUS-Gold steady on Greece debt fear; Shanghai margin weighs," Reuters, May 31, 2011)

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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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