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Greek Hopes Boost Gold As Data Disappoints

Release Date: 
Wednesday, February 8, 2012

The price of gold was slightly higher on Wednesday and neared 11-week highs from optimism that Greece would reach agreement to avoid default. The news bolstered the euro which hit 8-week highs and provided support for gold. The metal traded near the $1750 mark, reaching $1749.40 per ounce at 7:05 a.m. Pacific Time on the New York Spot Market with silver at $34.48 per ounce.

Greek leaders are set to meet today regarding austerity measures needed to secure a $172 billion rescue fund from the IMF and European Union. "If we see a deal being signed it's going to be euro-positive," said Morgan Stanley strategist Ian Stannard.

"The anticipation is that they are going to work out the Greek problem one way or the other here," said Paul Mendelsohn, chief investment strategist at Windham Financial Services. "The issue is, are you going to have a Lehman-type financial crisis, and the market's take on that so far is probably not."

Some analysts noted that uncertainty over Greece's economy will linger beyond any agreements on debt obligations. "If Greece were to agree on everything right away, I don't think it would solve everything because they will still have to implement the measures," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. "There are plenty of land mines left."

Friesen added that the uncertainty in Europe and its affect on the global economy will support gold, particularly as the world's central banks are expected to provide accommodative monetary policy to create growth.

New data indicates the Eurozone continues to suffer from a weak economy. Germany had its largest drop in exports in nearly three years in December and the Bank of France said the French economy would not grow in the first quarter of 2012.

(Sources: "Euro, global shares up as Greek deal seen near," Reuters, February 8, 2012; "PRECIOUS-Gold tests $1,750 as Greece buys more time," Reuters, February 8, 2012; "PRECIOUS-Gold consolidates gain as Greece lifts euro," Reuters, February 8, 2012)

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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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