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Greek Rescue Deal Pushes Gold Higher

Release Date: 
Tuesday, February 21, 2012

The price of gold rose to its highest level in the past ten days following approval of emergency funds for Greece.  Gold moved $19.00 higher in morning trading, reaching $1754.30 per ounce at 9:25 a.m. Pacific Time on the New York Spot Market with silver also higher at $34.25 per ounce.

Greece's $172 billion bailout avoids a March default. However, private bondholders will be required to take a loss on their Greek investments and the government must enact deep budgetary cuts that will likely spark further unrest. Despite the bailout, the Greek economy still faces a grim economic outlook over the next several years.

Peter Sorrentino, senior fund manager at Huntington Asset Advisors in Cincinnati, said in a Bloomberg interview that gold may reach $2,000 per ounce by the end of April. He cited supporting factors including continued global demand growth in gold, nationalized mining which may fuel central bank buying by China, Russia and Venezuela, and the potential for quantitative easing from the Federal Reserve.

Gold futures in India are likely to rise this week on expectations of dollar weakness and higher crude oil prices, according to Gnanasekar Thiagarajan, director with Commtrendz Research. "Higher crude oil prices and a weaker dollar are supportive for the precious metals complex," he said.

(Sources: "PRECIOUS-Gold rises after Greek deal gives euro brief boost," Reuters, February 21, 2012; "PRECIOUS-Gold hits 1-1/2-week high after Greece deal," Reuters, February 21, 2012; "Europe Debt Crisis, Emerging Markets, Gold," Bloomberg, February 21, 2012; "Gold, silver seen rising this week," Economic Times, February 21, 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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