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HSBC: Gold May Rise to $1,900 This Year

Release Date: 
Wednesday, October 17, 2012

The gold prices rose slightly in morning trade on a stronger euro after Moody’s chose not to lower Spain’s credit rating.  Gold was $.40 higher at 7:48 a.m. Pacific Time on the New York Spot Market, trading at $1,749.70 per ounce.  Spot silver was $.05 higher, trading at $33.11 per ounce.  (Click here for the most current spot prices.)

Moody's maintained Spain's credit rating at Baa3, preventing the country’s debt from slipping to junk status.  The news lowered interest rates and sent the euro to a one-month high. Investors remain hopeful that Spain will soon apply for formal aid from its European Union partners.

“Gold has moved in tandem to a certain degree with the euro and other commodities and rallied overnight on a weaker dollar,” said David Govett, head of precious metals at Marex Spectron.  "Most people are sitting back and waiting for tomorrow's European Union summit to go ahead to see if anything comes out of that. If there was a sudden announcement and Spain asked for help then it will be good for the euro, the dollar would come off and it would be good for gold."

HSBC analyst James Steel said the price of gold is expected to rise to $1,900 per ounce by the end of the year.  HSBC also raised the bank’s 2013 average gold price target. "Although the first rush of QE3-inspired gold buying is over, we believe that the Fed's open-ended commitment to easing until U.S. labor markets improve will support gold well into 2013," Steel said.

"The overall attitude towards the yellow metal remains positive looking out over the months ahead, UBS analyst Edel Tully said in a note to clients, conceding the market’s recent “hesitancy to express that view in the near term.”

Commerzbank commodity strategists said that following a recent price drop, “physical buying interest in Asia ahead of the festival season in India can be expected to pick up, thereby stabilizing prices.”  Monetary policy and supply issues could prove supportive for gold, the analysts suggested.   “Ultra-expansionary monetary policy pursued by central banks suggests that the gold price will rise again in the near future, as do the ongoing strikes in the South African gold mines,” they said.  The strikes are affecting half of the gold production of the fifth-largest gold producing nation, the analysts noted.

(Sources: “PRECIOUS METALS: Comex Gold Edges Higher on Euro Rally,” Wall Street Journal, October 17, 2012; “PRECIOUS-Gold firms with euro as Moody's affirms Spain rating,” Reuters, October 17, 2012; Gold pares gains after strong U.S. data,” Marketwatch, October 17, 2012; Gold Advances a Second Day as Dollar Drops Before Summit,” Bloomberg, October 17, 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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