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March 27, 2013

Release Date: 
Wednesday, March 27, 2013

Gold rose today in morning trading on the New York Spot Market on continuing euro zone fears and the Federal Reserve’s perceived long term commitment to quantitative easing: “The metal's inflation-hedge appeal also received a boost after two top Fed policymakers said the U.S. central bank should continue its bullion-friendly bond-purchases at least through 2013. (“Gold edges up on euro zone fears, Fed stimulus hopes,” Reuters, 3/27/13.) Silver was down slightly.

A survey of economists shows that Cyprus is unlikely to the last euro zone country seeking a bailout. Further, seventy-five percent of the polled economists believe these countries will be required to help pay for their bailout. Under the Cyprus agreement, uninsured deposits and senior bondholders were forced to forfeit billions in euros to secure the EU bailout. "The Cyprus deal has brought the European banking crisis to a new level," the director of G+ Economics told Reuters. “This represents a uniquely bad deal for the euro's future." (Cyprus bailout not expected to be euro zone's last -Reuters poll,” Reuters, 3/27/13.)

UBS reports that central banks have been “gobbling up bullion at a rate of 27-metric tons a month” which is “definitely bullish for gold… Central bank purchases are clearly a bullish sign for investors, but by no means are an indication that the market is ready to turn. With the specter of rising interest rates an improving U.S. economy, along with expectations of a stronger U.S. dollar in the medium-term, gold will have to derive its support from continued flare ups of Europe’s sovereign debt crisis. But, if the U.S. continues on its upward path and Bernanke’s bloated balance sheet begins to feed inflation, gold may once again find its legs.” (“Central Banks Bought More Than $3B In Gold In 2013: UBS,” Forbes, 3/27/13.)

Two recent forecasts see silver potentially rising to $200 in the next decade, driven by investor and industrial demand. “Silver could climb up to $200 an ounce in the next decade, predicted a Western Australian miner. The prediction, made at last week's Mines and Money conference in Hong Kong, would mean a sixfold price increase for the precious metal…. Eric Sprott (CEO of Sprott Asset Management) predicts silver price to rise to $200oz…” (Silver could hit $200 an ounce by 2023,” 3/27/13.)

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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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