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March 29, 2013

Release Date: 
Friday, March 29, 2013

The New York Spot Market was closed today for the Good Friday holiday. As such, Thursday, March 28, 2013, was the last trading day for the month.

As The Indian Express reports, gold saw a 1.3% gain for the month. “Gold is on track for a 1.3% rise in March - its first monthly rise in six - as worries flared up about the stability of the euro zone, stoked by the crisis in Cyprus and a political deadlock in Italy after inconclusive elections in February…The precious metal also got support from comments of US Federal Reserve officials, reiterating that the central bank would do best to keep buying assets at its current $85-billion-a-month pace until the jobs market is on firmer ground. This means liquidity would remain adequate in the system, likely keeping price pressure within the economy alive and auguring well for gold, which is considered a hedge against inflation. (“Gold price set to regain sheen as euro zone crisis stays strong,” The Indian Express, 3/29/13.)

The Financial Times reported on a report which shows important correlation between gold prices and Chinese inflation which is often reflected in pork prices. In a note to clients, CNC Asset Management wrote: “We have reviewed many Chinese macro indicators to detect their correlation with the gold price, and we are basically brought down to the very basics: the gold price is highly correlated to China’s inflation and real interest rate…”

What does this mean for future gold prices?  “Officials have warned that China faces inflationary pressures this year, with central bank governor Zhou Xiaochuan saying this month that China should be on ‘high alert against inflation. Inflation for the first two months of this year came in at 3.2 per cent, its highest level in 10 months… As Rahul Jacob noted on beyondbrics, pork prices are expected to rise sharply this year, by as much as 16 per cent according to some estimates. If that happens, it could be good news for gold bugs.” (“China: gold before swine,” The Financial Times, 3/28/13.)

The International Business Editor of The Daily Telegraph warns the Cyprus bailout may spell the end of the EU’s Economic and Monetary Union (the “EMU”): “The Cyprus debacle has taught us yet again that EMU has gone off the rails, is a danger to stability, and should be dismantled before it destroys Europe’s post-War order. Whether it marks a watershed moment in the crisis is another matter. Italy, Spain, France and Portugal have their own crises, moving to their own rhythm. The denouement will arrive when the democracies of southern Europe conclude that recovery is a false promise and that the only way to end mass unemployment is to break free of EMU’s contractionary regime.” (“Cyprus has finally killed myth that EMU is benign,” The Telegraph, 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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