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Nomura Says Gold Prices May Rise Through 2015

Release Date: 
Monday, June 25, 2012

Gold prices were higher on Monday as equities fell ahead of a European Union (EU) summit later this week. Gold was $13.50 higher at 9:07 a.m. Pacific Time on the New York Spot Market, trading at $1,586.80 per ounce. Spot silver was $0.60 higher, trading at $27.60 per ounce. (Click here for the most current spot prices.)

At the upcoming EU meeting in Brussels, European leaders will discuss specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund. A Societe Generale research note cited fading hopes for a breakthrough at the meeting. These diminished expectations, together with concerns over global economic growth, prompted investors to scale back exposure to riskier assets on Monday.

The Federal Reserve Bank of Chicago's National Activity Index fell to -0.45 in May from a revised 0.08 in April, indicating that national economic activity has fallen.

Nomura, a Japanese multinational financial services conglomerate, adjusted its target price for gold this year to $1,754 an ounce from $1,791 per ounce, but maintained a bullish outlook into 2014 and 2015 based on what it said was a continuing uptrend in precious-metals prices.

Nomura cited several positive factors for gold including central-bank buying, continuing strong Chinese demand, persistent negative real interest rates and a growing bunker mentality of some investors who see dark scenarios on the horizon. "The further deterioration of the economic recovery, enhanced potential for quantitative easing and continued structural problems in the euro zone lead us to believe that gold prices will stay stronger into 2014 and 2015," Nomura analysts said in the note Monday.

Long positions on rising gold prices gained 5 percent to 104,646 contracts, the CFTC data show. Those are the highest levels since May 1 and the fourth straight gain, the longest bullish streak since early February.  Net-long silver positions climbed 2.4 percent to 7,490 contracts, CFTC data showed.

(Sources: "PRECIOUS-Gold holds above $1,570/oz ahead of EU summit," Reuters, June 25, 2012; "Gold gains as investors look to E.U. summit," MarketWatch, June 25, 2012; "Bulls Proven Wrong As Prices Slump Into Bear Market: Comm," Bloomberg, June 25, 2012; "PRECIOUS METALS: Gold Climbs on Slower US Growth, EU Worries," Wall Street Journal, June 25, 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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