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Precious Metals Gain on Palestinian Conflict

Release Date: 
Monday, November 19, 2012

The Israeli-Palestinian conflict continued on Monday with Israel bombing dozens of suspected militant sites in the Gaza Strip while Hamas fired rockets across the Israeli border which, along with a weaker dollar, sent gold prices higher.  Gold rose $17.00 at 7:06 a.m. Pacific Time on the New York Spot Market, trading at $1,731.70 per ounce.  Spot silver was $.64 higher, trading at $33.05 per ounce.  (Click here for the most current spot prices.)

"The situation in the Middle East could be supportive for precious metals,” said analyst Peter Fertig with Quantitative Commodity Research.  Fertig explained that the conflict is “supportive for the price of crude and precious metals often rise with higher crude prices."

Tom Kendall, head precious metals research at Credit Suisse, said the Gaza Strip violence could have more impact on the gold market if energy prices move higher.  "There is a small risk that the violence could spill over into other parts of the Middle East. But it is having a pretty limited effect on the gold price right now," Kendall said.  "We would need to see much greater reaction to energy markets than we've been seeing for that to spread into gold."

The dollar fell amid prospects U.S. lawmakers will reach an agreement on the fiscal cliff.  David Govett, head of precious metals at Marex Spectron Group in London, said gold’s gain “was primarily in response to a weaker dollar, which in turn was due to ‘constructive’ talks in Congress about resolving the fiscal cliff.”   He added, “the situation in the Middle East continues with Israel continuing its targeting of Gaza and this in turn has also led to some buying.”

Saxo Bank vice president said the rising conflict between Israel and the Gaza Strip, worries over the unresolved euro zone debt crisis, and continuing talks to resolve the fiscal cliff all supported gold.  Once the fiscal cliff is resolved, the underlying interest rate environment is likely to remain low for some time and could support gold prices, Hansen said.  "The fact that we are holding above the $1,700 level is giving investors the kick to get back into gold," he added.

(Sources:  “PRECIOUS-Gold firms, buoyed by Middle East,” Reuters, November 19, 2012; “PRECIOUS METALS: Gold Climbs As Fiscal Cliff Fears Ease,” Wall Street Journal, November 19, 2012; “Gold Gains in New York on Weaker Dollar, Israel Conflict Concern,” Bloomberg, November 19, 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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