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RBS CIO Says Investors Need Gold In Their Portfolio

Release Date: 
Wednesday, August 22, 2012

Gold extended its gain to three-month highs ahead of the FOMC’s minutes from the Fed’s last policy meeting. Markets continue to anticipate monetary easing from the Fed and the European Central Bank (ECB). Gold was $4.00 higher at 7:08 a.m. Pacific Time on the New York Spot Market, trading at $1,643.60 per ounce. Spot silver was $.20 higher, trading at $29.63 per ounce.  (Click here for the most current spot prices.)

“Yesterday, the [gold] price did break out of its trading range, which triggered follow up buying. Moreover, the price is now in vicinity of the 200-day moving average, which also attracts technical buying,” said Commerzbank analyst Carsten Fritsch.

Analysts at ICICI Bank said gold will gain support on “some resolution” of the euro-zone debt crisis as Greece commenced talks with creditors and euro-zone financial ministers. The ECB is also expected to reduce borrowing costs for Spain and Italy.

The Fed is expected to consider monetary stimulus at its upcoming conference in Jackson Hole, Wyoming at the end of the month. “There’s a lot of monetary-easing chatter going around with the chairman going to Jackson Hole,” said Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago.

Gary Dugan, CIO, Asia & Middle East at Coutts, the private-banking division of Royal Bank of Scotland (RBS), advises investors to have a strategic holding in gold and expects that prices may rise. “I think in the next three months we could see $1,700. If we get the absolute collapse in Europe then I think we’ll be up at $1,900-$2,000 very, very comfortably.” 

Dugan said gold could extend its bull run as emerging-market central banks and investors accumulate the metal to protect against weakening currencies. “The reason we’re positive on gold is that major currencies around the world lack credibility…The natural buyers of today are emerging-market central banks, and over and above that, it’s going to be further investment demand…” 

(Sources: “Gold Advances To Highest Since May On Fed Stimulus Bets,” Bloomberg, August 22, 2012; “Gold To Rally As Central Banks, Investors Buy, Coutts Says,” Bloomberg, August 22, 2012;

Gold inches higher, hovers at three-month best,” Marketwatch, August 22, 2012; “Gold Could Hit $1,700 in the Next 3 Months,” CNBC, August 20, 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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