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Record Gold Price Streak Days Longest Since 1975

Release Date: 
Tuesday, July 19, 2011

Gold prices reached its 11th consecutive record high today, breaking the prior longest consecutive streak of record highs set in 1975. Continued uncertainty over debt in Europe and the U.S. and concerns over the American economy helped gold prices to its new record. So far, gold prices have increased 13% in 2011. Gold traded at $1603.50 per ounce at 7:18 a.m. Pacific Time, July 19, on the New York Spot Market. Analysts at Jinrui Futures, HSBC, Bank of Nova Scotia and VTB Capital provided their assessment on the factors influencing the gold market.

"Europe's debt is a time bomb and while the U.S. will eventually settle the current debt issue, there still exists a lot of uncertainties in that market," Hou Xinqiang, an analyst at Jinrui Futures Co., said by phone from Shenzhen, China. "Gold’s safe-haven properties have been in play recently and ever since the global recession in 2008, it has become a vital part of most people’s investment portfolio."

"Although the challenges facing the EU and U.S. are different, they share some common themes in that they are both based on sovereign debt issues and are seen as being political as well as economic in nature," said HSBC in a note. "Taken together, the combined effect on gold prices is...bullish, as investors wary of dollar and euro assets, seek a safe alternative.

"In Europe we've seen huge demand for metal in some areas, and huge amounts of scrap coming in in others, but demand seems to be winning the day," said Simon Weeks, head of precious metals at the Bank of Nova Scotia. "Exchange-traded funds in the last five sessions have gained just over 50 tons, so there is clearly money coming back in," he added. "It's not going to be one-way traffic, but the fundamental issues and concerns haven't gone away....and people have realized that gold is important as a currency."

"All depends on what happens in the euro zone... and QE3," said Andrey Kryuchenkov, an analyst at VTB Capital, discussing the continued concerns over European debt, growth and potential for monetary easing by the U.S. Fed. "(We) don't expect it, but some are pricing it in. Should risk aversion escalate, (gold) will go higher."

(Sources: "Gold May Rise, Extend Longest Advance Since 1975 on Sovereign-Debt Concern," Bloomberg, July 19, 2011; "PRECIOUS-Gold eases from record highs, eyes euro summit," Reuters, July 19, 2011)

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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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