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Russell Says Gold May Reach $6,200 Per Ounce

Release Date: 
Thursday, July 5, 2012

Gold prices were lower on Monday following Friday's significant rally as investors continued to digest news that the European Union (EU) would provide capital for struggling Eurozone banks. Gold was $4.30 lower at 7:20 a.m. Pacific Time on the New York Spot Market, trading at $1,595.80 per ounce. Spot silver was unchanged, trading at $27.57 per ounce. (Click here for the most current spot prices.)

European stocks hit two-month highs while Spanish and Italian government bond yields fell, buoyed by the EU announcement. "If spreads between peripheral EU nations narrow with German Bunds, the financial markets may be more confident of the euro rally and by extension ... the gold rally," HSBC said in a note.

Despite the relief for Spanish and Italian banks and more positive sentiment, some investors remain cautious over prospects for the Eurozone nations. "In the long term, we regard the current skepticism displayed by speculators to be constructive, for most fears should meanwhile be priced in," said analysts from Commerzbank in a note on Monday.

Veteran investment industry publisher Richard Russell, publisher of the Dow Theory Letters, recently commented on the appeal of gold. "Retail sentiment for gold is now low, which is bullish for the metal. I've been sitting with all my gold and paper gold. I still think gold will be the last man standing."

"Gold is in a classic bull market. It is now in the second psychological phase, which is the longest phase of a bull market...What will be the signs of the third phase of the gold bull market? First, new inflation adjusted highs in the price of gold (gold above $6,200). Next, gold will be the focus of every conversation... The coin dealers will be out of gold and will start touting silver and platinum (the prices of which will be rocketing higher)," Russell said. "Finally, the naysayers will start warning of a 'gold bubble.'...The price of gold will shoot up to unbelievable prices...."

(Sources: "Gold futures decline as Europe glow fades," MarketWatch, July 2, 2012; "PRECIOUS-Gold eases as post-EU summit rally runs out of steam," Reuters, July 2, 2012; Dow Theory Letters, June 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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