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Sales of Physical Gold Seen Rising

Release Date: 
Monday, May 16, 2011

Sales of gold coins are on track for the best month in a year, even as commodities prices have pulled back.  Demand for physical gold on May 6 was the strongest since early February, Standard Bank said in a report May 11.

Those sales are "certainly reflective of strong wave of demand for physical metal,'' said Ross Norman, chief executive officer of Sharps Pixley Ltd., a London-based bullion brokerage. "What drives people towards physical metal... is fundamental insecurity. It's like safe haven in extremis.''

According to a Bloomberg survey of 31 analysts, traders and investors, the price of gold will rise 17 percent to a record $1,750 an ounce by Dec. 31 and keep gaining in 2012.  "People are buying gold on weakness," said Martin Murenbeeld, the chief economist at DundeeWealth, Inc. in Toronto, which manages about $85 billion in mutual funds and brokerage accounts. "We're going to find that the U.S. economy is not very strong," he said. "A low interest-rate environment will remain for possibly all of 2012."

Gasoline and food prices pushed U.S. inflation to a 2 1/2-year high in April, but there was little sign of a broader pick-up in consumer prices.  Market watchers are awaiting a speech by the U.S. Federal Reserve chief Ben Bernanke in which he was expected to repeat the stance that the Fed is in no rush to raise interest rates.

(Sources:  "Gold Coins Show Bull Market Unbowed in Commodities Decline," Bloomberg, May 16, 2011; "PRECIOUS-Gold steady, silver falters under firm dollar," Reuters, May 16, 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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