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SandP Lowers Outlook for Greece

Release Date: 
Wednesday, August 8, 2012

Gold rose slightly despite a lower euro as Standard & Poor's lowered its outlook on Greece and German industrial production declined in June. Gold was $2.00 higher at 7:12 a.m. Pacific Time on the New York Spot Market, trading at $1,615.30 per ounce. Spot silver was $.02 higher, trading at $28.22 per ounce. (Click here for the most current spot prices.)

Standard & Poor's revised its outlook on Greece's sovereign debt rating from stable to negative. The nation's CCC rating is already eight levels below investment grade. The outlook revision reflects the risk of a further downgrade if Greece does not receive its next payment from the European Union and International Monetary Fund rescue fund.

"Gold seems to be supported by hopes that Europe and the United States would launch more stimulus measures to help shore up their faltering economies," Richcomm Global Services senior analyst Pradeep Unni said. "Investors are betting that the festering debt crisis in the euro zone could push the ECB to launch a new round of bond-buying soon."

Boston Fed President Eric Rosengren called for the Fed to launch an aggressive bond buying program to foster growth until unemployment begins to decline. Though he is not a voting member of the Federal Open Market Committee this year, Mr. Rosengren plays a role in Fed deliberations.

"I think the main support at this juncture is the increasing expectation that Fed may implement another round of quantitative easing effort in September," OCBC Bank analyst Barnabas Gan said. "On top of that, we also look for gold to play the inflation hedge once again as inflationary pressures are picking up due to higher grain and crude prices."

"Gold is still looking promising in the second half, with the peak physical consumption season on the horizon and more quantitative easing from the U.S. Fed still on the cards," said Li Ning, an analyst at Shanghai CIFCO Futures. She added that the technical outlook for the precious metal also looked supportive as lows on the weekly chart had been gradually moving up since July.

ANZ analysts also said in a report that daily technical charts for gold are biased towards the upside.

(Sources: "PRECIOUS-Gold steady, stimulus hopes support," Reuters, August 8, 2012: "Gold eases with stocks, euro as risk appetite wanes," Reuters, August 8, 2012; "PRECIOUS METALS: Gold Mostly Sideways in Asian Trade," Wall Street Journal, August 8, 2012; "Gold Declines As Stronger Dollar Curbs Investor Demand," Bloomberg, August 8, 2012)

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