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Sprott Says Gold May Hit $2,000 By Year End

Release Date: 
Thursday, May 10, 2012

Gold prices moved higher along with the euro after Europe's bailout fund approved a key payment to Greece and Spain took steps to bolster its banks. Greece secured funds needed for bond repayments, calming the fear of a Greek insolvency and an exit from the eurozone. Bargain hunting by Asian buyers also helped to support the precious metal. Gold was $9.40 higher, trading at $1,599.80 per ounce as of 7:09 a.m. Pacific Time on the New York Spot market, while spot silver was $0.11 higher, trading at $28.48 per ounce. (Click here for the most current spot prices.)

"Chinese and Indian interest in gold will likely be boosted by the latest fall in price," said Anne-Laure Tremblay, analyst at BNP Paribas. Chintan Karnani, Delhi-based director of Insignia Consultants, said gold demand in India has increased sharply after prices fell and the Indian government rescinded a proposed tax on gold dealers earlier this week.

Goldman Sachs reiterated its "constructive" price view for gold on Thursday. The bank said weak U.S. growth and renewed euro zone risks, together with resilient physical demand, were positive for the metal.

Eric Sprott, CEO and CIO at hedge fund Sprott Asset Management, is long on precious metals, with year-end price targets for gold at $2,000 per ounce and silver at $50 per ounce. "We're seeing statistics on physical gold purchases that argue very strongly for the price of gold to go up," he said. "Exports of gold from Hong Kong into mainland China went up 600% year over year in the month of March. And that's not just a one month phenomenon. In the last 9 months China has been buying massive amounts of gold," Sprott said.

Non-G6 central banks around the world are buying gold, Sprott argued. "As a non-G6 central bank do you really want to buy a U.S. Treasury that's yielding less than 2%? Do you want to own a European bond when their banking system is falling apart? No. They want to buy gold." Sprott also noted gold's historical performance. "Gold was the investment of the last decade," he said. "It blew away almost any other investment you could have made."

Sprott also said that silver is the investment of the next decade.

(Source: "Gold Trades $2000 by Year's End: Eric Sprott," CNBC, May 10, 2012; "Gold Back Below $1,600 Gold Back Below $1,600," CNBC, May 10, 2012; "PRECIOUS-Gold steadies as euro lifts from 3-1/2 month low," Reuters, May 9, 2012 "PRECIOUS METALS: Spot Gold Higher In Asia On Bargain Buying," Wall Street Journal, May 10, 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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