News Header

 

Stalled Euro Growth, Physical Demand, Help Gold

Release Date: 
Tuesday, August 16, 2011

Gold traded higher on Tuesday on news of stalled economic growth in Germany and other euro zone nations. The metal was trading at $1784.80 per ounce at 7:25 a.m. Pacific Time on the New York Spot Market. French and German leaders will attempt to forge a solution to sovereign debt issues affecting the euro zone at a meeting today.

Germany's economy, Europe's largest, expanded 0.1 percent from the first quarter, less than the 0.5 percent forecast by economists. France's recovery also stalled in the second quarter while Italy and Spain saw very slow expansion and Greece's economy contracted.

"There are still far too many macro uncertainties at the moment, with softening economic readings," Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report. "The short-term outlook for gold remains positive." If risk sentiment turns worse, "...it's back to $1,795 and then $1,800. As before, investors will be unwilling to liquidate," Kryuchenkov said.

Swiss bank UBS said Tuesday that its latest client poll showed 60 percent of respondents expected gold to be trading above $1,800 per ounce by year-end, with 32 percent expecting prices of $2,000 or higher. "That a majority of respondents expects gold to end the year above current very-elevated levels suggests that the macroeconomic backdrop is expected to remain supportive, and that September will again bring traditionally strong seasonal physical demand," the bank said in a note.

"Our physical sales to India picked up last week, and were the strongest since late June... That physical demand is resilient and scrap supply underwhelming...is providing strong fundamental support for gold," UBS wrote. "We've seen physical buyers come back into the market," said Liu Yangyi, a manager at China National Pearl Diamond Gem & Jewelry Import & Export Corp. "Physical buyers are adjusting to higher prices."

Large gold fund investors including hedge fund manager John Paulson kept their gold holdings in the second quarter, data showed on Monday. The price of gold is up approximately 25 percent this year.

(Sources:  "Gold Gains for a Second Day as Slowing Economies Stoke Investment Demand," Bloomberg, August 16, 2011; "PRECIOUS-Gold rises 0.6 pct as euro zone jitters resurface," Reuters, August, 16, 2011)

News Footer

 

†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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.