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Weaker Dollar, China Add Support for Gold

Release Date: 
Wednesday, February 15, 2012

Gold and silver prices were little changed on Wednesday, as the markets digested news of  a softer dollar and investor uncertainty about the prospects for a second Greek debt bailout and future growth in the euro zone. As of 9:33 AM Pacific Time, gold was trading at $1,732.20 per ounce on the New York Spot Market, and silver was trading at $33.69.

A positive driver for gold today was an announcement by China that it would continue to buy euro backed assets like bonds from the European Financial Stability Fund, a temporary bailout fund, or the European Stability Mechanism, a permanent bailout fund.

"I'm bullish gold," said HSBC analyst James Steel, who cited robust demand for bars and coins and rising gold demand in emerging economies.

Pau Morilla-Giner, head of equities, commodities and alternative investments at London and Capital Asset Management, said "Below the surface ... gold continues to trade about 60 to 70 percent of the time as an alternative currency, which clearly has to do with being a better store of value than nominal currencies that are being abused by excessive quantitative easing (QE) across the board," he added.

"It looks to me like gold is just trying to form a real strong base to move higher," argues Chuck Butler, president of EverBank World Markets. "I still think that gold is going to come back to at least its previous highs of last year ... I really do think that gold is the anti-dollar if you will."

(Sources: "Gold rises against darkening euro zone backdrop," Reuters, February 15, 2012; "Gold Prices Push Higher With Euro," TheStreet.com, February 15, 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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