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World Gold Council Researcher Sees Support for Gold

Release Date: 
Tuesday, August 7, 2012

Gold rose slightly along with the euro and equities on increased optimism for stimulus in the eurozone. Gold was $.10 higher at 7:58 a.m. Pacific Time on the New York Spot Market, trading at $1,612.70 per ounce. Spot silver was $.20 higher, trading at $28.18 per ounce. (Click here for the most current spot prices.)

Although European Central Bank (ECB) President Mario Draghi did not announce another round of quantitative easing last week, "Draghi ... reiterated that the ECB was ready to engage in 'non-standard' measures, potentially involving open market operations," VTB Capital said in a note. "Global risk sentiment turned bullish on high expectations for stimulus in the monetary union."

Despite the Federal Reserve's silence on any immediate plans for monetary stimulus, markets are hoping for Fed action in September. "Investors continue to eye possible moves by the Fed, and market opinion is skewed towards policy action," ANZ analysts said.

Juan Carlos Artigas, the World Gold Council's head of investment research, explained in a recent Forbes article that central banks have become net buyers of gold and are on track to purchase at least as much as they purchased last year, more than 450 tons. He also discussed several other factors that are supportive of gold.

China's Industrial and Commercial Bank of China, the world's largest commercial bank, launched gold backed savings accounts just a few years ago, Artigas noted. He said there are already more than 2 million Chinese allocating a percentage of their salaries to gold savings accounts.

Artigas also noted India's high demand for physical gold. "Private individuals hold about 18,000 tons of gold in India," he said. He described a "post program" in which post offices, the center for administrative life across all of India, are beginning to sell certified bars and coins. He also stresses the religious and cultural significance of gold in India and says buyers will pay a premium to buy from a guaranteed source such as a post office.

(Sources: "Gold climbs in line with euro, stocks," Reuters, August 7, 2012;
"PRECIOUS METALS: Gold Rangebound in Asia; Stimulus Hopes Support," Wall Street Journal, August 7, 2012; "Gold Buyers Eye Draghi And Bernanke, But Forget China And India's Voracious Appetite," Forbes, July 31, 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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