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Saturday, August 13, 2011

Gold price is likely to remain well supported

The gold price moved lower closing this week with, falling $14.05 to $1,7460 per ounce. Risk appetites rebounded, sending the price of gold moved to the downside and global stock markets broadly higher. The European Stoxx 600 climbed over 2%. Gold prices advanced after initially falling on the news that France, Italy, Spain and Belgium would temporarily ban short-selling on select stocks in order to calm volatility.

The better than expected data marked a noteworthy change from a plethora of disappointing economic reports in recent months. The worsening economic backdrop has fueled calls for the Federal Reserve to launch a third round of quantitative easing (QE3) to provide further monetary stimulus to the struggling economy. These calls have, in turn, helped lift gold prices to a series of new all-time highs in recent weeks.

While the latest jobless claims data provided a breath of fresh air, it will take several more positive reports to mark a change in the economy’s downward trend. Until such a development occurs, the gold price is likely to remain well supported, notwithstanding sharp corrections as witnessed yesterday.


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