Gold Climbs to the Highest in Nearly a Month on Greek Deal

on Nov 27, 2012

On 27 November 2012, Reuters reported that gold advanced to its highest level in nearly a month, with Eurozone finance ministers agreeing on Greece’s additional funding. In the last few days, the precious metal benefitted from growing investor confidence, as well as from the news that Brazil had raised its bullion holdings to the highest level in 11 years.

**Gold Advances on Greek Debt Agreement**
Following the news about the deal on Greece’s long-term debt, gold traded in a tight range around $1,750 an ounce. Reuters reports that spot gold traded at $1,749.41 an ounce, after climbing to $1,751.40. “As investors once again gain confidence in Europe after leaders give Greece another chance, that will help the euro and in turn gold,” pointed out Wang Xiaoxi, an analyst at Beijing Capital Futures Co, as quoted by Bloomberg. “The market may try for a test of $1,800 this week.”

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Gold, however, was not the only precious metal boosted by the Greek deal news, with Bloomberg reporting that cash silver advanced to its highest level in almost seven weeks, gaining 0.4 percent to $34.285 an ounce, whereas spot platinum rose 0.2 percent to $1,615.63 an ounce.
“The big picture is still driving people to precious metals, because they think the current problem is either not addressed, or won’t be realistically solved other than by the current tactic, which is to have central banks and finance ministries working together to stimulate economies,” noted one Hong Kong-based trader as quoted by Reuters.

**The Bigger Picture**
On November 23, the Financial Times reported that although gold had been struggling to move higher after its surge in August and September on the back of the US Federal Reserve’s third round of quantitative easing, the bullion was building a substantial longer-term following from investors. At the end of last week, gold posted a 1.3 percent gain, to touch a peak of $1.752.

!m[Precious Metal Boosted By Growing Investor Confidence and Brazil Purchases](/uploads/story/908/thumbs/pic1_inline.png)Gold is reported as being bought in significant quantities by investors such as sovereign wealth funds, pension funds as well as individual savers on account of concerns about devaluation of major currencies, with those concerns amplified by a potential extension of the Fed’s stimulus programme, as well as by the prospects of further monetary easing by the Bank of Japan. The FT quotes analysts as saying that the negotiations over the looming US fiscal cliff which could push the world’s largest economy into recession are also pushing investors toward the precious metal.

Bloomberg recently quoted Frank Lesh, a trader at FuturePath Trading, as noting that the continued Gaza conflict was also contributing to gold demand. “Physical demand is showing some strength,” noted Mr Lesh, as quoted by Bloomberg. “Middle East tension is also pushing some people toward gold.”
**Brazil Boosting Gold Reserves**
Among the most notable institutional gold investors is Brazil’s central bank, with data from the International Monetary Fund (IMF) showing on November 21 that the country has increased its gold holdings for a second consecutive month and to the highest level since January 2001. The FT reports that although the central bank has declined to comment on the reason behind its recent turn to gold purchases, it has stated its intention to diversify assets and reduce exposure to currency risks.


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