Increased Risk Appetite Sees Equities Rise and Yen and Gold Fall

Gold

Gold is currently trading at $1,218/oz and in euro, GBP, CHF, and JPY terms, at €994/oz, £831/oz, CHF 1,405/oz, JPY 112,630/oz respectively. Gold fell slightly in US trading yesterday on renewed risk appetite prior to sideways trading in Asia and then falling mid morning in Europe from $1,223/oz to $1,215/oz.

Interestingly, the decline in risk aversion has seen oil and the commodity currencies strengthen (AUS, NZD), the dollar and the euro flat and gold and the yen weaken slightly. Gold and silver filled the downside gaps of the previous day and are looking good technically.

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Gold looks like it is consolidating at these levels and there is support at $1220/oz and below that at $1,165/oz. The trend remains up with gold up in the last week, last month, last quarter, year to date and one year. Short term weakness could be seen again if equity markets come under pressure but the medium and long term fundamentals remain sound.

Equity indices internationally have risen but there the falls in the Chinese and Spanish markets show that the rising tide is not lifting all boats and underlines concerns about economic growth in China and of sovereign debt issues in Spain.

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Silver

Silver is currently trading at $18.30/oz, €14.94/oz and £12.51/oz.

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Platinum Group Metals

Platinum is trading at $1,556/oz and palladium is currently trading at $459/oz. Rhodium is at $2,625/oz.

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News

* Gold will trade at $1,050 to $1,350 an ounce this year, peaking in the third quarter, HSBC analyst James Steel said at a conference in London (Bloomberg).

* Pacific Investment Management Co.,  which runs the world’s biggest mutual fund, recently cut its  gold holdings in half in its multi-asset products, Co-Chief  Investment Officer Mohamed El-Erian said in an interview  published on the Motley Fool website. Gold may weaken as the result of "deleveraging" among borrowers worldwide, El-Erian said. Investors should favor high-quality government bonds as a  source of income and "stay on the sidelines" with regard to  equities amid concerns about European sovereign debt, he said, according to the article (Bloomberg).

* El-Erian pointed out how they continued to have an allocation to gold in some of their portfolios. "I can tell you that we had an allocation of gold in our multi-asset products, and we’ve halved it recently. We still think it makes some sense to have an allocation to gold, but not as much as we used to."

Mark OByrne

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