2011-07-18

gold advanced amid a flare-up of the European sovereign debt crisis

The gold price climbed toward $1,600 per ounce last week as worries over the surge in borrowing costs for Italy drove investors to add to long positions in the yellow metal. Gold prices, which have risen for ten consecutive days, gold advanced amid a flare-up of the European sovereign debt crisis. Italian ten-year bond yields crossed 6% last week and traded to record spreads against similar duration German bunds. The lack of deal over the weekend to raise the debt ceiling also helped bolster gold prices late Sunday.

HSBC gold analyst James Steele provided a bullish forecast for the gold price in a note to clients, stating:

“The climate driving gold higher is similar to that of Q2 2010 when gold also jumped to then record highs, buoyed by the emergence of the Greek sovereign crisis and U.S. quantitative easing. Gold is reacting to a similarly bullish cocktail of factors, except that as policy makers appear to have more limited options now, conditions are more gold-bullish now than in 2010.”

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