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Gold Holds Ground as Markets Wait

June 25, 2012 – Gold held steadier Friday after the markets worked through volatility from Wednesday’s Federal Reserve meeting, which announced a continuation of Operation Twist during the continuing assessment of the health of the Eurozone.

Gold held in a $14 range Friday after working within a $42 range Thursday, settling with a 0.1 percent gain. Silver closed down 0.64 percent, reaching the highest gold/silver ratio since September 2011. The ratio now stands at 58.6 to 1, after the September 26th high of 60 to 1.

Equities were mixed, the Eurozone Stoxx 50 closed down 0.6 percent while the Dow and the S&P closed up after the ECB announced it would accept a wider range of collateral in its lending operations, as well as assets of lower quality.

Equities were bearish at the beginning of the week as Eurozone debt concerns continue to overshadow sentiment in advance of the week’s European summit. Spain and Italy both are scheduled to auction government bonds in the coming days. Risk aversion is currently seen in currencies this morning with EUR/USD down 0.5 percent from Friday’s close. The current European summit meeting in Rome continues and will conclude on Friday.

Economic data out of the US, including the anticipated US New Home Sales, will be closely scrutinized, as well. The line-up for economic data for the week is heavy and includes the Eurozone Flash CPI, German Retail Sales and Employment, Durable Goods, and Jobless Claims.

Though the precious metals opened below Friday’s close, there has already been a steady advance this morning with the complex up a net 0.4 percent in the morning. Metals remain vulnerable to pressure from the broader risk sentiment by the Eurozone debt problems and bearish influence on the wider macro-economic picture. Gold has failed to breach trend-line resistance last week and the metal can possibly see further trade within the recent $1,550-$1,625 range while both gold and silver benefit from steady retail investment interest.

Trading in Futures and Options reflected this sentiment with 0.56 million ounce increase in net long gold positions on short covering. Silver net position declined from 8.1 million ounces after fresh short selling.

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