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Gold Moves Higher on Softer Dollar, Stock Recovery

September 27, 2012 – The price of gold gained again on Thursday, retracing from the previous session’s two-week low, tracking the euro, stock markets, and other commodities, though continued uncertainty over when Spain would request bailout funding capped market sentiment.

Fierce protests in Spain and Greece against austerity measures drove down markets on Wednesday, but European shares recovered some lost ground on Thursday with oil prices rising more than $1 a barrel and the dollar softening a bit.

The spot price of gold gained 0.6 percent to $1,761.30 per troy ounce as U.S. gold futures for December delivery gained $10.50 per troy ounce to $1,764.10.

Gold is set to end September with the largest quarterly gain in the precious metal in more than two years, a gain of nearly 10 percent, following the Federal Reserve’s unveiling of a third round of monetary stimulus measures earlier in the month.

Gold dropped sharply on Wednesday on worries over the euro zone debt crisis, which brought pressure to the euro and prompted some profit taking as some investors cashed in gains ahead of the quarter’s end. Gold retraced somewhat, but remained down 0.5 percent on the day.

Credit Agricole analyst Robin Bhar said in the short term she believes we’ll see more consolidation. She notes it is contingent on the performance of the dollar. The crisis in Europe is back with a vengeance, the euro will stay weak, the dollar will stay strong, and those factors will cap the gold price in Bhar’s analysis.

Spain is prepared to present its 2013 budget draft on Thursday. A credible budget along with comprehensive structural reforms could prepare the foundation for meeting the conditions for a Spanish aid package and pave the way for intervention by the European Central Bank in the bond market, according to Reuters.

Spanish government bond yields were stable despite uncertainty over whether the country would request a bailout, which kept investors on edge ahead of the budget unveiling.

CMC markets wrote in a note that after the events of the last 24 hours, in which Spanish police fired rubber bullets and used batons on austerity protestors, Spain’s politicians need to draw the sting from further political unrest today while satisfying the EU that any new budget is credible.

Silver is up 0.9 percent to $34.22 per troy ounce, spot platinum is up 1.3 percent to $1,649.49 per troy ounce, and spot palladium is up 1.4 percent to $633.97 per troy ounce.

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