Gold Up 1 Percent to 3-1/2 Month High on ECB Stimulus Talks

August 22, 2012 – Gold gained to its highest levels since May on Tuesday, a full 1 percent, as speculation increased that the European Central Bank will take action to assist Spain and Italy. Platinum is also hitting 3-1/2 month highs as violence at a South African mine has raised concern about supplies from the region.

Gold extended the rally into its fifth straight trading session, on track to posting its biggest one-day rise in almost a month, on reports that the ECB was preparing moves to ease Spanish and Italian borrowing costs.

Technical support also kicked in as gold broke through its 100-day moving average, though analysts see the 200-day moving average as the next line of resistance for the precious metal. Bullion buying also bolstered by a four-month high on Wall Street and surges in other commodities, led by crude oil and grains.

Jeffrey Sica, chief investment officer at SICA Wealth Management, pointed out that a persistent fear that equities markets have appreciated beyond a point of sustainability have also contributed to the move toward diversification into gold.

He added that economic numbers from around the world do not justify a recovery without liquidity created by central banks. Sica’s firm manages $1 billion in assets.

The spot price of gold hit a high at $1,641.20 per troy ounce, the highest level in the market since May 7. By midday trading, the price of gold hit $1,637.71 per troy ounce, a gain of 1.1 percent.

US gold futures for December delivery gained $17 to $1,630 per troy ounce, with trading volume in line to finishing the trading session close to its 30-day average, according to preliminary data from Reuters.

Silver also gained 1.7 percent to $29.26 per troy ounce. Earlier in the trading session, silver reached its highest level since early June at $29.42 per troy ounce.

The anticipation of stimulus was widespread ahead of a meeting between Greece’s prime minister, German Chancellor Angela Merkel, French President Francois Hollande, and Eurogroup chief Jean-Claude Juncker this week, at which time they are expected to attempt to secure more funding from the European Union, the International Monetary Fund, and the European Central Bank.

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