Gold Ends Q1 2012 on High Note, Silver Rallies

Los Angeles, Ca – June Gold contacts on the Comex division of the New York Mercantile Exchange closed Friday at $1671.90 an ounce. The yellow precious metal rose higher this week, up .42% on the U.S. dollar index trading lower and crude oil prices rising higher to $103.00 a barrel. Silver also closed Friday trading higher, up .66% to $32.49 an ounce.

The precious metals complex took a significant hit in the month of March, largely due to lack of physical demand in Asia and because of a strike by Indian jewelers over a higher import tax on Gold. In addition, slighty optimistic unemployment and economic news out of the Federal Reserve as well as lowered investor appetite for exchange-traded funds (ETFs) for Gold caused the drop in price. “Gold is being torn in two directions” said Edel Tully, precious metals strategist at UBS. “The generally improved U.S. economic outlook weighs on the metal, but it falls when riskier assets do, so it hasn’t acted like a safe haven [as of recent].” Despite March’s lowered physical demand, Gold is up 6.23% in 2012 at the close of the first quarter of business.

Many financial authorities still believe gold will be bullish for the rest of 2012. In a report on the Wall Street Journal, Investment titan Goldman Sachs forecast Gold to be bullish through 2012. Goldman Sachs states:

“Gold prices remain too low relative to the current level of real rates. Under our gold framework, US real interest rates are the primary driver of US$-denominated gold prices. However, after being remarkably strong in the first half of 2011, this relationship broke down last fall, with gold prices falling sharply in the face of declining US real rates, as tracked by 10-year TIPS yields. While gold prices have returned to trading with a strong inverse correlation to US real rates since late December, at sub-$1,700/toz they remain below the level implied by the current 10-year TIPS yields.

The gold market’s expectation that real rates would be rising along with economic growth may help explain this valuation gap. We believe that despite last fall’s decline in 10-year TIPS yields, the gold market may have been expecting that real rates would soon be rising along with better economic growth, leading to a sharp decline in net speculative length in gold futures. Accordingly, a simple benchmarking of real rates to US consensus growth expectations suggested a level of +40 bp by year end. Our models suggest this higher level of real rates would be consistent with the current trading range of gold prices. As we look forward, our US economists expect subdued growth and further easing by the Fed in 2012, which should push the market’s expectations of real rates back down near 0 bp and gold prices back to our 6-mo forecast of $1,840/toz.”

As of the end of March, Gold prices are in an 11-year-old uptrend and the long-terms bulls can correctly argue that until the uptrend is broken, the longer-term prospects for gold still look positive. Next week marks the start of Q2, which will be important for Gold; if the precious metal can maintain its posture at $1660.00 shorter-term bulls will emerge with a current psychological resistance of $1700.00 and technical support at $1629.80 an ounce. Silver also has its fair share of work to do with regards to investor interests, holding a psychological resistance of $33.19 and a technical support at $31.09 an ounce.

Now is the time to buy into the Gold and Silver market while the prices are fair. Precious metals are tangible assets that work as a safe-haven investment against market uncertainty and inflation of the U.S. dollar. To learn more about how to roll over a portion of your IRA or former 401(k) into a Gold IRA or Silver IRA, please contact American Bullion today at 800-326-9598 or email us at