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Saturday, June 16, 2012

Gold Poised to Rise on Central Bank Stimulus Expectations, Safety

With weak economic data coming in from China and the United States, and the ongoing sovereign debt crisis in Europe, it appears the probability of even more stimulus will be inevitable.

The presidential election in the United States, which is increasingly competitive, and could result in Obama getting routed as the economy continues to fall apart and he panders to his radical base.

It's highly improbable that more austerity will be put in place before elections, although some in the euro zone remain adamant about it, with the most important player - Germany - continuing to resist eurobonds without more controls in place.

Even then it's uncertain the euro zone will be allowed to go forward with the idea that all the countries can spend and go into debt with impunity, while the rest of the countries share their risk.

That won't work over time, but it could be attempted and put in place because of the politically religious commitment to the euro and the European Union, which both are in danger of collapsing.

Consequently, with expectations of more stimulus growing, currencies are coming under pressure again, with the U.S. among them, providing a positive environment for the rise in the price of gold and silver.

With the U.S. dollar losing appeal, gold is again rising in importance for the place to safely place capital. There really is no other alternative when the dollar falls out of favor, as most other currencies are in even worse shape.

Gold miners are also getting a closer look from investors, as they have been hit hard by the recent fall in price of gold.

A couple of companies receiving recent analyst attention are Randgold Resources Ltd. (NASDAQ: GOLD) and Yamana Gold (NYSE: AUY).

Randgold was upgraded by Goldman Sachs (NYSE: GS) from a "Sell" rating to a "Neutral" rating.

Yamana Gold was downgraded by Dundee from a "Buy" rating to a "Neutral" rating.

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