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Gold prices traded around yesterday reached a maximum of seven weeks due to the weakening of the dollar and the stock market downturn.
Increase in gold prices on the eve of observed against the background of a drop in prices on world stock markets after Monday night clearinghouse China banned investors use corporate bonds with low ratings as collateral for short-term financing. This decision was made as part of Beijing's attempts to reduce financial risks and to support long-term growth.
"Stock indexes fall, and investors are looking at gold as a cheaper safe-haven than what they can get in the bond market," - said Adam Klopfenshteyn, senior market strategist at Archer Financial Services, Inc. Chicago.
Gold futures were trading 38% below its record high reached in August 2011, while the prices of US Treasury bonds, which are an alternative safe haven, remain near historic highs. As a result, gold is currently more attractive investment adds Klopfenshteyn.
"Gold can rise if the financial markets are worried about the weakening Chinese stocks, concerns over the euro zone and the instability of the currency market," - said HSBC analyst James Steel.
"There is an opportunity to continue covering short positions, especially if sustained volatility in the stock markets in Asia. A further increase in the prices will start to dampen demand in Asia, depending on the price, and could threaten the rally."
The world's largest reserves of gold secured fund ETF SPDR Gold Trust on Tuesday rose 0.37 percent to 721.81 tons, but still close to six-year low.
The cost of the February gold futures on the COMEX today fell to 1225.30 dollars per ounce.
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