Gold gains on stimulus hopes

SINGAPORE (May 23) Gold rose on on strong Chinese demand and after Federal Reserve officials allayed investor concerns that the US central bank will soon exit its bullion-friendly bond purchases.

Gold has been pressured in recent weeks by fears the Fed could scale back or halt its monthly $85 billion bond purchases that have buoyed bullion’s appeal as a hedge against inflation. Spot gold rose 0.2 percent to $1,378.29 an ounce by 0628 GMT, but remains not far off a two-year low of $1,321.35 reached during a sell-off last month. The metal had fallen for eight sessions out of the last nine as of Tuesday and is down nearly 18 percent for the year.

Investors are eyeing Fed Chairman Ben Bernanke’s testimony in Congress on the state of the US economy later in the day for clues to his stance on ending the monetary stimulus this year. The Federal Open Market Committee also releases the minutes of its April 30-May 1 meeting on Wednesday. “We would suggest that Bernanke will hint at some sort of pullback, in which case, we could see a pickup in volatility and lower gold prices heading into the balance of the week,” said Edward Meir, a metals analyst at brokerage INTL FCStone.