Gold climbs to 2-1/2 week high on Fed stimulus hopes

 SINGAPORE (July 11)  Gold jumped to its highest
level in more than two weeks on Thursday after Federal Reserve
Chairman Ben Bernanke said the U.S. central bank would continue
its accommodative monetary policy for now to support the
economy.
    That marks bullion's fourth day of gains in its longest
winning streak since mid-April, pushing prices of other precious
metals and U.S. gold futures to multi-week highs.
    Gold, which is still down about 25 percent this year, had
taken a beating after Bernanke said in May and June that the Fed
could begin tapering its bond purchases later this year.
    But comments from him on Wednesday suggested that stimulus
could last longer, supporting prices of gold as it is typically
seen as a hedge against inflation.
    "Bernanke was quite dovish in his comments. Maybe we won't
see a pullback in quantitative easing as quickly as we
anticipated," said Amber MacKinnon, an analyst at Nomura
Securities in Sydney.
    "We are likely to see a short-term rally in gold up to
around $1,400 and then a fall back to current levels."
    Spot gold had risen 2 percent to $1,289.49 an ounce
by 0638 GMT. It earlier climbed 2.7 percent to $1,298.36 - its
highest since June 24.
    Comex gold jumped as much as 4 percent to a two-
and-a-half week high of $1,297.2. Spot silver climbed 4.8
percent to $20.26 - its highest in three weeks.
    Platinum and palladium jumped to three-week
peaks.
    Spot gold may break a resistance zone of $1,294-$1,302 per
ounce and rise more to $1,331, said Reuters technical analyst
Wang Tao.   
   
    CAUTION PERSISTS
    But traders said there was lingering uncertainty over the
outlook for Fed stimulus.
    "People are cautious. They don't really know what to do as
just recently gold fell to a three-year low on tapering comments
from the Fed and now they are saying the opposite," said a
trader in Hong Kong.
    Bernanke on June 19 said the U.S. economy was expanding
strongly enough for the Fed to begin scaling back its stimulus
later this year and end the measures by mid-2014.
    Physical demand in key markets India and China has been
subdued, different from the rush to buy in April when prices
dropped about $200 in two days. A near-term rally in spot prices
could further hit demand.