Gold prices retreat ahead of Fed testimony
LONDON (July 17) Gold prices eased on Wednesday as the dollar firmed ahead of testimony from Federal Reserve Chairman Ben Bernanke later in the day, which will be closely watched for clues on U.S. monetary policy.
Bernanke is expected to reiterate central bank support for the U.S. economy when he addresses Congress at 1400 GMT, but that will likely be balanced by a reminder that the Fed's ultra-easy policies will not last forever.
The dollar rose 0.1 percent against a basket of currencies ahead of the Fed statement, pressuring commodities priced in the U.S. unit.
Spot gold was down 0.6 percent at $1,284.81 an ounce at 0934 GMT, while U.S. gold futures for August delivery were down $6.80 an ounce at $1,283.60.
Gold has fallen nearly 25 percent this year, hurt by fears the Fed is set to curb its quantitative easing measures, which have driven gold to record highs in recent years by pressuring long-term interest rates while stoking inflation fears.
The Fed indicated earlier this year that it could be set to rein in its $85 billion monthly bond-buying programme, but Bernanke's more dovish tone later prompted a sharp drop in the dollar and a rebound in gold.
"Bernanke appeared to scale back some of the more aggressive comments regarding curtailment of QE and focused on additional monetary stimulus for the remainder of this year," Jonathan Butler, an analyst at Mitsubishi, said. "If there's a reiteration of that, we might well see gold push a bit higher."
"But the one thing we've learned from the last few Fed statements is that there tends to be a great deal of volatility in and around the comments," he added. "Things seem pretty calm now, but we might see some choppy trading later on today."
GOLD STRUGGLES TO BREAK $1,300/OZ
Gold hit a three-week high of $1,298.36 on Thursday last week but has repeatedly failed to breach the $1,300 level. Physical demand has also retreated as prices have bounced off recent lows.
Buying interest from China has been subdued over the last few days as indicated by Shanghai premiums, which have eased to around $25 per ounce from $36 from last week.
Outflows from gold-backed exchange-traded funds, which issue securities backed by physical bullion, continued on Tuesday, with the largest, New York's SPDR Gold Trust, reporting a 1.5 tonne drop in its holdings.
That brings the fund's outflows for the year to 413 tonnes, taking its overall holdings to a 4-1/2-year low.
