Gold keeps falling as dollar recovers

New York (July 12)  Bullion prices kept declining as investors headed to buy the US dollar that recovered from the two-day fall after Federal Reserve (Fed) Chairman Ben Bernanke revealed the intention to keep the monetary easing program running. Some analysts also noted that physical demand for the precious metal diminished.

Market players await US consumer sentiment data as well as one of Fed President James Bullard's speech later in the day.

Gold futures fell 0.52% to $1,273.30 an ounce as of 8:42am EDT. Silver futures sank 0.89% to $19.780 an ounce as of the same time.

Standard Chartered's outlook

Standard Chartered said in its latest statement that it expects the market to remain broadly range-bound between $1,300 - $1,500 an ounce in the next one to two years. The organization's outlook is based on the premise that the central bank's buying programs will continue to provide support to gold.

The trend will be outlined by the high physical demand from Asia stemming from the relatively low gold prices.

Bernanke's comments

“Highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy," said Bernanke on Wednesday, calling for maintaining accommodation, even though the Federal Open Market Committee (FOMC) meeting minutes indicated that the debate over whether or not to stop bond buying is still ongoing among its members.

Bernanke spoke just three hours after the Fed released its minutes from the most recent session on June 18-19, showing that about half of the 19 participants of the meeting voted for halting quantitative easing (QE). However, FOMC members remained increasingly concentrated over unemployment that still remains above the Fed's desired target of 6.5%.

There were two participants who wanted to lessen the monetary policy "relatively soon", probably irrespective of unemployment rate as they feared disastrous consequences of the program.

However, the exact target figure remains unknown, “because we ourselves don’t know precisely what would define substantial improvement," Bernanke said at the last FOMC meeting. Most investors believe that the Fed will not start to scale back its monetary policy until the unemployment rate falls under the 7% threshold.