Gold trades higher as dollar remains muted
NEW YORK (July 16) Gold future prices continued to trade in the green territory as investors preferred to buy safe haven yellow metal to a weakening US dollar.
The US currency is under pressure ahead of Federal Reserve (Fed) chief Ben Bernanke's testimony on Wednesday that may reveal fresh clues about US monetary policy, amid recent confusing signals from various senior Fed officials. Last week, Bernanke indicated no change to the central bank's current asset purchases any time soon.
A fresh US inflation report that showed consumer prices sped up in May more than analysts expected had no significant impact on gold.
Gold futures advanced 0.50% to $1,290.00 an ounce as of 1:14 pm EDT, while silver lingered below the $20 boundary, rising 0.45%, to $19.930 an ounce. Gold reached its intraday high of $1,294.22 an ounce earlier on Tuesday.
During the last three sessions gold prices have been trading within the range of $1,270 and $1,300 mark, as investors sentiment of a future without quantitative easing is reflected into markets.
US inflation and industrial data
Consumer prices rose 0.5% in June driven by gasoline prices on a monthly basis, the most in four months, after recording a 0.1% drop in the previous month, while a 0.3% hike had been expected.
On an annual basis, the index hiked as expected by 1.8% in June before seasonal adjustment, compared to a 1.4% rise in the previous month.
Core consumer price index measuring inflation for goods and services, excluding food and energy, rose 1.6% year-on-year in June, a slight decrease from 1.7% recorded in May. On a monthly basis it accelerated 0.2%, in line with expectations, after recording a 0.2% speed-up in May.
US industrial output expanded by 0.3% in June, the most in four months, according to Federal Reserve data on Tuesday. In the previous month production remained unchanged. Market analysts expected the gauge to expand at the same pace of 0.3% recorded last month. Quarterly, output rose 0.6%.
Unclear Fed messages
Last week, Bernanke called for maintaining accommodation, even though the Federal Open Market Committee (FOMC) meeting minutes indicated that the debate over whether to stop bond buying is still ongoing among members of the committee.
“A highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy," the Fed chief said.
After Bernanke's comments, St Louis Fed President James Bullard's speech from Friday delivered another dose of backing that the Fed would not scale back its $85-billion monthly asset purchase program until inflation had accelerated towards its 2.0% target.
However, Friday also saw a contradictory speech from another Fed official, when Philadelphia Fed President Charles Plosser announced that the Fed could begin to wind down its generous monetary stimulus program in September, and completely end it by the end of this year.
To add to the mixed messages from US policymakers, Barclays' projection sees QE tapering at the September meeting and an end to the purchases in March 2014, according to an analysts' note published on Monday.
