Gold slips but stays near its three-week high
SINGAPORE (July 17) Gold eased on Wednesday but stayed near a three-week high, as the dollar gained ahead of a keenly awaited congressional testimony by US Federal Reserve chairman Ben Bernanke later in the day.
Bullion prices have traded in a tight range over the past few sessions as investors held back on big bets ahead of the testimony, which they hope would provide a clear outlook regarding the Fed’s $85bn monthly bond purchases.
Slowing physical demand also contributed to the market’s cautious undertone.
"The trend is unclear, so gold is just following the dollar," Wing Fung Precious Metals’ head of dealing, Peter Fung, said in Hong Kong.
"We are not sure what to expect from Bernanke as he has made contrasting comments over the last few weeks. Gold is waiting for guidance from him," said Mr Fung.
The Fed’s bond purchases have boosted market liquidity, benefitting gold and other commodities. It has also kept the dollar subdued, driving purchases of commodities by holders of other currencies.
Spot gold fell 0.14% to $1,290.16 an ounce by 3.08am GMT. US gold lost about $1 to $1,289.30.
The dollar inched 0.2% higher on Wednesday but was not far from a three-week low.
Gold has swayed between sharp gains and losses in the past few weeks following mixed comments from the Fed about the likely timing of a scale-back in monetary stimulus.
Mr Bernanke said in June that the US economy was recovering strongly enough for the Fed to begin pulling back its bond purchases over the next few months. But following the market panic that ensued, he said last week that a "highly accommodative policy is needed for the foreseeable future".
Slowing demand
Gold hit a three-week high of $1,298.36 on Thursday but has struggled to cross the $1,300 level. Physical demand has also taken a pause as prices have bounced off recent lows.
Buying interest from China has been subdued over the past few days, as indicated by Shanghai premiums, which have eased to around $25 an ounce from $36 from last week.
"Although demand remains strong, compared to the recent past, physical demand is easing," Standard Bank analyst Walter de Wet wrote in a note.
Outflows from SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, resumed after a three-day pause. Holdings of the fund fell to 937.57 tonnes on Tuesday, their lowest in four years.
