Gold trades near session high after Bernanke-driven slide
NEW YORK (July 18) Prices of gold erased earlier losses and turned slightly positive on Thursday, as investors digested the Federal Reserve (Fed) Chairman Ben Bernanke's semiannual testimony in the previous session.
The Fed chairman will appear before the US Senate's Banking Committee on Thursday, delivering a prepared speech and then answering lawmakers' queries, possibly bringing more volatility to the markets, depending on his statements.
Gold futures were trading up 0.21% to $1,280.30 per troy ounce at the time of writing, while silver futures declined 0.24% to $19.375 an ounce.
The US dollar index added 0.07% to 82.7650 as of 9:55am GMT.
According to market analysts, gold trading will remain volatile amid shifting sentiment regarding the timing of Fed tapering, and with weak investment demand and ongoing gold ETF liquidation, a strong physical market is crucial for the metal's price.
Holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded fund, fell to the lowest level since February 2009 yesterday.
Bernanke's message
Although Fed Chairman Bernanke's testimony before the House Financial Services Committee on Wednesday was largely anticipated by markets dying for fresh news from the US central bank's kitchen, his speech was eventually far from remarkable, as he basically repeated his recent stance without concrete details to speak of, giving investors only a small dose of much-needed reassurance.
The Fed’s asset purchases “are by no means on a preset course,” Bernanke announced, emphasizing once again that the central bank has no set schedule to scale back its massive multi-billion program and the final decision depends on the pace of economic recovery.
“If the data is stronger than we expect, we’ll move more quickly” to reduce purchases. If data “doesn’t meet the kinds of expectations we have about where the economy’s going, then we would delay that process or potentially increase purchases for a time.”
Bernanke's statement went as usual - he spoke about the stubbornly high unemployment, preponderance of part-time jobs, low inflation rate, rebound in the housing market and relatively weak conditions in the overall economy, acknowledging that the series of desperate attempts aimed to fix the economy ended partly in vain.
"We have not been as successful as we'd like to be," Bernanke said, signaling that the Fed is still far from happy with the pace of US recovery, thus indicating that the beginning of stimulus tapering may come later than previously expected, in line with his recent comments from mid-June.
Bernanke mentioned two main factors to watch when reaching the final decision regarding the end of fiscal stimulus - labor market, noting that the nation's employment situation remains "far from satisfactory" and inflation rate, that is still under the Fed's target.
The US unemployment rate was unchanged in June at 7.6% although the economy added more than 200,000 jobs month-on-month. The Bureau of Labor Statistics recorded an inflation rate of 1.8% in the same month, higher than the 1.4% in May, considerably lower than official Fed's 2% target.
