Gold gains on U.S. stimulus hopes; Bernanke eyed
Gold rises by 0.2 per cent, it was recently under pressure on account of fears the Fed could scale back or halt its monthly $85 billion bond purchases.
Gold rose on Wednesday on strong Chinese demand and after Federal Reserve officials allayed investor concerns that the U.S. central bank will soon exit its bullion-friendly bond purchases.
Gold has been pressured in recent weeks by fears the Fed could scale back or halt its monthly $85 billion bond purchases that have buoyed bullion's appeal as a hedge against inflation.Spot gold rose 0.2 percent to $1,378.29 an ounce by 0628 GMT, but remains not far off a two-year low of $1,321.35 reached during a sell-off last month.The metal had fallen for eight sessions out of the last nine as of Tuesday and is down nearly 18 percent for the year.Investors are eyeing Fed Chairman Ben Bernanke's testimony in Congress on the state of the U.S. economy later in the day for clues to his stance on ending the monetary stimulus this year. The Federal Open Market Committee also releases the minutes of its April 30-May 1 meeting on Wednesday."We would suggest that Bernanke will hint at some sort of pullback, in which case, we could see a pickup in volatility and lower gold prices heading into the balance of the week," said Edward Meir, a metals analyst at brokerage INTL FCStone.New York Fed President William Dudley and St. Louis Fed chief James Bullard, who will both vote at the central bank's next scheduled meeting on June 18-19, made clear further economic progress was needed before they would support curtailing bond purchases.Some officials are calling for an early end to the monetary easing given recent gains in the U.S. jobs sector. Spot silver gained 0.5 percent to $22.49 an ounce, regaining more ground after dropping to 2-1/2-year lows earlier this week.CHINA DEMANDStrong demand from China, the world's second-biggest gold consumer after India, provided key support to the metal. "Chinese buying is mainly pushing up gold prices," said a trader in Tokyo, adding that bullion could go up to $1,385.Shanghai gold prices fell slightly on Wednesday but were still around $30 higher than spot gold, indicating that Chinese demand was strong because it would be cheaper for local buyers to purchase gold from overseas.U.S. gold was little changed at $1,377.4 an ounce. Persistent outflows from exchange-traded funds as well as technical charts suggest gold faces more downside pressure. Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust, fell 0.8 percent on Tuesday to 1,023.08 tonnes, the lowest in more than four years. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
