PRECIOUS-Gold holds near 1-1/2-week high as Bernanke backs stimulus

Wed Feb 27, 2013 1:26am EST

* Bernanke testimony eases fear of QE exit
    * Italy's political gridlock underpins safe-haven demand
    * Asia physical gold buying slows as prices rise
    * Coming up: Fed Chairman testifies in Congress for 2nd day

 (Adds details, comments; updates prices)
    By Rujun Shen
    SINGAPORE, Feb 27 (Reuters) - Gold edged lower on Wednesday,
but held near a 1-1/2-week high hit in the previous session as
the U.S. Federal Reserve reassured investors of its commitment
to loose monetary policy, burnishing bullion's appeal as a hedge
against inflation.
    Fed Chairman Ben Bernanke strongly defended the U.S. central
bank's stimulus measures before Congress on Tuesday, easing
fears it would cease buying bonds through so-called quantitative
easing sooner rather than later. 
    "The market is a little less concerned about a premature
exit of quantitative easing, which would be bad for gold," said
Nick Trevethan, senior commodity strategist at ANZ in Singapore.
    The three rounds of QE from the Fed have helped gold stage a
record-breaking rally in the past few years, as investors
worried about currency debasement due to money-printing seek to
store value in gold. 
    In recent months, concerns that the central bank could exit
the policy on signs of a fledgling economic recovery have
weighed on the metal.
    As a gauge of investor interest, holdings of the SPDR Gold
Trust, the world's top gold-backed exchange-traded fund,
fell 2.408 tonnes from the previous session to 1,270.44 tonnes
on Feb. 26 in its sixth session of decline. 
    U.S. housing data released in the previous session showed
that the property market was on the mend, but the job market,
which the Fed has pegged its policy to, remains sluggish.
 
     "Don't forget that the Fed's focus is on jobs and
inflation. The job market has stabilised, but we are not seeing
efficient job growth to make the exit of QE look imminent. There
is still a long way to go," said ANZ's Trevethan.
    Spot gold edged down 0.2 percent to $1,609 an ounce
by 0606 GMT, off a 1-1/2-week high of $1,619.66. It rose 1.2
percent on Tuesday, its biggest daily gain in three months.
    U.S. gold lost 0.4 percent to $1,609.60.
    Technical analysis suggested spot gold faces a resistance at
$1,619 an ounce and may retreat to $1,604, said Reuters market
analyst Wang Tao. 
    Bernanke is is due to deliver testimony to the House
Financial Services Committee at 1500 GMT and will remain a key
focus for the market,.
    Worries that Italy's inconclusive elections could drag the
euro zone into another crisis have supported demand in
safe-haven assets such as gold and U.S.
Treasuries.  
    But physical buying in Asia slowed after gold climbed for
four days straight.
    "We have seen profit-taking along the way up and much less
physical buying at these levels," said a Singapore-based dealer.
    "Clients still prefer to buy on dips and probably will start
buying again if prices retreat to close to $1,600."
    Goldman Sachs cut its 2013 gold price forecast to
$1,600 an ounce from $1,810 an ounce, saying the metal's recent
price drop and an increase in U.S. real interest rates have led
it to bring forward its projections for a decline in the metal.
 
    Spot platinum dropped half percent to $1,610.74,
returning to a small premium over gold after the gap closed
briefly on Tuesday.
    
    Precious metals prices 0606 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1609.90   -3.21   -0.20     -3.86
  Spot Silver        29.22   -0.14   -0.48     -3.50
  Spot Platinum    1610.74   -7.75   -0.48      4.93
  Spot Palladium    740.75   -2.97   -0.40      7.04
  COMEX GOLD APR3  1609.60   -5.90   -0.37     -3.95        19117
  COMEX SILVER MAR3  29.19   -0.08   -0.26     -3.46         2151
  Euro/Dollar       1.3063
  Dollar/Yen         91.73
  COMEX gold and silver contracts show the most active months
  

 (Editing by Richard Pullin)
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