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