Gold falls after Bernanke comments

By Frank Tang

NEW YORK (BestGrowthStock) – Gold fell on Wednesday, largely tracking sharply weaker equity markets after Federal Reserve Chairman Ben Bernanke said that the U.S. economy faces “unusually uncertain” prospects.

Wall Street fell more than 1 percent after Bernanke told the U.S. Senate Banking Committee that the central bank was ready to take further steps to bolster growth if needed.

“Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain,” Bernanke said.

Spot gold was at $1,185.85 an ounce at 2:43 p.m. EDT, against $1,191.40 late in New York on Tuesday. U.S. gold futures for August delivery settled up 10 cents at $1,191.80 an ounce.

Safe-haven demand was largely absent despite Bernanke’s comments and a weak Portuguese debt auction in early session that stoked concerns over the fragility of the euro zone banking sector.

The SPDR Gold Trust reported a 6.1-tonne fall in holdings, the biggest one-day decline since December which took a toll on investor confidence.

The gold market was largely flat in early trade prior to Bernanke’s news, consolidating gains after a bullish reversal on technical charts in the previous session.

Scott Meyers, senior analyst at Pioneer Futures in New York, said that gold was in a consolidation mode on Wednesday and prices should find support between $1,168-1,175, the upper part of the previous session’s trading range.

“The market has been trading lower for the better part of July. Yesterday was the first significant reversal that we have seen,” Meyers said.

(Graphic: http://link.reuters.com/tyq78m)

Earlier this week, prices fell toward an important bullish support level, which was seen by technical analysts as a natural market entry point.

The dollar climbed against the euro, boosted by Bernanke’s comments and the disappointing Portuguese debt auction. Portugal sold 1.25 billion euros in 12-month Treasury bills, but the average yield more than doubled from the last sale, indicating caution.

The historical negative correlation between gold and the U.S. currency has reversed since the start of the year as both benefited from risk aversion.

REUTERS POLL BULLISH

Gold has slipped since reaching a record $1,264.90 an ounce at the end of June, boosted by investment in the metal as a haven from volatility in other markets amid concerns over the economic outlook and euro zone sovereign debt levels.

Analysts’ outlook for bullion remains broadly positive, however.

Respondents to a Reuters poll of 55 analysts, traders and fund managers said they see gold prices posting an eleventh year of gains in 2011 as investors seek refuge from an uncertain global economic outlook.

The poll showed expectations for gold prices in 2011 have risen by nearly 7 percent to a median $1,228 an ounce since a similar survey conducted in January. For 2010, expectations for gold have risen by 4 percent to a median $1,197.00 an ounce.

Among other precious metals, silver was at $17.58 an ounce versus $17.65, platinum at $1,514 against $1,512.95 and palladium at $447 versus $449.53.

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(Additional reporting by Jan Harvey and Pratima Desai in London; Editing by Sofina Mirza-Reid)

Gold falls after Bernanke comments