Daily Nugget: Gold Flirts With $1300 On Bernanke, Housing Sales

Yesterday Bernanke took a swipe for the price of gold after he said that the FOMC still plans to start scaling back bond purchases later this year. But, as central bankers like to do, he left open the possibility of changing his mind. He attributed any asset purchase tapering to a decisive acceleration in inflation (towards 2% target) and greater gains in the economy than expected. Whilst his prepared statement was seen as dovish, the gold price fell when the follow-up answers in the Q&A were seen as relatively hawkish and weren’t saying much at all.

In the early part of the day, gold flirted with $1,300 reaching a high of $1,299.70 in the morning (US). As well as the release of Bernanke’s prepared statement a report on housing sales also affected the gold price.

Following Bernanke’s prepared statement the dollar climbed by 0.4%. As markets worked to dissect the Chairman’s testimony gold swung between gains and losses. It continues to face resistance at $1,300 as the guessing game of bond purchases continues. Many analysts believe selling began just as gold looked as though it would hit the key $1,300 level as traders are unsure if it will hold above that key price.

Ultimately however, gold finished the day at $1,283.80 – basically back where it began prior to Bernanke’s statement release.

Expect to see further volatility for gold as uncertainty over tapering affects gold investment over the summer. The metal is clearly still under pressure as we await the almighty FOMC to stop teasing us and just decide what they’re going to do. Gold make break through the recent low of $1,267/oz.

Bernanke is up in front of the Senate Banking Committee later today but the tune is not expected to change much. Also today we await US weekly jobless claims.

MPC United

Here in the UK, minutes from Carney’s first MPC meeting show the committee was united in its vote against further stimulus. In regard to increasing interest rates the minutes showed that the MPC members believe ‘UK developments, whilst broadly positive, had not been enough to warrant such an upward move in the near-term path of the bank rate.’

Whilst the minutes show a unanimous vote, they also show some members are keen on further stimulus and are merely waiting for further information from the Bank’s reviews. This suggests that the unanimous nature of the vote may be short-lived.

Lose the kilos, gain gold grams

In completely different news, Dubai has found a new incentive to encourage citizens to lose weight – gold. The UAE is famed for its love of gold and when the Dubai authorities announced a new version of fat-camp, they were sure to get a positive response. For each kilo of weight you lose, you will receive a gram of gold. Minimum weight loss is 2kg, but worth it for a couple of free grams of gold!