💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

REFILE-PRECIOUS-Gold undermined by Bernanke, firm dollar

Published 07/15/2011, 06:32 AM
PMC
-
GC
-
SI
-
PA
-
PL
-
BIG
-

By Pratima Desai

LONDON, July 15 (Reuters) - Gold slipped on Friday undermined by growing perceptions that further stimulus measures from the United States were unlikely and by a higher dollar against the euro, which was under pressure from concern about the results of European bank stress tests.

Spot gold was bid at $1,579.30 a troy ounce at 1021 GMT from $1,586.75 an ounce late in New York on Thursday when the precious metal hit a record high of $1,594.16.

U.S. Federal Reserve chairman Ben Bernanke said on Thursday that the central bank is prepared to act if the recovery falters. But Bernanke also made clear the Fed was not at that point.

"We're of the view that the U.S. doesn't need (further monetary easing), that U.S. growth will accelerate and that QE3 won't be needed," said Dan Smith, analyst at Standard Chartered.

"Strong demand growth in Asia, high inflation in Asia and a dollar under pressure will support gold in the medium term."

The Fed's $600 billion bond purchase programme that ended in June -- dubbed QE2 -- pumped large amounts of cash into the global financial system, much of which found its way to commodities sparking a sharp price rally.

Gold is also used to protect investment portfolios against inflation, which could be fuelled by excess liquidity.

The euro fell against the dollar as investors worried that European bank stress tests may reveal things that could further sour sentiment towards the single currency.

The European Banking Authority at 1600 GMT publishes the results of its stress tests of 91 lenders along with measures to

bolster capital for those that failed and for those that nearly failed.

"There's been some profit-taking, using the dollar, euro and stress tests as an excuse," a gold trader said. "The market seems to be ignoring the chances of a U.S. debt default."

Ratings agency Standard & Poor's warned there is a one-in-two chance it could cut the United States' prized AAA credit rating if a deal on raising the government's debt ceiling is not agreed soon.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust and that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged.

Spot silver was bid at $38.03 an ounce from $38.18 late on Thursday when it saw $39.34 an ounce, its highest since May 11.

"We see the silver market as being very vulnerable to swings in risk appetite as the primary silver market is in surplus," Credit Suisse private banking said in a note.

"In light of persisting sovereign debt woes, we consider gold as a safer place to be compared to silver."

Spot platinum was bid at $1,748.99 an ounce from $1,760.80 late on Thursday and palladium was at $770.45 an ounce from $772.73.

(Reporting by Pratima Desai)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.