Last week, gold registered the biggest weekly gain since October 2011, after U.S. Federal Reserve Chairman Ben S. Bernanke called for maintaining stimulus.
In early trading today, bullion for immediate delivery gained as much as 0.7 percent to $1,295.20 an ounce and traded at around $1,289 in Asia. Gold for August delivery climbed as much as 1.3 percent to $1,293.60 on the Comex.
Spot gold climbed 5.4 percent last week after U.S. Federal Reserve Chairman said that highly accommodative monetary policy is still required for the foreseeable future. The rebound helped spur speculation that the selloff in bullion, which has lost 23 percent in the year so far on concern the U.S. Federal Reserve will rein in stimulus, may be coming to an end.
However, last week, Federal Reserve Bank of St. Louis President James Bullard said that the U.S. central bank shouldn’t trim bond purchases until inflation accelerates toward its target. Still, Federal Reserve Bank of Philadelphia President Charles Plosser said the same day that the Fed should begin tapering in September, and end unorthodox stimulus by the end of the year.
Market analysts expect the U.S. economic data to disappoint at some point in the next three to six months, which should reduce fears of an abrupt tightening of U.S. monetary policy.
In the coming week, gold traders actions would be influenced by the Chinese economic data, which came out a little weaker than expected. This fact is an evidence of a further slowdown in economic activity. Traders would be also hoping for more clarity on the Federal Reserve’s plan for ending its bond-buying program and would be watching the testimony from Federal Reserve Chairman Ben Bernanke in front of Congress later in the week.
At present, gold traders are reassessing the knee-jerk reaction to the U.S. Federal Reserve’s plans to revise its extraordinary monetary policy. Traders expect gold prices to rise further in the week.
