NEW YORK (TheStreet ) -- Gold prices were weaker Thursday as investors bought riskier stocks instead of gold despite Ben Bernanke's discouraging comments on the economy.
Gold for August delivery was falling $5.50 to $1,186.30 an ounce at the Comex division of the New York Mercantile Exchange on low volume. The gold price Thursday has traded as high as $1,189.30 and as low as $1,180.70. The U.S. dollar index was losing 0.73% to $82.68 while the euro was rallying 0.93% to $1.28 vs. the dollar as traders bet on the euro ahead of the Friday's "stress tests" results from 91 European Union banks. The spot gold price was slipping slightly, according to Kitco's gold index.
Risk appetite was improving Thursday, which was helping stocks but hurting gold prices. The eurozone manufacturing numbers for July beat expectations and European Union May industrial new orders also rose an unexpected 2.5% year over year. The upbeat data offset Federal Reserve Chairman Ben Bernanke's Wednesday remarks which described his economic outlook as "unusually uncertain" as well as rising weekly initial jobless claims.
Bernanke will wrap up his testimony to the Committee on Banking, Housing and Urban Affairs Thursday where he is expected to reiterate that inflationary pressures aren't a near-term concern. Those investors who were buying gold as a hedge against immediate inflation might sell some of their positions. Bernanke's insistence that inflation is not a worry highlights the fact that deflation might be. High unemployment and stagnating prices might be a deflation cocktail, which, some believe, will give gold prices a strong boost over the long term.
"Deflation, like inflation, means a crisis in money, and gold is always well bid amidst monetary instability, let alone fear," argues Adrian Ash, head of research at BullionVault.com.
As deflation destroys capital and purchasing power, investors might need a safer place to preserve the wealth. Weak currencies typically lead to higher gold prices as gold is a form of money that retains some type of value.
One wild card waiting in the wings for gold, especially the U.S. gold investor, is a provision in the Patient Protection and Affordable Care Act. Under the code, the Internal Revenue Service will be able to widen the Form 1099, used to monitor supplementary income and self-employed earnings, to include gold sales over $600.
