By Myra P. Saefong and Michael Kitchen, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures on Tuesday extended their gains into a second session, with investors expecting congressional testimony this week from Federal Reserve Chairman Ben Bernanke to offer clues on the central bank’s decision on monetary policy.
Comex gold for August delivery GCQ3 +0.51% tacked on $10.60, or 0.8%, to $1,294.10 an ounce on the Comex division of the New York Mercantile Exchange. Prices settled $5.90 higher in Monday’s session.
For any early withdrawal from quantitative easing, the Fed had specified two conditions: a fall in the unemployment rate to 6.5% and a rise in inflation, said Chintan Karnani, an independent bullion analyst based in New Delhi.
The increase in the core U.S. consumer price index “suggests that U.S. economy will meet both these conditions for an early withdrawal from QE,” he said, noting that as a key reason why gold and silver prices pulled back after the CPI numbers.
On Tuesday, the Labor Department reported that the CPI rose by a seasonally adjusted 0.5% in June. That matched the forecast of economists polled by MarketWatch. Core consumer prices climbed 0.2%, also in line with expectations.
But for any major selloff, gold needs to fall below $1,270, said Karnani, noting that prices have held their ground over that level for the past three trading sessions.
And for now, “traders are [taking] long or shot positions in gold” as they looked ahead to Bernanke’s testimony beginning Wednesday, said Karnani.
Strong physical demand from Asia also provided support for gold — “as seen in the high premiums in India and especially in China,” where the Shanghai Gold Exchange has seen record deliveries, said Mark O’Byrne, executive director at GoldCore.
Waiting on Bernanke
Many analysts have linked the Fed’s ultra-loose monetary policy to gold’s sharp gains since the global financial crash of 2008. Just prior to the financial crisis outbreak, gold futures traded around the $750-an-ounce level.
HSBC analysts James Steel and Howard Wen said that the metal could make a move higher based on Bernanke’s testimony slated for Wednesday and Thursday.
“The market’s anticipation that Mr. Bernanke will continue to emphasize his earlier views on easy monetary policy may help lift gold prices, we believe,” they wrote in a note late Monday.
The HSBC analysts also cited a cut to production guidance at AngloGold Ashanti Ltd. ZA:ANG -4.80% AU +2.57% .
The world’s third-largest gold producer on Monday cut it output forecast for the year and said it’ll likely book a charge of as much as $2.6 billion in the second quarter.
Shares of AngloGold Ashanti were up 0.4% Tuesday morning, after tallying a loss of 6.6% in the past two sessions.
Among metals futures September silver SIU3 +0.56% added 12 cents, or 0.6%, to $19.96 an ounce, while platinum for October delivery PLV3 +0.51% rose $10.60, or 0.8%, to $1,432 an ounce, and September palladium PAU3 +0.05% climbed $3.85, or 0.5%, to $736 an ounce.
September copper HGU3 +1.11% added 4 cents, or 1.4%, to $3.19 a pound.
Rio Tinto Ltd. AU:RIO +1.37% RIO +3.22% said Tuesday in its quarterly production report that activity at one of its major copper mines in the U.S. was recovering faster than anticipated.
Rio Tinto ranked No.10 among the world’s copper producers last year, according to Mining.com data.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews.
