Gold lower on Fed uncertainty, supported by weak dollar

Gold fell on Thursday as uncertainty about Feds monetary stimulus keeps weighing on the precious metal. Key U.S. data for May is scheduled for publish today at 12:30 GMT. Retail Sales are expected to to have risen by 0.4% compared to last months 0.1% gain. Retail Sales Less Autos are also projected to have increased by 0.3% after they declined 0.1% in the preceding month. Initial Jobless Claims should stand at 345 000, 1 000 less than Aprils 346 000 figure. The Import Price Index should show a 1.4% decrease on annual basis and no change compared to April. Business Inventories, due at 14:00 GMT, which remained unchanged in the preceding period, are expected to mark an increase of 0.3%. If expectations are met and an improvement in the U.S. economy is at hand, this would dampen expectations for further monetary easing, which would cause the currency to strengthen and pressure down gold.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery stood at $1 384.95 per troy ounce at 8:01 GMT, down 0.51% on the day. Prices varied between days low at $1 384.05 and high of $1 394.25 an ounce.

The precious metal has been following shifting expectations about Feds monetary easing program throughout the year. A possible earlier-than-expected Quantitative Easing scale back would deliver a massive shock to gold prices. Investors buy the yellow metal in order to hedge against risks of inflation, which could be spurred by Feds bond purchasing program.

Gold has lost around 17% of its value so far this year amid uncertainty of Fed’s Quantitative Easing program direction. Japan’s central bank, Bank of Japan, took a decision on Tuesday not to expand its monetary stimulus further. BoJ stuck to its April position to increase the monetary base by 60 trillion to 70 trillion yen a year. This spurred speculation whether the U.S. central bank will follow up and reduce its own bond purchases.

Ben Bernanke, Fed chairman, said Fed’s monetary stimulus could be scaled back if the U.S. labor market showed stable improvement. According to a Bloomberg survey of economists last week, the U.S. central bank will reduce its monetary easing program to $65 billion a month in October.

However, gold found support by the weakened dollar, which extended losses versus its major counterparts during the week. The dollar index, which tracks the greenbacks performance against six major currencies, dropped to its lowest level since February as it traded at days low of 80.72. The dollar tends to trade inversely to dollar-priced commodities. Weakening of the greenback boosts the appeal of raw materials as alternative investments and also makes them cheaper for foreign currency holders.