Gold remains near three-week low ahead of Fed meeting

Gold remained fairly unchanged in the early European session on Wednesday, trading near its three week low ahead of Ben Bernankes statement that will be held later today.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery gained 0.15% on the day. The precious metal traded at $1 368.95 per troy ounce at 7:30 GMT, ranging between days high and low at $1 369.65 and $1 364.15 an ounce respectively.

Gold prices slumped yesterday as decent U.S. data showed a stable and low rate of inflation, which pressured the precious metal as it is mainly used as a hedging tool against inflationary effects. Core CPI, which excludes the more volatile energy and food prices, rose only by 0.2% compared to 0.1% in April and met projections. On an annual basis Core Consumer Price Index also met expectations and remained the same compared to May 2012 at 1.7%. CPI for May was even lower than anticipated and stood at 0.1%, below forecasts for a 0.2% increase.

A separate report showed the Housing Starts indicator was below forecasts of 0.950 million gain, but standing at 0.914 million it outperformed April’s 0.856 million reading. Building Permits stood at 0.974 million, below projections of 0.977 million and below last month’s revised reading of 1.005 million.

Gold slipped into a bear market in April, followed by its biggest slump on April 15-16 as a result of investors losing confidence in the precious metal as a safe haven for wealth preservation. Gold lost 18% of its value this year, supported only by increased physical from some central banks, lured by the lower prices. India, its biggest importer, introduced higher taxes on inbound shipments as a measure to reduce its record current account deficit, which widened after physical demand surged during April.

The precious metal has been priced throughout the year according to the shifting expectations regarding the future of Feds Quantitative Easing program as it is directly linked in an inverse relation to the dollar. On May 22 Ben Bernanke, Fed chairman, said the central bank could start tapering its bond purchasing program as soon as the economy shows signs of sustainable recovery and the labor market is stable enough. Analysts projected this would most likely happen in the second half of the year. Although inflation in the U.S. is still low, as data showed yesterday, and there is generally more room in the economy for monetary easing, slowing down the Quantitative Easing program will cause investors to go even more bearish. All eyes are pointed at the Bernankes statement later today.

Elsewhere on the precious metals market, silver, platinum and palladium were mixed, marking limited movements. Silver for July delivery lost 0.12% on the day, trading at $21.650 an ounce. It ranged between daily high and low at $21.670 and $21.493. Platinum futures for July delivery lost 0.01% at 7:26 GMT, standing at $1 439.95 an ounce. Palladium September futures marked a more moderate movement, gaining 0.29% for the day. The metal traded at $710.40 at 7:27 GMT, ranging between days high and low at $712.40 and $705.50 an ounce respectively