Gold trades higher on stimulus outlook

Gold surged during the Asian session and extended gains throughout the early European session as yesterdays disappointing U.S. data temporarily dampened speculation of an earlier than expected Quantitative Easing deceleration. The precious metal fell to a new three-year low yesterday prior to The Bureau of Economic Analysiss final Q1 GDP reading.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 239.15 per troy ounce at 8:14 GMT, up 0.76% on the day. Prices ranged between days high and low at $1 244.15 and $1 223.85 respectively. The precious metal hit its lowest level since August 2010 yesterday, standing at $1 221.55 per troy ounce. It settled with a major loss, shedding 3.62% off its value after marking a 6.8% weekly lost last week.

The yellow metal drew support on Wednesday and Thursday by disappointing U.S. data, which eased concern of an earlier-than-expected scale back of Feds bond purchasing program. The Bureau of Economic Analysis said final Q1 GDP reading mismatched projections of a 2.4% increase, standing at 1.8%, below Q1 2012′s 2.4% figure. Consumer Spending for the first quarter of the year was also lower than anticipated, gaining 2.6%, but straying from the 3.4% forecast and below last year’s Q1 reading of 3.4%. Core Consumer Spending managed to fulfill expectations and stood at 1.3%, remaining unchanged compared to last year.

Gold has lost 22% since the start of April and is headed for a record quarterly loss. The precious metal has largely been tracking shifting speculation about a premature deceleration of Feds monetary stimulus. Gold’s bearish sentiment remains intact after last week’s inflation data and Ben Bernanke’s statement. The Fed Chairman stated the central bank will most probably wind down its bond purchasing program during the second half of the year and bring it to an end by mid-2014, if stable recovery signs are provided and meet projections.

Last week U.S. economic data showed the inflation rate in the world’s largest economy was low and stable, which devalued the precious metals. Core CPI, which excludes the more volatile energy and food prices, rose only by 0.2% in May, 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.

Jonathan Barratt, chief executive officer of commodity newsletter Barratts Bulletin said for Bloomberg: “Sentiment has certainly moved and weve had a rash of liquidation. Weve still got major issues out there, stimulus hasnt started to be wound back, yet theyve decided to punish the metal.”

Elsewhere on the precious metals markets, silver, platinum and palladium are also marking daily gains, paring some of yesterdays losses. Silver futures for September delivery traded at $18.763 at 8:05 GMT, up 0.81% on the day. Silver is considered as the worst performing metal and has dropped 38% this year, hitting a lowest level since August 2010 yesterday. Silver dropped 34% this quarter alone.

Meanwhile, platinum October futures stood at $1 327.95 at 8:09 GMT, marking a 1.57% daily gain. Prices ranged between days high and low $1 330.65 and $1 302.75 an ounce respectively. The precious metal fell 16% this quarter.

Palladium for September delivery surged 1.87% today, standing at $645.10 an ounce. Prices varied between days high at $645.79 and low of $630.30, the lowest since November. The metal has lost 17% of its value since April.