Gold remains higher after U.S. data, eyes on Bernanke

Gold remained steady and higher in the late European session even after the release of positive U.S. economic data showing increasing economic activity. Investors remained cautious ahead of Ben Bernankes statements to Congress on Wednesday and Thursday.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 290.55 per troy ounce at 13:55 GMT, up 0.55% on the day. Prices held in range between days high and low of $1 292.75 and $1 275.95 an ounce respectively. The precious metal has advanced more than 0.4% so far this week, limited by concern that further gains may curb physical purchases. Gold settled 5.09% higher the previous week, but investors remained cautious prior to Ben Bernankes statements this week.

The yellow metal remained higher and fairly unchanged following todays positive U.S. economic news as the dollar remained pressured by the euro, which was boosted by Angela Merkels statement today. The dollar index for September settlement stood at 82.93 at 13:35 GMT, down 0.31% on the day. Futures held in range between days high and low of 83.26 and 82.83.

Gold tends to trade inversely to the dollar. Weakening of the U.S. currency makes dollar-denominated commodities cheaper for foreign currency holders, boosting their appeal as an alternative investment. The dollar remained pressured ahead of Bernankes statement tomorrow even following the positive U.S. data. According to the U.S. Labor Department, consumer prices rose by 0.5% in June, surpassing expectations for a 0.3% gain and Mays 0.1% reading. Year-on-year, CPI surged by 1.8%, outperforming Mays annualized 1.4% gain and expectations for a rise to 1.6%. Gasoline prices accounted for about two thirds of the increase in the indicator.

The government agency also reported that month-on-month Core CPI, which excludes the more volatile energy and food costs, met both expectations and Mays reading of a 0.2% increase. On an annual basis, core consumer prices also met projections of a 1.6% gain, but underperformed Mays 1.7% rise.

Redbook Retail Sales gained 0.8% in the week ending July 13, well above the preceding periods 0.3% decline. A separate report showed Treasury International Capital rose to $56.4 billion in May, up from Aprils upwards revised reading of $28.3 billion.

Meanwhile, U.S. Industrial Production also reinforced sentiment for a recovering economy, meeting expectations for a 0.3% surge in June, up from Mays unchanged reading compared to April. Capacity Utilization for June outperformed both projections and Mays upwards revised reading of 77.7%, rising to 77.8%, which indicated a recovering manufacturing sector.

However, investors keep focusing on Bernankes statement to Congress on Wednesday and Thursday as recently different Fed presidents stated controversial opinions regarding whether the monetary easing program should be tapered or not.

St. Louis Federal Reserve President James Bullard said on July 12 the U.S. central bank shouldn’t taper its monetary easing program until inflation reaches its target. Meanwhile, Philadelphia Fed President Charles Plosser said the same day exactly the opposite. He stated Fed should trim its bond purchasing in September and bring it to an end by the end of the year.

Apart from Bernankes testimonies, market players will also be keeping an eye on the remaining U.S. data for the week. On Wednesday, Building Permits and Housing starts will provide data about the U.S. construction sector. The Labor Department will release Initial Jobless Claims on Thursday. The number of people who have filed for unemployment payments is expected to have dropped by 20 000 to 340 000 after last week an unexpected surge to 360 000 supported Bernanke’s statement that the U.S. labor market is still fragile.

Elsewhere on the precious metals market, silver, platinum and palladium are all trading higher on the day. Silver for September delivery stood at $19.923 at 13:54 GMT, up 0.42% on the day. Platinum October futures traded $1 428 per troy ounce, marking a 0.46% daily gain, while palladium for September delivery surged 0.48% to trade at $735.70 an ounce.