Forexpros – Gold futures turned lower on Thursday, a day after suffering the worst daily drop since December 2008 as investors continued to readjust positions after Federal Reserve Chairman Ben Bernanke diminished expectations for more U.S. monetary easing.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,708.75 a troy ounce during U.S. morning trade, shedding 0.14%.
It earlier rose by as much as 0.85% to trade at a session high USD1,726.35 a troy ounce.
Futures were likely to find support at USD1,689.95 a troy ounce, Wednesday’s low and a five-week low and resistance at USD1,792.15, Wednesday’s high and the highest since November.
Gold traders continued to rebalance their portfolios after prices plunged by 5% on Wednesday, or nearly USD80 per ounce, its largest one-day loss since December 2008.
In testimony before Congress on Wednesday, Fed chair Bernanke said that while keeping monetary stimulus is warranted, rising gasoline prices are likely to push up inflation temporarily and the drop in unemployment has been more rapid than expected.
But investors looking for signs of more monetary easing were disappointed as he refrained from mentioning any plans to move toward a third round of quantitative easing bond-buying, known as QE3.
The comments triggered a sharp selloff in gold and silver, as traders unwound long positions fuelled by expectations a third round of bond-buying was imminent.
Fed chairman Bernanke is back on Capitol Hill today for his semi-annual economic testimony, this time before the Senate Banking Committee, though his testimony is not expected to differ from Wednesday’s appearance before the House Financial Services Committee.
Technical selling also pressured gold after it failed to sustain gains above Monday’s high at USD1,790 an ounce and break through key resistance at USD1,800.
Losses accelerated once prices dropped below USD1,700 an ounce, triggering fresh sell orders from hedge funds and large institutional investors and pushing down prices to as low as USD1,686 an ounce.
Bernanke’s remarks hit gold particularly hard because heavy bullish bets had been positioned leading up to Bernanke’s testimony and after the European Central Bank’s second three-year long-term refinancing operation.
Gold prices rallied in recent weeks, boosted by growing expectations for further monetary easing measures from global central banks.
Further weighing on the metal, market participants noted a large sell order on the Comex, said to have been 1 million ounces, or 31 tonnes, prompted by the Bernanke testimony.
Other traders noted that they had not seen that sort of volume before and the activity was akin to “computerized manipulation” and that there were “massive volumes going through and appeared as if some large entities had bids and offers at the same price”.
Elsewhere on the Comex, silver for May delivery rose 0.75% to trade at USD34.89 a troy ounce, while copper for May delivery rallied 1% to trade at USD3.918 a pound.
Silver prices plummeted nearly 7% on Wednesday, but futures are still up almost 20% since the start of 2012.
The volatile movement in silver prices added to speculation that big Wall Street banks have been suppressing the price of silver through short-selling.
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