Forexpros – Gold futures traded lower during U.S. afternoon trade Thursday, extending overnight losses after Federal Reserve Chairman Ben Bernanke said the Fed stands ready to act if stresses escalate, but refrained from offering any details.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,589.05 a troy ounce during U.S. afternoon trade, plunging 2.76%.
Gold futures were likely to find support at USD1,546.35 a troy ounce, the low from June 1 and near-term resistance at USD1,647.85, the high from May 4.
The precious metal sold off soon after Fed Chairman Bernanke gave his Congressional testimony about the state of the U.S. economy.
While Bernanke cited that the European crisis posed significant risks to the U.S., the economy was expanding at a moderate pace.
Bernanke added that while the Fed remains ready to act if stresses escalate, he failed to offer any further clues on the central bank’s direction on further easing measures.
Gold prices rose to a one-month high on Wednesday, amid growing speculation the Federal Reserve will consider more action to stimulate growth in the U.S.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 9% since late February, amid growing concerns the European debt crisis has been escalating, which has fueled demand for the yellow metal’s hedge, the greenback.
Gold prices were supported earlier in the day after the People’s Bank of China unexpectedly announced that it had lowered its benchmark interest rate by 0.25% to 6.31% from 6.66% effective June 8.
It was the first rate cut since December 2008, when the world economy was in the midst of the financial crisis.
Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn’t offer investors any similar guaranteed payout.
Elsewhere on the Comex, silver for July delivery plunged 3.34% to trade at USD28.50 a troy ounce, while copper for July delivery slipped 0.09% to trade at USD3.376 a pound.
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