Forexpros – Gold futures surged Monday as Federal Reserve Chief Ben Bernanke statement that further monetary easing may be instituted sent the greenback tumbling and the precious metal higher
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,686.25 a troy ounce during U.S.afternoon trade, surging 1.34%.
It earlier traded at USD1,690.45 a troy ounce, the highest since March 13.
Gold futures were likely to find support at USD1,641.95 a troy ounce, last Friday’s low and at USD1,706.15, the high from March 13.
Gold futures spiked higher when Fed Chairman Ben Bernanke stated that further monetary accommodation is needed to bring about big gains in the U.S. jobs market, which he described as “far from normal,” despite a recent improvement.
“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” Bernanke said.
The comments helped fuel speculation that further quantitative easing from the central bank may be coming, weakening the U.S. dollar and in turn strengthening dollar denominated commodities.
The euro turned higher against the U.S. dollar following Bernanke’s words, climbing close to a four-week high. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
Quantitative easing by the Fed, keeps interest rates and borrowing costs low, which makes gold more attractive compared with yield- or dividend-bearing assets such as bonds or stocks.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.35% to trade at 79.25, the lowest since March 9.
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