Gold Prices Gain after Bernanke Speech, Silver Prices also Up

Gold prices edged higher during Asian trading hours on Tuesday as the U.S. dollar softened against major traded currencies after Federal Reserve Chairman Ben Bernanke while addressing a gathering at the University of Michigan on Monday, ruled out increasing benchmark interest rates or halting ongoing quantitative easing, keeping metal’s inflation-hedge appeal intact. Silver prices also edged higher in early trading on Tuesday.

At around 6:00 a.m. EST, U.S. gold futures for February delivery gained 0.67% to $1,680.50 an ounce.

Bullion investors took a sigh of relief on Monday after the Fed chairman said that the central bank will not raise interest rate “prematurely” as it would harm the economy whilst he added that ongoing bond and mortgage backed asset purchase program are not going to spark any inflationary pressure.

Bernanke’s remarks have thus put an end to speculation that the Federal Reserve is in hurry to stop its QE3.

Earlier in January, bullion investors started to liquidate inflation hedge bets in drove after minutes released from the Fed’s latest FOMC showed that concerns were mounting in certain quarters over central bank’s swelling balance sheet.  The minutes led investors to speculate that sooner or later the Fed will cut down its economic stimulating measures.

However, the yellow metal’s gains are likely to be capped in the short to middle-term as uncertainty surrounding the debt-ceiling issue will act as a headwind.

“The gold market may go through a repeat of what we saw in December, namely, varying ‘mood swings’ that will result in directionless trading,” Ed Meir, an analyst at INTL FCStone, said in a research note to clients.

Besides, hosts of economic indicators, such as U.S. consumer-price index, retail sales data and China’s fourth quarter GDP data, slated to be released in this week will keep investors anxious. Any weakness in Chinese GDP data for instance will badly hurt metal’s outlook as the country is one of the biggest consumer of gold.

Silver futures edged up 0.59% to $31.30 an ounce.

In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 1%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was up 1.26%.

edliston

edliston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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