The price of gold continued to rise in value on July 16, as global market participants were impacted by speculation surrounding the coming testimony of Federal Reserve Chairman Ben Bernanke and a lower value for the U.S. dollar relative to other currencies.
In addition, an increase in physical demand has helped to provide upward pressure for the price of the precious metal, as global traders have responded to the recent depreciation in gold, Bloomberg reports.
By 14:01 GMT, August gold was $5.70 per ounce higher at $1289.20 on the Comex division of the New York Mercantile Exchange and spot gold was up 0.7 percent at $1,290.31 an ounce, according to Reuters.
The precious metal rose during six of the last seven trading sessions, after recording sharp declines earlier this year, Bloomberg reports. Through July 15, gold prices plunged 23 percent. The commodity sank into a bear market in April, having lost 20 percent of its value since reaching an all-time high late in 2011.
Many investors have expressed their lost faith in the appeal of the metal as a safe haven after it recorded sharp declines in value this year.
Federal Reserve speculation
Global investors have been coping with a wide range of statements on the future of quantitative easing provided by both Bernanke and also other officials of the central bank.
"Bernanke is sending confused messages and I think the guessing will continue, and he's likely to keep his words cloudy and unclear," Societe Generale analyst Robin Bhar told Reuters.
The analyst made these statements after the head of the Fed provided largely different statements in June and July. Last month, he spoke with members of the media immediately after the conclusion of the Federal Open Market Committee meeting, stating that QE could be slowed in pace starting as early as this year.
At the time, he also indicated that this economic stimulus could be eliminated completely next year, as long as such a move was justified by market conditions.
Then, when speaking with the media in July, he stated that the lackluster state of the economy would require the Fed to harness such robust stimulus policies for some time.
Investors will soon have more information they can process, as Bernanke is scheduled to testify in front of Congress later in the week, according to the news source.
Chintan Karnani, a New Delhi-based independent bullion analyst, told MarketWatch that the recent inflation data provided by the U.S. Labor Department points to a withdrawal of stimulus. The increase in the consumer price index "suggests that U.S. economy will meet both these conditions for an early withdrawal from QE."
Impact of weaker dollar
The value of the dollar relative to other currencies would likely increase in the event that the Fed's bond purchases are lowered, Reuters reports. Such a move would be bearish for gold, since a more expensive greenback makes many contracts for the commodity more expensive for people using foreign currencies.
Gold was supported on July 16 by a weaker dollar, as the value of this currency was pushed lower when global market participants responded to weak data on retail sales that were released the day before, according to the news source.
The precious metal also received support from the strong demand of Asian market participants, Mark O'Byrne, executive director at GoldCore, told MarketWatch. He noted that the boost that this activity provided to prices was made evident "as seen in the high premiums in India and especially in China."
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