Gold Prices Slip, Silver Prices Gain

Gold prices extended their losses during Asian trading hours on Wednesday as the physical side demand remained weak due to a holiday in China while growing fears that global central banks would adopt more hawkish stance in coming months is also putting pressure on the metal’s inflation-hedge appeal. Silver prices, meanwhile, edged higher in early trading on Wednesday.

At last check, gold futures for August delivery slipped 0.08% to $1,375.90 an ounce while spot gold edged down 0.14% to $1,377.06 an ounce.

China, which is the world’s second biggest consumer of gold after India, is closed on account of three day Dragon Boat Festival. Demand for gold in China has been particularly strong since the metal slumped to its two-year low level of $1,321 an ounce in mid-April.

Speaking to Reuters, one Sydney based trader said, “The sentiment is still bearish… Since there is no China today, we can expect gold to fall again towards $1,365.”

Bullion has come under severe pressure ever since the Federal Reserve Chairman, Ben Bernanke, hinted at early winding down of the QE3. In his latest testimony to the congress, Bernanke said that the central bank could start scaling down the $85 billion worth monthly bond purchase program should the job and housing market show significant improvement.

Just last week, the Labor Department’s non-farm payrolls data showed that the U.S. economy added more-than-expected jobs in May.

The upgrade of the U.S. sovereign credit outlook to “stable” from “negative” by Standard & Poor, earlier this week is also accentuating the fact that the U.S. economy is rebounding.

Meanwhile, the Bank of Japan also refrained from providing any further economic stimulating measures on Tuesday. Earlier on Monday, the European Central Bank’s President Mario Drgahi also categorically said that the central bank will not resort to fuelling up the inflation rate in order to end euro zone crisis.

With global central banks adopting hardened stance, bullion investors are worried that gold’s allure as an inflation-hedge will diminish.

Silver futures were gaining 0.25% to $21.70 an ounce.

In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 0.57%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was up 1%.

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Post Written By: Ed Liston 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.