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Gold Prices Logs Gain as Dollar Falls; Silver Prices Also Move Higher

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Gold prices edged higher on Tuesday as broadly weaker dollar bolstered the demand for dollar-priced commodities; however, the metal has failed to breach $1,300 an ounce level as investors doubt whether the Federal Reserve will keep on its quantitative easing for a prolonged period. Silver prices also edged higher in trading on Tuesday.

U.S. gold futures for August delivery gained 0.6% to $1,291 an ounce while spot gold climbed 0.8% to $1,292 an ounce. In late trading, the SPDR Gold Trust (ETF) (NYSE: GLD) was up 0.42% to $124.70.

Silver futures were last up 0.53% to $19.95 an ounce.

The U.S. dollar eased on Tuesday as speculators and investors cut their long positions on the U.S. unit ahead of Bernanke’s testimony to the Congress both on Wednesday and Thursday. Bernanke’s testimony might provide some clarity as to when the bank could start winding down its multi-billion dollar asset purchase program.

However, speculation is rife that the Fed could start scaling down its economic stimulating measures by December or by the beginning of the next year.

In case, the Fed announces the winding down of asset purchase in its next FOMC then interest rates will jump, which in turn boost the demand for U.S. dollars and weigh on gold prices.

In a note to investors, Robin Bhar an analyst at Societe Generale said, “Bernanke is sending confused messages and I think the guessing will continue, and he’s likely to keep his words cloudy and unclear,” according to Reuters.

“But if there is more evidence of this tapering program plan, gold should start edging back down again and I would be looking at the $1,250 – $1,260 area as the next support,” added Bhar.

 








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edliston
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.

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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.

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