Gold back above $900
an ounce as dollar loses steam
By Polya Lesova & Nick Godt
futures edged higher Wednesday, after two
sessions of sharp losses, with the dollar losing
steam after Federal Reserve Chairman Ben
Bernanke said the U.S. economy might contract in
the first half of the year.
Gold for June delivery gained $12.40, or 1.4%,
to finish at $900.20 an ounce on the New York
Mercantile Exchange. It earlier hit a high of
$903 an ounce.
In testimony to Congress, Bernanke said that the
outlook for U.S. economic growth has worsened
since January and that the possibility of a
recession can't be ruled out.
"It now appears likely that real gross domestic
product will not grow much, if at all, over the
first half of 2008 and could even contract
slightly," the top U.S. central banker said.
The dollar index, which tracks the performance
of the U.S. currency against other major
currencies, was recently down 0.25% at 72.33.
"The U.S. dollar rose initially, then headed
somewhat lower as Fed Chairman Bernanke painted
a cautionary picture for the U.S. economy for at
least the first half of this year," said Jon
Nadler, senior analyst at Kitco Bullion Dealers
The dollar had firmed earlier after the ADP
employment report showed that private sector
jobs rose by 8,000 in March. The greenback
gained 0.6% against the Japanese yen and 0.2%
against the euro. See Currencies.
The ADP report comes two days before the Labor
Department reports on nonfarm payroll growth for
March. Adding in some 25,000 jobs typically
created by government, the ADP report suggests
nonfarm payrolls grew by about 33,000 in March,
much better that the drop of 60,000 expected by
Wall Street economists. Analysts note that the
ADP has overshot the employment report in each
of the past four months. Nonfarm payrolls shrank
63,000 in February.
On Tuesday, gold futures tumbled $33.70 to close
at $887.80 an ounce, adding to a loss of $15 on
"Given the need to generate cash and the
apparent increase in risk appetite, it looks as
if the precious [metals] complex will remain
vulnerable to further bouts of selling pressure
in the short term and could see gold test the
psychologically important $850 level," said
James Moore, an analyst at TheBullionDesk.com,
in a research note.
The recent correction in gold prices will likely
be viewed favorably by physical traders ahead of
one of the key periods of jewelry purchases and
should help absorb further selling pressure,