Fed Director Bernanke Sends Gold Skywards

                            Gold’s biggest rally in months edged into day three to trade above the 1615.00 level after being stuck under the resistance level of 1600, when the U.S. Federal Reserve chief defended the stimulus program that has stoked gold buying on inflation worries. Mr. Bernanke’s testimony seemed to indicate that the FOMC would continue its ongoing asset purchase programs, which helped bump gold skywards. Bernanke said that the current programs were not causing inflation or an asset bubble.

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This morning gold is giving back a few dollars after the US dollar rebounded late in trading on yesterday on positive eco data and as traders took advantage to the rally to sell and book profits as the month comes to a close. Gold rose 1.3 percent on yesterday, its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke’s defense of U.S. bond-buying stimulus boosted bullion’s inflation-hedge appeal. The metal broke above $1,600 an ounce, extending its rally to a fourth straight day, after Bernanke said Fed policymakers are cognizant of potential risks from its loose monetary policy, but the risks did not seem material now. In his testimony on the central bank’s semiannual report on monetary policy,

Bernanke said the Fed has all the tools it needs to retreat from its monetary support in a timely fashion. The market largely ignored a cut of more than $200 in the gold price outlook by Goldman Sachs, one of the top global bullion banks. It reduced its 2013 gold price forecast to $1,600 an ounce from $1,810, citing bullion’s recent price drop and an increase in U.S. real interest rates. If that projection proves accurate, it will mark the first year gold has recorded a lower average price year-on-year since 2001, when its record-breaking 12-year bull run began.

Continued worries in the eurozone after Italy elections gave an inconclusive result also boosted safe haven buying in gold and supported prices.

Gold importers in India, kept to the sidelines on Tuesday as prices recovered partly from the lowest level in seven months hit last week, and on a liquidity crunch. Market participants feel that there could be another round of hike in import duty on refined gold to 8 percent from the earlier 6 percent to keep a lid on the rising current account deficit. While China’s Ministry of Industry and Information Technology reported that China’s 2012 total gold production increased 11.66% or by 42.1 tons to a total 403.1 metric tonnes of which 341.8 tonnes came from gold mines while 61.3 tons were by-products of nonferrous metal smelting. Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, stood at 1277.44 tons by Feb 26, remains unchanged from the previous business day. While silver backed exchange-traded fund iShares Silver Trust stood at 10602.76 tons by Feb26. Gold is trading at 1611.30 on Wednesday morning while silver is holding at 29.295