SINGAPORE (Reuters) – Gold edged lower on Wednesday, extending losses from the previous session when the U.S. Federal Reserve Chairman Ben Bernanke disappointed gold bugs by offering no signs of imminent monetary stimulus measures.
The central bank chief reiterated the stance that the Fed was prepared to take further action should the economic conditions worsen, but offered few hints on the timing of such action.
Gold over the past few months has been especially sensitive to Fed headlines as investors expect further easing to boost bullion, seen as a hedge against a rising inflation outlook due to rampant cash printing.
“We suspect that the short-term outlook for the precious group will be somewhat lower from here,” said Ed Meir, an analyst at INTL FCStone in a research note.
“While easing may be expected, investors are still saddled with the uncertainty of not knowing exactly when such an order will be given.”
Spot gold edged down 0.2 percent to $1,580.02 an ounce by 0643 GMT, after losing about half a percent on Tuesday.
Gold has gained about 1 percent so far this year, after posting a 10-percent rise in 2011 on safe-haven flow as investors fretted about the euro zone debt crisis and a U.S. debt ceiling crisis.
U.S. gold futures contract for August delivery lost 0.6 percent to $1,579.90.
Technical analysis suggested that spot gold will be trading sideways between $1,571.16 and $1,599 an ounce during the day, said Reuters market analyst Wang Tao.
Bernanke will address the House Financial Services Committee later on Wednesday.
His Tuesday’s testimony could be seen to suggest that fiscal policymakers need to do more to help the economic recovery as effectiveness of monetary policy is weakening, said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
“Our view is that the monetary policy is kind of at its end right now. What will be needed to make it more effective is that fiscal issues need to be dealt with,” he said.
“Monetary policy will still be part of the equation and we are definitely still on a loosening cycle.”
Market participants have been worrying about the so-called “fiscal cliff”, referring to sharp spending cuts and tax hikes that are scheduled to take place at the start of next year if the Bush-era tax cuts expire without congressional action.
Bernanke told lawmakers it was essential to find a way to avoid the fiscal cliff, warning it could tip the already weak economy into a recession.
(Editing by Himani Sarkar)
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