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Gold lifted by Bernanke

The price of gold has been given a boost at lunchtime by encouraging words from Ben Bernanke of the Federal Reserve.

All trading involves risk. Losses can exceed deposits.

This morning gold was drifting lower ahead of the announcement, as traders were fearful of what Mr Bernanke would say. But when he made it clear that the Fed’s monetary policy is not set in stone, investors took this as a positive sign. Over the past few months, traders have been speculating that the Fed would taper its bond-buying programme. Amid the resulting uncertainty, traders bought back into gold as they felt that a weak US dollar would make gold relatively cheap to buy. Gold, like all commodities, is traded in dollars, so when the dollar is relatively weak gold prices become attractive.

There is an also an element of bargain-hunting pushing the price of gold higher. The metal lost 25% between April and June, making it the worst performing quarter since the 1920s. Dealers used this sell-off as an opportunity to pick up gold at a bargain price.

Spot gold chart

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