Bulls return to bullion after Bernanke comments
Amid declining gold prices, sentiment improves as Fed chairman signals stimulus will continue
Gold traders are the most bullish in a month after Federal Reserve chairman Ben Bernanke signalled record stimulus will continue until the economy improves.
In a survey, 12 analysts expect prices to rise next week, with nine bearish and eight neutral, the highest proportion of bulls since April 26.
Bullion is poised for its first weekly gain in three and trading and investment company Degussa Goldhandel said demand this month will be double the first-quarter average.
Investors have so far this year sold 463.4 tonnes of bullion valued at US$20.8 billion from exchange-traded products as some lost faith in gold as a store of value amid an improving United States economy and rally in equities. While prices entered a bear market last month and hedge funds are making the biggest ever bet against the metal, the slump is boosting jewellery and coin sales.
"Gold should still be in demand as an alternative currency," said Daniel Briesemann, a commodities analyst at Commerzbank in Frankfurt. "The quantitative easing by central banks should lead to a depreciation in rates for major currencies and in the end should also lead to some inflation concerns, although this is not an issue at the moment."
Bullion rose as much as 2.8 per cent and then fell as much as 1.6 per cent on May 22 after Bernanke expressed concern to Congress that federal budget cuts were blunting the recovery.