Gold prices drop as Bernanke predicts growth

SINGAPORE: Gold fell for the first day in three after Federal Reserve chairman Ben S Bernanke said that growth will resume, boosting speculation the central bank may not add extra stimulus and eroding the appeal of haven investments.

Immediate-delivery gold traded 0.9% lower at $1,812 an ounce at 2:20 pm in Singapore, after dropping 1.2% earlier. The metal has slumped 11% from its all-time high of $1,913.50 on August 23 as equities rebounded. December-delivery bullion in New York rose 1% to $1,814.70 after gaining as much as 2.5%.

Bernanke said the recovery is likely to improve in the second half and the Fed can aid the recovery if needed, without giving details on what policy makers may do. A second day has been added to the Federal Open Market Committee meeting next month for “a fuller discussion” of the economy and the Fed’s possible response, he said at Jackson Hole, Wyoming on August 26.

“The likelihood of QE3 has diminished and the dollar is slowly gaining traction after its low in May, and these will turn investors away from gold in the near term,” said Ye Yanwu, deputy head of research at Everbright Futures, referring to further asset purchases or so-called quantitative easing.

Exchange-traded product holdings fell for a sixth day on August 26 to 2,152.049 tonne after reaching a record 2,216.756 tonne on August 8, Bloomberg data show.