Gold extends best week since October 2011 on QE outlook

Gold rose on Monday, extending last weeks advance after Fed Chairman Ben Bernanke deferred Quantitative Easings imminent scale back at his latest statement, easing pressure on gold. On Monday, economic data from China showed the countrys economy expanded at a lower pace, but met projections.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 284.25 per troy ounce at 8:12 GMT, up 0.52% on the day. Prices held in range between days high and low of $1 293.55 and $1 283.45 respectively. The precious metal settled almost unchanged on Friday but still marked a 5.09% weekly gain, the highest since October 2011.

Gold surged last week as the U.S. dollar plunged following the released minutes from the latest FOMC meeting on Wednesday, after which Ben Bernanke made an announcement in Boston. Assets in the SPDR Gold Trust remained unchanged for a second day on Friday at 939.07 metric tons as the metal rebounded after falling for four straight days. The dollar index retreated from a three-year high and plunged to the red scale as the protocols from the FOMC’s June meeting showed that policymakers were divided in their opinion about the future of Quantitative Easing. Around half of them believe the central bank should start winding down bond purchasing by the end of the year, while the rest think the labor market remains weak, citing the latest Unemployment Rate reading. The U.S.

Later on, Ben Bernanke dampened investors’ speculation for an earlier than expected deceleration of Fed’s monetary easing program. He said the U.S. economy needs Fed’s accommodative monetary easing program over the near-term as while the manufacturing sector, housing industry and other sectors from the industry have improved, the latest 7.6% unchanged reading of the Unemployment Rate pointed at a fragile labor market. Meanwhile, inflation remained stable and low, giving the central bank more room to ease money supply.

St. Louis Federal Reserve President James Bullard said on July 12 the U.S. central bank shouldnt taper its monetary easing program until inflation reaches its target. Meanwhile, Philadelphia Fed President Charles Plosser said the same day exactly the opposite. He stated Fed should trim its bond purchasing in September and bring it to an end by the end of the year.

Macquarie Group Ltd. said in a report today: “There probably isnt too much downside from here. U.S. economic data is likely to disappoint at some point in the next three to six months, which should reduce fears of an abrupt tightening of U.S. monetary policy.”

Meanwhile, somewhat controversial but overall matching expectation economic data from China supported the precious metal. China’s economy grew by 7.5% in the second quarter, below last year’s 7.7% but met expectations. Although this marked a ninth decline for the past ten quarters, it was a relief for investors as some expected even lower readings following statements from government officials last week. On a quarterly basis, Chinese GDP rose by 1.7%, above Q1′s 1.6%, but failed to meet projections at 1.8%.

According to China’s National Bureau of Statistics, the Asian country’s industrial production in June failed to meet expectations for a 9.1% surge and stood at 8.9%, also below May’s 9.2% reading. However, oil consumption in the world’s second biggest consumer rose by 11% from a year ago to nearly 10 million barrels per day. Chinas June Retail Sales rose by 13.3% on an annual basis, exceeding both projections and the comparable periods reading of 12.9%.

Investors are now looking ahead into this week’s key U.S. economic data, which will provide information about the economy’s recovery pace. Retail sales, Core Retail Sales, New York Empire Manufacturing Index and Business Inventories are due on Monday. Consumer inflation (Consumer Price Index) and Industrial production are scheduled for release on Tuesday, while on Wednesday Building Permits and Housing starts will provide data about the U.S. construction sector. Initial Jobless Claims is also due on Thursday and Ben Bernanke will make two separate statements on Wednesday and Thursday, bringing further insight into the future of the central bank’s monetary stimulus.

Elsewhere on the precious metals market, silver, platinum and palladium are all tracking golds upward movement. Silver for September delivery traded at $19.873 an ounce at 8:12 GMT, up 0.41% on the day. Prices held in rang between days high and low of $20.133 and $19.848 respectively. Platinum October futures stood at $1 415 an ounce, up 0.58% for the day. Price varied between days high at $1 422.75. a three-week high and low of $1 410.20. Palladium for September delivery traded at $728.80 at 8:15 GMT, marking a 0.86% advance. The metal swung between high of $733.80, nearly a month high, and low at $722.30 per troy ounce respectively.