Gold Recovers Slightly From Week’s Low

Gold traded above this week’s low in New York as investors weighed the outlook for U.S. stimulus with tension over Ukraine.

Prices fell 1.5 percent yesterday, the most since April 15, as Federal Reserve Chair Janet Yellen told a congressional panel “sufficient underlying strength” made measured reductions in bond purchases “appropriate.” While economic data show “solid growth” in the second quarter, the U.S. economy still requires stimulus, she said. The Bloomberg Dollar Spot Index reached the lowest since October as Yellen prepared to testify to U.S. lawmakers for a second day.

Gold slid 28 percent last year on speculation the Fed would scale back asset purchases. It rebounded 7.5 percent this year, partly as tension over Ukraine spurred demand for a haven. Russian President Vladimir Putin said Russia is testing its army’s combat readiness, ramping up tensions after pledging a pullback from Ukraine’s border. Pro-Russian separatists in Ukraine vowed to press ahead with autonomy votes.

“Safe-haven buying has dominated jittery gold trading since early April amid a lack of other drivers,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Declines are “likely, should matters de-escalate from here. We expect limited upside in the second half of 2014, with bullion ever-so sensitive to the Fed’s policy expectations.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza