Gold futures have eased slightly after comments from the head of the U.S. Federal Reserve about deflation, but the metal isn't losing much ground as concerns about the economic recovery continue to support it as a refuge investment.
The most actively traded gold contract, for December delivery, was recently down $1.50 U.S., or 0.1%, at $1,236.20 U.S. an ounce on the Comex division of the New York Mercantile Exchange.
Federal Reserve Chairman Ben Bernanke Friday said he's ready to do what it takes to support an economic recovery that's been losing steam. Bernanke said he expects the U.S. economy to continue growing in 2011 and subsequent years, signaling further Fed action may not be needed.
Still, he stressed the U.S. central bank is ready to act if needed to bolster the economy and to avoid deflation, for which he sees no significant risks at this time.
"That immediately puts a little spook into the gold," said Bob Haberkorn, senior market strategist with Lind-Waldock in Chicago.
Gold is often bought as a hedge against inflation. But at the same time, it is often considered a safe-haven asset, and Bernanke's comments about slower economic growth are supportive for the metal in this role.
The metal is also facing some headwinds from a stronger U.S. dollar, which makes dollar-denominated gold pricier for purchasers using other currencies, which can hamper demand.
Earlier in the day, gold had moved higher as the ICE Futures U.S. Dollar Index pulled back after the government revised the second quarter GDP estimate from 2.4%, to 1.6%, compared with economists' expectations for a larger cut to 1.3%.
Although the data were slightly stronger than expected, "it's still bad," Haberkorn said. "It's nothing anyone's getting excited about."
Because gold isn't as linked to economic cycles as industrial commodities like oil and copper, it is often considered a refuge thought to hold its value more strongly than other assets like equities or currencies during economic turmoil.
On Thursday, gold futures declined slightly as stronger-than-expected jobless data shaved off some of the metal's recent haven premium, but losses were kept in check as the market remains fretful about the pace of the economic recovery.
Earlier in the week, the precious metal gained after data showed U.S. new-home buying dropped, demand for U.S. manufactured durable goods increased far less than expected, and existing home sales plunged to their lowest level in 15 years.
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