Gold Bounces as Bernanke Confirms Zero-Rate Policy, Denies the Fed Risks Inflation

From Chris Mullen at GoldSeek.com...

Gold fell as much as $32.88 to $1135.92 a little after lunchtime in Asia on Monday, before it bounced back higher in London and New York and saw a nice pop in early afternoon US trade.

Recovering as high as $1164.60 in reaction to Fed chairman Ben Bernanke's remarks about US interest rates, gold cut its losses to 0.5% for the session.

Bernanke spoke before the Economic Club of Washington about the Fed's latest outlook on monetary policy and no major changes were announced, but it seemed that Bernanke reassured the market to an even greater extreme than before that the Fed will not be raising interest rates at any time in the near future.

Oil fell about 2% on worries over future energy demand.

The US Dollar index saw impressive gains in early trade in continued reaction to last Friday's jobs data – which had some speculating that interest rates may be on the rise sooner than previously thought – but Bernanke indicated that any interest rate increases are still a long way away.

The Dollar then erased its advance and ended unchanged. Treasuries rose after Bernanke’s remarks sent interest rates lower.

The Dow, Nasdaq, and S&P ended mixed and near unchanged as Bernanke’s remarks both increased worries over the economy and also encouraged market participants over continued low interest rates.

The Fed chairman also said that the US central bank's actions will not cause inflation and that it may even go lower from here.

US Consumer Credit for Oct. meantime came in $3.5 billion lower from Sept., cutting the pace of contraction sharply below analyst forecasts.

There are no major US economic reports due out Tuesday.

The Gold Price in Euros also dived, recovering to €781.

Silver dropped as low as $17.855 by late morning in New York before it also rallied back higher in the last couple of hours of trade and climbed as high as $18.34 in the final minutes of Monday's session. Silver still ended with a loss of 1.0%.

Platinum lost $2 to $1438, and copper fell a few cents to about $3.19.

Gold Mining and silver equities fell over 3% at the open before they rebounded back to almost unchanged by early afternoon, but they then fell back off into the close and ended with about 2% losses.

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