Gold rose on Tuesday as the dollar eased ahead of Federal Reserve Chairman Ben Bernanke's congressional testimony later in the week, which investors expect could provide clues on the timing of the central bank's tapering of monetary stimulus. Bullion rose 5 percent last week - its biggest weekly gain in nearly two years - on hopes the stimulus would continue after dovish remarks by the Fed's chief.
But prices have been stuck in a tight range over the last three sessions, failing to cross above the $1,300 mark as investors take the view that the market will have to think of life without quantitative easing, at least in the United States. The tapering of the Fed's $85 billion monthly bond purchases would support a rise in interest rates and bolster the dollar, reducing gold's attractiveness.
"Bernanke is sending confused messages and I think the guessing will continue, and he's likely to keep his words cloudy and unclear," Societe Generale analyst Robin Bhar said. Spot gold rose 0.7 percent to $1,290.31 an ounce by 1401 GMT, while US gold futures for August rose $5.70 to $1289.20 an ounce.
The dollar came under pressure after disappointing US retail sales for June on Monday raised doubts about an imminent reduction in stimulus by the Fed. Gold's appeal as a safe-haven and inflation hedge has been tarnished this year by a stronger dollar, rallying stock markets, improving bond yields, which all led to rapid outflows from gold-backed exchange traded funds. The top eight gold ETFs have seen holdings drop by about 19 million ounces, or $24 billion at current prices, so far this year, according to Thomson Reuters data.
Gold jewellery demand in top buyer India ebbed and was seen as unlikely to gain traction until late August, when seasonal buying during the autumn wedding season and religious festivals should pick up again. Premiums for gold bars on the Shanghai Gold Exchange (SGE) fell to $25 over the London spot price from as high as $36 last week, capping price rallies.
Hong Kong and Singapore premiums remain however healthy at $5 an ounce and $3 an ounce respectively, Swiss refiner MKS SA said. Silver rose 0.2 percent to $19.93 an ounce, having risen 5.6 percent last week. Palladium was up 0.6 percent to $732.72 an ounce. Platinum was unchanged at $1,422.50 an ounce after data showed the European auto market was very weak in June. Europe is the main market for diesel engines, which mostly use platinum-based catalysts to clean up exhaust emissions.
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