Gold rose 1 percent on Friday after the Federal Reserve chairman said it was critical to reduce US unemployment, which encouraged some safe-haven bullion buying after days of liquidation pushed gold down sharply from record highs this week.
Gold fell briefly after Fed Chairman Ben Bernanke did not provide details on steps the Fed could take, but it rose as investors focused on the Fed's pessimistic economic outlook and intention to boost the economy. Analysts said gold's long-term bull run was intact due to global economic uncertainty, even though Bernanke did not announce a third round of quantitative easing, or government bond purchases, by the Fed, known in the market as QE3.
"Gold's movement shows that it is trading on a fundamental basis. If it were trading on speculation of a full-blown QE3, we would have seen gold sell off sharply after Bernanke's speech," said James Rife, an assistant portfolio manager at Haber Trilix Advisors, which manages $2 billion in assets.
Spot gold was up 0.9 percent at $1,786.20 an ounce by 12:54 pm EDT (1653 GMT). US gold futures for December delivery were up $27.20 an ounce at $1,790.40. Lingering fears about a European debt crisis underpinned gold's safe-haven appeal after sources close to the situation told Reuters Greece could miss its 2011 fiscal targets and can expect tough discussions on its bailout program next week with senior inspectors from the European Union, International Monetary Fund and European Central Bank.
"Gold is going to continue to focus on Europe and on the uncertainty there, and it is going to form a nice base and gradually start to move higher," said Bill O'Neill, partner of commodity investment firm LOGIC Advisors. Silver was down 0.8 percent at $40.69 an ounce.
But gold was still set for its first weekly loss in eight weeks after days of profit taking on its surge to record highs at $1,911.46 on Tuesday. Prices slid more than $200 from that level by Thursday in volatile trading. Bullion held gains as Wall Street rose more than 1 percent as investors digested Federal Reserve Chairman Ben Bernanke's remarks and regained hope the door was still open for further monetary stimulus down the road.
Crude oil and grain prices also gained.Fears that Hurricane Irene could wreak havoc in the populous US Northeast and to disrupt the world's biggest financial markets there prompted investors to turn to liquid investments such as gold and Treasuries. Outflows from the world's largest gold-backed exchange-traded funds also dried up on Thursday, with its holdings remaining at 1,232.3 tonnes. It is still on track to post an outflow of nearly 60 tonnes this week, however.