New York: Gold rose 2 percent on Friday after days of liquidation pushed bullion down from record highs this week, as the US Federal Reserve chairman raised hopes that the central bank could consider further stimulus measures to fight high unemployment.
Gold fell briefly after Fed Chairman Ben Bernanke did not provide details on steps the central bank could take, but it rose as investors focused on the Fed's pessimistic economic outlook and its intention to consider what more it could do at an extended policy meeting in September.
Analysts said gold's long-term bull run was intact despite this week's 3 percent pullback. Lingering fears about a European debt crisis amid new troubles facing Greece underpinned gold's safe-haven appeal.
"Bernanke said the Fed has more tools in the chest and he will use them as necessary, so that's supportive to the gold market. That's why we are seeing the bulls have things under control for the moment," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.
Spot gold was up 2.2 percent at USD 1,808.60 an ounce by 2:28 PM EDT.
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 USD 1,911.46 on Tuesday. Prices slid more than USD 200 from that level by Thursday in volatile trading.
US gold futures for December delivery settled up USD 34.10 an ounce at USD 1,797.30. Trading volume was lighter than the last three sessions, when turnover hit a new record in volatile trade.
McGhee said that gold's rally amid lighter Friday afternoon volume ahead of a major hurricane approaching the US East Coast suggested bullion is vulnerable for a pullback.
Bernanke said the Fed will meet for two days in September instead of the planned one to mull its options to provide additional monetary stimulus, among other topics.
"It is clear the recovery from the crisis has been much less robust than we had hoped," Bernanke said in remarks prepared for delivery to an annual Fed retreat at Jackson Hole, Wyoming.
James Rife, an assistant portfolio manager at Haber Trilix Advisors, which has USD 2 billion in assets, said that gold was driven more by economic uncertainty rather than speculation on a third round of quantitative easing.
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, sources close to the situation told Reuters.
US growth slowed, hurricane watch
Gold received a boost after government data earlier showed the US economy grew much more slowly than previously thought in the second quarter as business inventories and exports were less robust, although consumer spending was revised up. 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.
First Published: Saturday, August 27, 2011, 09:06