Gold slid 23 percent this year, wiping $59.3 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value. Declines accelerated last quarter as the Fed indicated its bond-purchase program could be tapered should the job market improve. Gold’s drop to a 34-month low on June 28 spurred more physical demand.


Gold gained as investors weighed the U.S. Fed outlook for stimulus

Gold gained for the fifth time in six sessions in New York as U.S. retail sales rose less than expected in June, boosting speculation the Federal Reserve will maintain stimulus measures to shore up economic growth. Also, as a weaker dollar increased demand for an alternative asset and as investors weighed the U.S. Federal Reserve’s outlook for stimulus.

“Since Bernanke’s speech, there’s been more of a question mark as to when the Fed begins tapering stimulus,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview to Bloomberg. “We’re back to a data-dependent mentality, and anything that shows a weaker economy is going to be supportive.”

Bullion rose last week as Fed Chairman Ben S. Bernanke called for maintaining asset purchases. Bernanke, scheduled to testify before a congressional committee tomorrow, said “highly accommodative monetary policy for the foreseeable future is what’s needed.”

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected. Any improvement in U.S. economic activity could scale back expectations for further easing, boosting the dollar and weighing on gold.

Investors might get back into gold

“With the dollar not really performing as much as before, people might get back into gold,”Afshin Nabavi, a senior vice president at bullion refiner MKS (Switzerland) SA in Geneva, said today by phone to Bloomberg. “Tomorrow, we’ve got Bernanke talking and that’s what the market is going to be looking at carefully.”