Gold futures drove higher in value on Wednesday after weaker-than-expected economic data made economists and analysts think twice about whether the U.S. Federal Reserve will taper monetary stimulus measures, according to Reuters.
The U.S. dollar dipped in the aftermath of producer price data indicated a tame outlook for inflation. The Producer Price Index for last month was even despite projections for it to demonstrate a 0.3 percent increase.
President James Bullard with the St. Louis Federal Reserve is slated to deliver a speech on Wednesday evening. The topics he will delve into are the state of the U.S. economy and monetary policy.
"We've had several speeches earlier in the month, and gold prices have reacted initially to the speeches then – but the surprise factor isn't as apparent anymore," analyst Howard Wen with HSBC told the news source on Wednesday.
At 12:21 p.m. on Wednesday, gold futures rose 0.84 percent, an $11.06 lift to $1,332.73 per troy ounce.
Wednesday performances reverses Tuesday losses
The yellowish metal dropped roughly 1.1 percent on Tuesday, which ceased four consecutive trading sessions of advances for bullion. Stronger than forecast economic data released by the U.S. prompted the poor performance on Tuesday.
The Federal Open Market Committee is slated to convene a two-day meeting on September 17 and 18, when many investors and economists anticipate the policy-making arm of the U.S. Federal Reserve will reduce the stimulus program.
The central bank of the U.S. has played a key role in the value of bullion, which has had better years. Thus far this year, the yellowish metal has dropped 21 percent, putting in peril the annual increase streak's continuation for this year. A thirteenth-straight year of gains is hanging in the balance during the next four-plus months.
Lows signify opportunity to invest
While prices of gold futures are down, investors have capitalized on the opportunity to purchase at the reduced rate, according to MarketWatch. That, in turn, is pushing the price of gold up in value, but only moderately.
Analysts with ICICI Bank stated in a Wednesday note that the stronger performance of gold futures on Wednesday is at least partially attributable to "value buying following significant losses," according to MarketWatch.
The precious metal's losses on Tuesday also were linked with commentary of President Dennis Lockhart with the Federal Reserve Bank in Atlanta. His remarks cut down on the commodity's advance yet he also noted that hot-and-cold economic data released by the U.S. has provided difficulty in regard to whether the Fed will taper stimulus.
Ben Bernanke said earlier this summer that the body he leads would like to taper in the coming months and close the program by the end of the year.
But, despite the uneven performance of the yellowish metal thus far this year, one asset management firm's chief predicted gold will skyrocket to prices of $1,600 per troy ounce by the end of this year, according to Bloomberg.
Asset manager predicts strong rebound
President Adrian Day with Adrian Day Asset Management correlated that prediction with government efforts to spur economic development and growth. He told the news source on Tuesday that the reaction to whether the Fed will taper stimulus has been exaggerated.
"All the Federal Reserve is talking about is cutting back on the additional stimulus put in place," he told the media outlet during an interview on Tuesday. "No one is talking of tightening or reducing the Fed's balance sheet."
Day's firm, which is based in Annapolis, Maryland, last month merged efforts with Euro Pacific Capital of Westport, Connecticut, to begin the EuroPac Gold Fund, Bloomberg reports. The company targets its investments toward precious metals and companies that conduct mining and exploration.
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