Gold prices were unresponsive to the long awaited resignation of Egyptian president Hosni Mubarak, which followed more than two weeks of intense mass protests that at one point turned violent.
Traders were opting for the US dollar, which was in demand after an update from the Commerce Department showed that US trade deficit widened from US$38.3 billion in November to US$US$40.6 billion in December.
Safe haven demand was quite low after the US Labor Department reported that initial jobless claims dropped 36,000 to 383,000 last week, hitting the lowest level in over two years, while the University of Michigan consumer confidence index surged from 74.2 in January to 75.1 in February.
In his testimony to the House Budget panel, chairman of the Federal Reserve Ben Bernanke indicated that the Fed’s monetary policy would remain unchanged as unemployment in the US is still too high, while inflation is too low and the job market has shown only slow improvement.
This means that the interest rates will remain at the current ultra low level for an extended period of time, while the Fed will continue its US$600 billion stimulus programme.
The Fed’s asset purchase programme is beneficial for gold, which is seen as an inflation hedge and an alternative asset to the US dollar, which will likely be weakened by further money printing.
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