The gold price hovered just below $1,700 per ounce Tuesday morning in London – over 4% up on its low last week – before easing ahead of US markets open as the US dollar regained some of the ground it lost on Monday following comments by Federal Reserve chairman Ben Bernanke.
The silver price rose to $33.25 per ounce – a 6.8% gain since its week's low last Thursday – before it too eased.
The US Dollar Index, which measures the dollar's strength against other major currencies, hit its lowest level since the start of the month Tuesday. Longer-dated US Treasuries dipped, while European government bonds gained despite warnings that the sovereign debt crisis has not been resolved.
European stock market gains were relatively muted Tuesday morning, compared to those of the preceding Asian and US sessions, while commodities were broadly flat.
Yesterday saw the gold price move back above its 200-day moving average – which by PM London Fix prices stood at $1682 per ounce Monday afternoon in London – after Bernanke spoke of the need for "continued accommodative policies" and said that the labor market "remains far from normal" despite recent signs of improvement.
"Bernanke was back on solidly dovish ground again," say Standard Bank currency analysts Steve Barrow and Jeremy Stevens.
"Rightly, or wrongly, the market seems to think that his comments could imply another loosening of [policy] via some form of QE3," they added, referring to the possibility of a third round of quantitative easing.
"Fed likely to hint at QE3 in April meeting," said Bill Gross, managing director of world's largest bond fund Pimco, via the fund's Twitter account.
Physical gold demand meantime "has shot higher as demand from South-East Asia in particular increased with gold below $1,650 over the past few days, no doubt providing support to the gold price when investor sentiment turned bearish," says Walter de Wet, commodities strategist at Standard Bank, citing the bank's Gold Physical Flows Index.
Over in New York, the world's largest gold ETF, the SPDR Gold Trust (GLD), added six tonnes to its gold holdings yesterday.
Also in New York, today sees the expiry of April options on Comex gold futures contracts, with a lot of open interest – both bullish and bearish – clustering around the $1700 an ounce mark. The last options expiry date on Feb. 23 saw gold prices jump to a then 3-month high.
Economic growth meantime "is stalling" in Europe, according to Angel Gurria, secretary-general of the Paris-based Organization for Economic Co-operation and Development.
"Market confidence in the Euro area is fragile," says the OECD's “Economic Survey of the Euro Area 2012,” published today.
"The outlook for growth is unusually uncertain and depends critically on the resolution of the sovereign debt crisis."