Wholesale market gold prices ticked lower Wednesday morning in London, dropping below $1,580 an ounce, while stock markets and commodities were broadly flat and US Treasuries gained, as markets continued to digest yesterday's testimony to Congress by Federal Reserve chairman Ben Bernanke.
Like gold, silver prices also eased, falling as low as $27.04 an ounce in Wednesday morning's London trading.
A day earlier, gold prices fell 1% in an hour on Tuesday after Bernanke began his testimony. Although the Fed chairman said monetary policy is "still on a loosening cycle", there was no clear mention of a third round of asset purchases, known as quantitative easing.
"The bull camp in gold wanted to see more quantitative easing," says a note from CME Group.
"[But] seeing the US economy hold together might keep broad based risk-off deflationary selling interest from resurfacing in the near term."
"We suspect that the short-term outlook for the precious group will be somewhat lower from here," adds INTL FCStone analyst Ed Meir.
"While easing may be expected, investors are still saddled with the uncertainty of not knowing exactly when such an order will be given."
"Monetary policy is kind of at its end right now," Bernanke told US lawmakers yesterday.
"What will be needed to make it more effective is that fiscal issues need to be dealt with."
The Fed chairman said that the so-called "fiscal cliff" – the combination of tax hikes and spending cuts currently due to come into effect at the start of 2013 – risks "negative effects likely to result from public uncertainty about how these matters will be resolved".
"The recent downshift in economic data," says a note from Swiss refiner MKS, "may suggest that there will be steady pressure on the Fed to provide additional monetary accommodation."
Bernanke also said that in 2008 the New York Fed "informed all the relevant authorities" in the US and UK about suspicions it had that the interbank interest rate Libor was being manipulated. Bank of England governor Mervyn King however told UK lawmakers Tuesday that he first heard about alleged wrongdoing two weeks ago.
Bernanke is due to give further testimony to Congress today when he appears before the House Financial Services Committee. This will be the last chance Ron Paul has to quiz the Fed chairman, with the Texas Congressman due to retire from Congress in December.
Here in London, the Bank of England's Monetary Policy Committee voted seven-to-two in favor of the decision to increase quantitative easing by £50 billion to £375 billion, minutes from this month's MPC meeting published Wednesday show.