Bundesbank Looking to Take Gold Back to Germany

Spot market prices for gold bullion rose to a two-week high above $1,680 an ounce Tuesday morning in London, before dipping back to just below that level before lunchtime, while stocks and commodities were slightly down on the day and the US dollar ticked higher, with US policymakers continuing to disagree on fiscal matters. 

"Gold is still expected to stay above the $1,625 January low," says Commerzbank senior technical analyst Axel Rudolph, "but looks to be short-term range bound." 

"As long as the environment of negative real interest rates persists, gold will remain on the shopping list of investors," adds a note from refiner Heraeus. 

Germany's central bank meantime plans to repatriate some of its gold bullion held at the Federal Reserve Bank of New York and all of its gold vaulted in Paris, according to a report from German newspaper Handelsblatt. 

Like gold, silver touched a two-week high this morning, hitting $31.39 an ounce, before it too eased lower. 

The US economy "is not out of the woods" according to Federal Reserve chairman Ben Bernanke, speaking at a question and answer session at the University of Michigan Monday. 

"I want to be clear that while we've made progress, there's still quite a ways to go before we'll be satisfied...we are approaching a number of other critical watersheds." 

Bernanke noted that politicians are yet to agree a deal that would remove automatic spending cuts that were postponed to the start of March as part of the fiscal cliff deal, nor is there agreement on raising the $16.4 trillion debt ceiling." 

"It's very, very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn't pay its bills," Bernanke said. 

"Congress should act as soon as possible," says a letter dated yesterday from Treasury secretary Timothy Geithner to Republican House of Representatives speaker John Boehner, "to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments." 

The letter adds that the Treasury expects its extraordinary measures designed to keep the US from hitting the debt limit will be exhausted "between mid-February and early March." 

"The full faith and credit of the United States is not a bargaining chip," President Obama told a press conference yesterday. 

"[The Republicans] will not collect a ransom in exchange for not crashing the American economy." 

"The American people," responded Boehner after the press conference, "do not support raising the debt ceiling without reducing government spending at the same time." 

"We likely will see more protracted bickering in the weeks ahead," says Ed Meir, metals analyst at INTL FCStone. 

"This means that the gold market may go through a repeat of what we saw in December, namely, varying 'mood swings' that will result in directionless trading." 

Here in the UK meantime, consumer price inflation held steady at 2.7% last month, according to official data published Tuesday. 

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