World gold eases after rally, US Fed boosts sentiment

Gold edged down on Tuesday as it consolidated after its biggest daily gain since late January in the previous session when the US Federal Reserve signalled it would keep interest rates low. A weaker US dollar also supported gold after Federal Reserve Chairman Ben Bernanke said ultra-loose monetary policy was still needed to reduce unemployment even though the US economy has shown signs of improvement, raising hopes of another round of quantitative easing. Click here for Cloud Computing Also Read Related Stories News Now - Bernanke's words drive Wall St up 1% - US needs faster growth to lower unemployment: Bernanke - Time to govern - Money, money, everywhere - Customs hike won't stop the wedding march: WGC - Defensives rally on flat day for Wall St Gold fell $3.85 an ounce to $1,687.89 by 0237 GMT, having risen to $1,693.39 on Monday, its strongest since March 13, on safe-haven buying driven by Bernanke's comments. Bullion struck a record around $1,920 an ounce last September. "For the next few days, we could see the market challenge the upside, although I am not sure it will manage to significantly break above $1,700. It may be capped at around $1,720 level," said Nick Trevethan, a senior commodity strategist at ANZ in Singapore. "The weaker dollar is very supportive. Going forward, market sentiment should be more friendly towards commodities right after the Bernanke's commentary." Monday's rally was the reserve of what gold experienced on February 29, when the metal posted its biggest one-day drop in more than three years after Bernanke stopped short of signalling further bond buying. US gold added $3.60 an ounce to $1,689.20 an ounce. The US dollar held near a near one-month low against a basket of major currencies on Tuesday after the Fed signalled supportive monetary policy would remain and kept alive hopes of more stimulus for the US economy. Bernanke's comments supported views that easy monetary policy would remain in place for some time and fanned expectations for more Fed asset purchases. Previous rounds of quantitative easing have weakened the US dollar and boosted US and global stocks. "Key to direction, however, will be Chinese PMI data released Sunday, the March US non-farm payrolls and, of course, the Fed meeting, where some in the market at least are expecting a hint about QE," said Trevethan at ANZ. Asian stocks rebounded on Tuesday after Wall Street stocks jumped more than 1% on Monday. Global equities have been rallying since late last year, partly due to steadily improving US economic data and massive doses of liquidity from central banks, but hit a bump in mid-March after China signalled its growth was moderating. The physical market saw selling from Thailand, but top consumer India was on the sidelines because of a strike by jewellers to protest against a government levy. "There's very light profit-taking from Thailand, while Indonesia has been quiet since yesterday. There's nothing much from India because their market is slowing down," said a physical dealer in Singapore