Gold: an overview of the market situation

Gold prices rose today, helped by the weakening of the U.S. dollar and the statements of high-ranking official of the Federal Reserve, who said that the central bank is in no hurry to start curtailing economic incentives.

The president of the Federal Reserve Bank of St. Louis James Bullard said the quantitative easing remains the most effective tool for mitigating the near-zero rates. Meanwhile, he added that unconventional measures to keep the inflation expectations around the target level. He also believes that we should stick to the current program, adjusting the asset purchases as needed

Experts say that the market is still digesting Bernanke's comments that caught everyone by surprise, but now Bullard went in a slightly different direction by saying that tightening does not come too quickly, which will support lending. In addition, they note that any signs of improvement in the sector jobs in the U.S. is likely to be considered carefully, as it may encourage speculation that the Fed may curtail the incentive program in September.

Gold has also received support from the European shares, which fell on concerns regarding the completion of quantitative easing in the U.S. and weak economic data from China and Europe. As it became known, the activity of the private sector in the euro area fell again in May, which is likely to add additional arguments in favor of action by the European Central Bank and the government, aimed at stimulating economic growth.

According to Markit Economics published data, preliminary composite purchasing managers' index (PMI) euro zone, the indicator of activity in services and manufacturing rose in May to 47.7 from 46.9. The total value exceeded economists' expectations, but the index is still below 50, indicating a contraction in activity. A reading above 50 indicates an increase in activity. Note also that according to a report provided by HSBC Holdings Plc and Markit Economics, China PMI index for the manufacturing sector fell to 49.6 in May from 50.4 in the previous month.

Also today, it was reported that gold holdings in SPDR Gold Trust fell yesterday by 0.3% to 1,020.07, the lowest level in more than four years.

The cost of the June gold futures on COMEX today dropped to 1381.30 dollars an ounce.