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Gold gains on solid retail sales, Bernanke hints at no policy changes

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Shutterstock photo - Gold prices rose on Tuesday after retail sales came in better than expected, which sent the precious metal rising especially after Federal Reserve Chairman Ben Bernanke a day earlier suggested loose monetary policies will stay in place for now.

Fears brinkmanship will roil markets as debt ceiling debates heat up sent investors taking up safe-haven dollar positions, which capped gold's gains.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 0.76% at USD1,682.05 a troy ounce in U.S. trading, up from a session low of USD1,666.25 and down from a high of USD1,684.25 a troy ounce.

Gold futures were likely to test support USD1,653.55 a troy ounce, Friday's low, and resistance at USD1,695.35, the high from Jan. 2.

Federal Reserve Chairman Ben Bernanke said in a speech on Monday that while the Fed is weighing the costs of its loose monetary policies, which include inflationary pressures, it may be too early to consider winding down stimulus programs today, which boosted gold prices into U.S. trading on Tuesday.

The Fed has slashed interest rates to near zero and is currently running a monthly USD85 billion bond-purchasing program, known as quantitative easing, which weakens the dollar as a side effect.

Gold and the dollar trade inversely from one another.

Elsewhere, gold and other risk-on asset classes saw added demand earlier after the U.S. Commerce Department reported that retail sales rose 0.5% in December, far outpacing expectations for a 0.2% gain.

A separate report showed that producer prices in the U.S. fell 0.2% last month compared to expectations for a 0.1% decline, though gold still charged ahead.

However, many investors opted to avoid gold and other risk-on asset classes over fears markets may roil as the U.S. government approaches its USD16.4 trillion debt ceiling, likely sometime by late February.

President Barack Obama on Monday urged congressional Republicans to agree to lift the borrowing limit though he stopped short of offering concrete concessions in return, sparking fears the brinkmanship that marked the 2011 debt ceiling debates will return next month.

Also in the U.S., the Empire State manufacturing index declined to -7.8 in January from a reading of -7.3 in December.

Analysts had expected the index to improve to 2.0 this month.

Meanwhile on the Comex, silver for March delivery was up 0.64% and trading at USD31.310 a troy ounce, while copper for March delivery was down 0.12% and trading at USD3.630 a pound. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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