Gold makes headway as Bernanke approves stimulus

<p>Gold has made headway as Ben Bernanke defends the Fed’s stimulus programme.</p>

Gold has responded favourably to news that the chairman of the US Federal Reserve (Fed) has defended the central bank's monetary stimulus before Congress.

Ben Bernanke said yesterday (February 26th) that he wants lawmakers to avoid the sharp spending cuts due to come into effect on Friday, which run the risk of creating a "significant headwind" for the economic recovery when combined with recent tax increases.

The Fed chairman said he and his colleagues are cognisant of the potential risks from their support for the economy, including the possibility that it might fuel unwanted inflation or stoke asset bubbles.

Historically, support for, or the implementation of, stimulus measures sees the dollar depreciate and the price of gold – a dollar-denominated commodity – make gains, which is why the precious metal has rallied on the markets.

Today, the Forex Gold Index (am fix) rose by 0.7 per cent to $1608.50 per ounce, while Dubai Gold Futures closed lower by 1.6 per cent last night on $1615.30 per ounce.

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