Gold price jumps as Fed chief defends QE policy

Julian Harris
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THE PRICE of gold rebounded sharply last night after US Federal Reserve chief Ben Bernanke leapt to the defence of its unprecedented quantitative easing programme.

The yellow metal jumped around 1.3 per cent to hit $1,614.11 an ounce in the early hours of this morning.

Gold is often seen as a hedge against inflation, which can be provoked by loose monetary policy.

Testifying to the US Congress yesterday, Bernanke quashed the belief that Fed officials may be set to apply the brakes to its monetary stimulus.

“There is no risk free approach to this situation. The risk of not doing anything is severe as well. So, we are trying to balance these things as best we can,” Bernanke told the Senate banking committee.

“To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation.”

The January minutes of the Fed’s latest policy meeting, released a week ago, had revealed that some officials were concerned about the risk of side effects from QE.

Yet Bernanke’s words reaffirm his dovish chairmanship of the Fed.

Meanwhile, unrelated data showed that consumer confidence in the US has recovered better than expected.

Industry group the Conference Board said its index of morale hit a reading of 69.6 in February, the highest level since November and up from 58.4 in January.

And another widely-regarded survey, the S&P/Case-Shiller index of house prices in 20 urban areas across the US, revealed that prices closed out 2012 with the biggest annual gain in more than six years.

Home prices soared by 6.8 per cent in the 12 months to December, the index said, the best year-on-year gain since July 2006.

And the US housing market’s recovery has continued into 2013, according to separate figures from America’s Commerce Department. It said that sales of new single family houses in January were up 15.6 per cent compared to December.

•President Barack Obama’s nominee to be the new US treasury secretary, Jack Lew, was yesterday backed by 19 votes to five by the Senate Finance Committee. The wider Senate will now vote on Lew’s candidacy.