Investing.com - Gold futures rallied on Thursday to trade near a three-week high, after comments by Federal Reserve Chairman Ben Bernanke helped ease concerns over the possibility the central bank will begin to taper its bond-buying program before the end of the year.
Prices found further support after data showed that the number of people who filed for unemployment assistance in the U.S. rose to the highest level in two months last week.
The U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits in the week ending July 6 rose by 16,000 to a seasonally adjusted 360,000, compared to expectations for a drop of 4,000 to 340,000.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,282.25 a troy ounce during U.S. morning hours, up 2.7% on the day.
Comex gold prices rose by as much as 3.8% earlier in the session to hit a daily high of USD1,297.05 a troy ounce, the strongest level since June 24.
Gold futures were likely to find support at USD1,207.25 a troy ounce, the low from July 5 and resistance at USD1,347.45, the high from June 20.
At an appearance in Boston late Wednesday, Fed Chief Bernanke said that “highly accommodative” monetary policy will be needed for the “foreseeable future,” citing low levels of inflation and the high unemployment rate.
The comments came after the minutes of the central bank’s June policy meeting showed that Fed policymakers remain divided over when to begin tapering its USD85 billion-a-month asset purchase program.
Around half of Fed policymakers believe the bank should start to scale back bond purchases by the end of the year, while others believe the labor market still remains too weak.
The U.S. dollar came under broad selling pressure as expectations grew the Federal Reserve would keep its loose monetary policy in place.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 1.3% to trade at 83.13, the lowest level since June 25.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold prices are on track to post a loss of 23% on the year, the worst yearly decline since 1981, amid speculation the Fed will start to unwind its stimulus program by the year's end.
Bernanke said last month the bank could begin tapering its USD85 billion-a-month asset purchase program by the end of 2013 and wind it down completely by the middle of 2014 if the economy picks up as the central bank expects.
Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.
Elsewhere on the Comex, silver for September delivery surged 4.5% to trade at USD20.02 a troy ounce, while copper for September delivery jumped 3% to trade at USD3.185 a pound.
The red metal found additional support amid growing expectations the People’s Bank of China will introduce fresh easing measures to boost growth following the release of dismal trade data on Wednesday.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.