New York 27/03/2012 - Comex gold trade remained broadly positive on Tuesday, with investors adding positions following yesterday's doveish comments from Fed chief Ben Bernanke.

But physical demand has begun to wane on the approach to $1,700 per ounce.

Gold futures on the Comex division of the New York Mercantile Exchange were last up $7.70 at $1,695.90. Prices have ranged from $1,683.80 to $1,695.90.

Further improvements in the labour market will require more-rapid expansion of production and demand from consumers and businesses, Bernanke said on Monday, a process that can be supported by continued accommodative policies.

The markets interpreted this to mean that additional quantitative easing (QE3) could be forthcoming later in the year.

Monetary stimulus is viewed as unequivocally bullish for gold as extra liquidly tends to create future inflationary risks and pressures dollar lower. Gold prices rose about 2.3 percent or $40 just minutes after Bernanke's prepared statements were released.

“Several groups of investors immediately took advantage of Bernanke’s remarks to purchase gold,” Commerzbank AG said in a note. "The world’s largest gold ETF, the SPDR Gold Trust, saw inflows of 6 tons. ETF investors are regarded as having a long-term horizon."

While gold is holding and even extending its gains, breaking through the psychologically important $1,700 ceiling could prove a challenge, Standard Bank said in a note.

“We caution that this renewed enthusiasm could once again see a build-up in speculative length, similar to that observed in the first two months of this year and after which gold came under severe selling pressure,” it said.

“We would not advocate adding new long positions at these levels, especially as we are seeing physical market selling emerge at these levels,” the bank analysts said, adding that Indian merchants, who will face higher import duties later this year, are increasingly sensitive to price.

In wider markets, the euro, while slightly weaker on the session, is still trading above $1.33. US equity markets opened modestly higher.

In data, the S&P/Case-Shiller home price indices showed annual declines of 3.9 percent and 3.8 percent for the 10- and 20-city composites respectively.

“Despite some positive economic signs, home prices continued to drop. The 10- and 20- city composites and eight cities – Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa – made new lows,” David Blitzer, chairman of the Index Committee at S&P Indices, said in a statement.

In other precious metals, Comex silver for May delivery was last up 20 cents at $32.960 per ounce. Trade has ranged from $32.725 to $33.190.

Platinum futures for April delivery on Nymex were $16.20 higher at $1,662.90 per ounce, while June palladium was at $667.20, down $1.55.


(Editing by Mark Shaw)

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