Gold futures edged slightly higher on Thursday as the dollar fell against major currencies Thursday after Federal Reserve Chairman Ben Bernanke said the U.S. economic outlook had worsened and urged the central bank to support growth.
Gold for April delivery gained 60 cents to end at $910.80 an ounce on the New York Mercantile Exchange.
The dollar extended losses against most major counterparts after Bernanke said the central bank is ready to further cut interest rates if new signs of a weaker-than-expected economy emerge.
Bernanke's comments reinforced the belief that the Fed will once again cut interest rates again. The Fed has cut the benchmark rate by 225 basis points in the current easing cycle.
The dollar index, which tracks the value of the greenback against a basket of other major currencies, has remained low as the Fed cut short-term rates during the year. The DX declined 0.4 percent to 76.135.
A weak U.S. currency creates export advantages for buyers using foreign exchange to purchase dollar-denominated commodities, such as gold. The opposite is true when the dollar rebounds.
Gold was well-supported with the dollar weaker and oil again higher, said Mark O'Byrne, executive director at Gold and Silver Investments Ltd., in a research note.
In the medium to long term, the combination of strong international safe-haven demand and decreasing production of and supply of gold in most major producers and particularly in South Africa will likely result in gold going significantly higher in the coming months, O'Byrne said.
Eskom Holdings Ltd., South Africa's state-run utility, allows top mining companies, like AngloGold Ashanti Ltd., to receive only 80 to 90 percent of their usual required amount of power. South African gold output fell 6.5 percent in 2007 compared to 2006 in volume terms, Statistics South Africa said this week. Analysts expect the power woes to cause further cuts to production levels.
On Wednesday, gold futures ended down 90 cents at $910.20 an ounce.
Gold remains confined within a channel reaching from $890 to $930, but needs to record new highs lest it avoid a deeper correction to the $845/$865 area, said Jon Nadler, senior analyst at Kitco Bullion Dealers.
The Philadelphia Gold and Silver Index fell 1.2 percent to 177.31 points, and the Amex Gold Bugs Index dropped 0.6 percent to 435.81 points.
Also on the Nymex, April platinum surged $22.20 to end at $2,005.90 an ounce, after earlier hitting a record high of $2,030.60.
March silver dropped 9.80 cents to $17.255 an ounce, while March palladium gained $2.10 at $441.15 an ounce. March copper dropped 4.25 cents to $3.4880 a pound.