Gold price added to its losses after U.S. Pending Home Sales for July showed a 2.4% increase

Gold prices remained in consolidation mode on Wednesday as investors continued to tread lightly ahead of Fed Chairman Ben Bernanke’s speech on Friday in Jackson Hole, Wyoming.  The spot gold price held near $1,670 per ounce in overnight trading, but fell toward $1,660 amid strength in the U.S. dollar after a better than expected report on the U.S. housing market.

As trading progressed on Wednesday, the gold price added to its losses after U.S. Pending Home Sales for July showed a 2.4% increase – well above the 1.0% gain economists were forecasting.  Coupled with yesterday’s encouraging Case-Shiller housing price data, today’s report further affirmed the notion that the U.S. economy continues to grow, albeit modestly.  Furthermore, the data provides the Federal Reserve with additional evidence arguing against the need for another round of monetary stimulus.

Looking ahead for the Fed and the price of gold, Commerzbank analyst Daniel Briesemann wrote in a note to clients that “Our view is that Bernanke will disappoint markets, and that is definitely a concern for gold.  But it should only be temporary.”

Briesemann added that “We’ve seen huge exchange-traded fund inflows of late; central banks are continuing to buy gold; and money managers also became more optimistic about gold of late, so there should be quite good support. A temporary downward move should be seen as an attractive buying opportunity.”

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