SINGAPORE (Reuters) - Gold edged lower on Monday, tracking minor losses in the euro, while investors returned to a wait-and-see mode ahead of a key presentation by the U.S. central bank chief later in the week as bullion remains sensitive to monetary policy changes.
U.S. Federal Reserve Chairman Ben Bernanke will present his semi-annual monetary policy report to Congress on Tuesday and Wednesday, from which investors will seek clues on the Fed’s attitude towards another round of quantitative easing.
Gold has been eyeing the Fed’s stance on monetary stimulus this year, as the euro zone debt crisis continues to strain the market liquidity, depress the euro, and drive investors to seek safety in the dollar and Treasury bills which have outstripped bullion as the top choices of safe-haven flow.
“Any sign of an inclination towards quantitative easing would encourage gold, though we think the chances of the QE3 in July are very small but the Fed may launch it in the next couple of months, “ said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
After hitting a two-year high against a basket of currencies last week, the dollar might come under some pressure this week, which would help underpin the sentiment in gold, Chen said.
Spot gold edged down 0.2 percent to $1,587.19 an ounce by 11.25 p.m. EDT on Sunday, after rallying 1 percent on Friday.
U.S. gold futures contract for August lost 0.3 percent to $1,587.10.
Technical analysis, however, suggested spot gold could retrace to $1,570 an ounce during the day, said Reuters market analyst Wang Tao.
Hedge funds and money managers cut their net long position in U.S. gold futures and options by nearly 20 percent in the week to July 10, wiping out gains from the previous week.
In Europe, solid domestic demand helped the Italian Treasury sell 5.25 billion euros in bonds on Friday with lower yields than a month ago, but a rise in 10-year yields highlighted concerns that the country may still fall victim to the euro zone debt crisis.
Editing by Himani Sarkar