NEW YORK – Gold prices inched lower Tuesday after Federal Reserve Chairman Ben Bernanke discounted the threat of inflation.
Speaking before in his semiannual address to Congress, Bernanke laid out specific steps the central bank plans to take to ease its stimulus efforts as the economy improves. He also assured investors that the central bank will be able to keep inflation low.
The Fed has pumped trillions of dollars into the financial system in an effort to drive down interest rates and revive the economy by keeping borrowing costs low. But investors have worried that these moves would put pressure on the dollar and lead to inflation.
As the economy recovers, the Fed will need to reverse some of its efforts to stave off inflation. Bernanke's testimony on Tuesday sent a clear signal that the central bank is fully prepared to do that.
Investors often turn to gold as protection against inflation, so Bernanke's comments discouraged investors from parking their money in the precious metal. Other metals faltered alongside gold.
"A lot of the recent buying in precious metals has been predicated on coming inflation," said James Steel, an analyst with HSBC in New York.
Prices for gold and other commodities rose this spring as investors feared a falling dollar could trigger inflation. An improving outlook on the economy also fostered buying of commodities, giving investors hope that demand for basic materials would soon pick up.
However Bernanke also stressed in his remarks that the recovery will be gradual and that it is still too soon to exit the Fed's emergency financial aid programs, which include rock-bottom interest rates and large purchases of Treasury bonds and other kinds of debt.
On the New York Mercantile Exchange, gold for August delivery slipped $1.90 to $946.90 an ounce, while September silver lost 14.7 cents to $13.4780 an ounce.
July platinum dropped $11.90 to $1,172.80 an ounce.
September copper futures shed 1.8 cents to $2.4510 a pound. Aluminum prices also fell.
Oil prices, however, extended recent gains, rising 74 cents to settle at $64.72 a barrel. That's more than $5 above last Tuesday's closing price.
Investors have been sending prices higher in recent days amid better-than-expected earnings reports and improved profit outlooks from companies.
In other Nymex trading, gasoline for August delivery rose 2.06 cents to $1.81 a gallon and heating oil gained less than a penny to $1.6986.
Grain prices fell on the Chicago Board of Trade.
September wheat futures shed 7.5 cents to $5.3475 a bushel, while corn for September delivery lost 11.75 cents to $3.115 a bushel.
November soybeans fell 18 cents to $9.05 a bushel.