Gold slips ahead of US Federal Reserve minutes

The metal has struggled to breach key technical levels after hitting a five-week high last week, but might get support from firm oil prices and the dollar, which stayed near record lows against the euro.

“The dollar is still the main driver of gold prices and there will be a set of important data points this week, which may influence the euro/dollar and hence gold,” Michael Widmer, research director at Calyon Corporate and Investment Bank, said.

“We expect gold to trade within a tight range as investors are unlikely to take big positions ahead of the minutes from the Fed meeting, Bernanke’s testimony and US inflation data.”

Spot gold rose as high as $666.15 an ounce before falling to $662.90/663.50 by 0951 GMT on profit-taking, against $664.00/664.80 in New York late on Monday.

The dollar was pinned near a record low versus the euro and multi-decade troughs against sterling and the New Zealand dollar as concerns over problems in the US subprime mortgage market dented sentiment.

A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Oil stabilised within sight of record highs.

In addition to Bernanke’s testimony to the US Congress and the Senate, dealers also await data on June consumer prices on Wednesday and the June figures on housing starts and building permits.

“Although market participants do not expect any surprising comments from the Fed on inflation or the subprime fallout, investors and traders will scrutinise the comments to discern the economic status from the Fed’s standpoint,” said Pradeep Unni of Vision Commodity Services in Dubai.

But dealers said that any signs of concerns from Bernanke about problems in the subprime market when he delivers his semi-annual testimony on monetary policy on Wednesday and Thursday may prompt more selling in the dollar.

“While gold’s rally over the past two weeks has lifted the metal out of its recent down channel, the metal has yet to see the surge of demand that many were expecting, given the recent dollar weakness and inflationary energy movements,” said James Moore, precious metals analyst at TheBullionDesk.com.

In industry news, Osaka’s bourse will launch Japan’s first gold price-linked exchange traded fund in August.In other metals, platinum fell to $1,305/1,309 an ounce from $1,313/1,317 in New York, while palladium eased to $365/370 an ounce from $366/369. Silver edged down to $12.87/12.91 an ounce from $12.94/12.99.