By Frank Tang
NEW YORK | Fri Oct 26, 2012 12:18pm EDT
(Reuters) – Gold rebounded on Friday after data showed U.S. economic growth picked up in the third quarter, but the metal was heading for its first three-week losing streak in over a year on uncertainty over the future of the U.S. Federal Reserve’s monetary stimulus.
Bullion prices reversed early losses after the U.S. Commerce Department said gross domestic product expanded at a better-than-expected 2 percent annual rate, driven by a late burst of consumer spending.
Analysts said, however, that uncertainty over global economic recovery and questions on the future of U.S. monetary policy that has been ultra-loose under Fed Chairman Ben Bernanke could dent gold’s appeal as an inflation hedge.
“I don’t believe gold is able to rally off of that (GDP) data for now. Gold is an momentum asset and its momentum is not there right now,” said Jeffrey Sica, chief investment officer at SICA Wealth, which manages more than $1 billion in assets.
Spot gold edged up 0.2 percent at $1,713.84 an ounce by 11:34 a.m. EDT (1534 GMT)
Bullion was set for a weekly drop of 0.4 percent, and that would mark its first three-week consecutive loss in more than a year. Gold posted a four-week decline after a rally to a record price above $1,920 an ounce in September 2011.
U.S. COMEX gold futures for December delivery was up $1.90 at $1,714.90 an ounce, with trading volume on track to finish below its 30-day average, preliminary Reuters data showed.
Traders said gold’s 0.5 percent decline this week was partly due to doubts over a report earlier this week that Bernanke has told close friends that he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election.
“Without Bernanke, monetary stimulus from the Federal Reserve could be greatly reduced, and that will weigh on the price of gold,” Sica said.
Gold’s outlook hinges on uncertainty related to the November 6 U.S. election and the so-called “fiscal cliff,” a series of automatic spending cuts and tax increases in 2012 if Congress fails to reach a deficit reduction deal by the end of the year.
On charts, gold has come under technical pressure after it has several times run near formidable resistance at $1,800, which it has not broken since November 2011, and failed each time, said Adam Sarhan, CEO of Sarhan Capital.
Silver was up 0.4 percent at $32.21 an ounce.
Bullion rallied to an 11-month peak above $1,795 an ounce in early October after the Fed’s latest program of purchasing mortgage-backed debt stirred inflation worries.
Momentum has since stalled, with weak global economic data helping send prices below $1,700 earlier this week, when U.S. durable goods data showed the first cutbacks in investment in more than a year by cautious businesses.
Year to date, gold is up nearly 10 percent, on track to gain for a 12th consecutive year. Bullion’s gains in the last several years have largely been powered by economic uncertainty related to the Fed’s bond-buying to stimulate growth.
Platinum group metals are on track to fall more than 3 percent this week as economic worries and easing supply fears from top producer South Africa triggered heavy selling.
Platinum eased 0.2 percent to $1,556.99 an ounce and palladium fell 0.7 percent to $597.50 an ounce.
(Editing by James Jukwey, Helen Massy-Beresford and; Peter Galloway)