Much of the sharp gains in precious metals this year came on expectations that central banks in Europe and the U.S. would keep the global financial system cash-flush in an effort to stave off a credit crunch. But in testimony to Congress on Wednesday, the Federal Reserve chief didn't indicate that fresh monetary stimulus, or quantitative easing, was near.
Gold for April delivery, the most actively traded contract, was recently down $5.30, or 0.3%, at $1,783.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Futures fell as low as $1,720.20 an ounce, the lowest intraday price since Feb. 17.
Silver, which was trading higher before Bernanke began speaking to Congress, was recently down 3.8%, at $35.80 an ounce.
"Bernanke's comments to Congress left the door open for more QE," said Steve Scacalossi, a director of precious metals with TD Securities, in a note. "But his statements that employment is recovering at a better than expected rate implies that if QE is coming, it won't be for a while."
Gold's losses mounted as the market's weakness drew sellers who place bets based on patterns in trading activity, Scacalossi said, highlighting gold's fall through $1,762 an ounce and silver's decline below $36.60 an ounce.
Gold had traded in negative territory earlier Wednesday, as the largely as-expected result of the European Central Bank's latest effort to boost liquidity in the euro zone wasn't enough to draw new buyers to the market after the previous day's three-month highs.
The ECB on Wednesday released the results of its second round of long-term emergency loans to the region's banks. A total of 800 banks participated, borrowing more than $700 billion in cheap, three-year loans.
Gold prices slumped late last year as concerns mounted about a potential financial crisis in the euro-zone and spurred traders to hold cash instead of precious metals. But the ECB's efforts to keep cash flowing in the euro zone's financial system has eased the pressure on gold, helping prices gain 14% in 2012 through Tuesday's close.
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