Gold hangs on to US$1,900, supported by ECB decision and US inflation data

GOLD is set to close the week on an optimistic note above US$1,900 an ounce, after prices rebounded from the lowest they hit this week to trade above a psychological barrier. For most of the week, prices stayed put just below US$1,900 as investors waited for clues on inflation. For gold, this week has been all about the US consumer price index (CPI) and the European Central Bank's (ECB) rate decision on June 10, just as next week it would be about the Federal Open Markets Committee (FOMC).

Benchmark gold futures for August delivery on the Comex Exchange and spot gold prices spent the first four days of the week consolidating within last week's trading range as investors stood on the sidelines. Last week, Comex gold futures touched a high of US$1,919.20, the highest in five months, then retreated significantly to US$1,855 as strengthening US economic optimism suggested earlier tapering of monetary stimulus.

Gold prices started to recoup losses after the ECB renewed its pledge to maintain faster emergency bond buying. The ECB raised its growth and inflation views, but promised to keep ample stimulus flowing.