Spot gold was bid at $932.90 an ounce at 1420 GMT, against $932.35 an ounce late in New York on Thursday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange eased 70 cents to $933.90 an ounce.

Prices awaited new direction from the currency markets, currently the main driver of gold. Gold becomes cheaper for holders of other currencies as the U.S. dollar slips.

“If you are looking at the ups and downs of gold in its narrow trading range, it is more or less a reflection of the swings in the euro/dollar exchange rate,” said Peter Fertig, a consultant at Quantitative Commodity Research in Germany.

The dollar fell broadly as improved U.S. data fuelled hopes of an economic recovery. It later pared gains against a basket of currencies, however.

Moves in the currency remained limited ahead of a two-day Fed policy meeting next week. As long as the currency markets remain rangebound, gold will also be hemmed in.

Factors such as jewellery buying, safe-haven demand and inflation hedging are all likely to remain subservient to the influence of currencies, analysts said.

“Inflation expectations are not there just yet, and the precious metal could see even more losses if equities bounce back up,” VTB Capital said in a note.

“Gold’s attractiveness as a safe haven asset is virtually zero at the moment, which is evident from the unchanged speculative positions in gold futures or ETFs,” it added.

On other markets, European shares extended gains early afternoon, while U.S. stocks opened higher as appetite for equities picked up. Oil firmed a touch after bullish economic data helped the demand outlook.

WIDER MARKETS

Holdings of the major gold exchange-traded funds were stable, as investors awaited clues from the wider markets. Another wave of bad news on the economy could unleash new inflows, however, analysts said.

The U.S. Senate signalled its approval of a long-planned sale of just over 400 tonnes of gold by the International Monetary Fund on Thursday.

UBS analyst John Reade said in a note: “There are lots of uncertainties regarding the sale but we do not expect this to be a negatively disruptive factor to the gold market.”

“If the gold is taken by other official sector buyers (it) could be a very positive development for the market,” he added.

Silver was at $14.22 an ounce against $14.19. Platinum was at $1,206 an ounce against $1,200, and palladiumat $240.50 against $238.

ETF Securities said holdings of its ETFS Physical Palladium fund rose to a record on Thursday, up just over 3,000 ounces or 1 percent to 315,572 ounces. The fund’s reserves are up 10,000 ounces or 3.3 percent week-on-week.

LONDON, June 19 (Reuters

World food prices will fall from current peaks in the coming years but will remain “substantially above” average levels from the past decade.

The world’s poorest nations are most vulnerable — particularly the urban poor in food-importing countries — and will require increased humanitarian aid to stave off hunger and undernourishment, a joint agricultural outlook by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization said.

High oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuel production and speculation have sent food prices soaring worldwide, triggering protests from Africa to Asia and raising fears that millions more will suffer malnutrition.

Meanwhile, in the US the core US inflation rate or Producer Price Index (PPI) rose 0.4% in April, double the increase forecast by economists.

This puts the core US inflation rate up 3% in the past year, the biggest year-over-year rise since late 1991.

“Since the beginning of the credit crisis last summer, Fed policy has been purely inflationary,” says Bill Bonner in The Daily Reckoning, “intended to convince people that they had more money and credit than they thought…and that they should spend it and invest it. But that policy can’t work forever. Eventually, consumer prices rise sharply. Then, the game is over…the Fed has to ‘lower inflation expectations’ before it can inflate again. The hocus pocus only has a positive effect, in other words, as long as people are misled…once they catch, the jig is up.”And on a global scale, “rising raw material prices, in particular rising food prices, are now causing real hardship and what represents a cause for shoppers in developed economies to grumble is a matter nothing short of life and death for the millions less fortunate around the world,” says Money Week editor Merryn Somerset Webb.

Surging prices for gasoline, food and other commodities forced the Fed to sharply boost its inflation outlook for this year, but not for next year. At the same time, their forecast for economic growth this year was revised much lower this year, with a rebound next year still in the cards.

 

The minutes echoed the comments of Fed policymakers in recent days. Fed Vice Chairman Donald Kohn said Tuesday that policy was “appropriately calibrated,” while San Francisco Fed President Janet Yellen had said that current policy was appropriate. Fed Gov. Kevin Warsh said Wednesday that the Fed would resist bringing out “the hammer” again.

Surging prices for gasoline, food and other commodities forced the Fed to sharply boost its inflation outlook for this year, but not for next year. At the same time, their forecast for economic growth this year was revised much lower this year, with a rebound next year still in the cards.

“When the Fed intervenes with artificially low rates, it is merely pretending that it has resources available that it does not actually have,” states Bill Bonner in The Daily Reckoning.

“That is the trick known popularly as ‘inflation’, in which the supply of purchasing power is inflated with money that doesn’t exist. Since the beginning of the credit crisis last summer, Fed policy has been purely inflationary – intended to convince people that they had more money and credit than they thought… and that they should spend it and invest it.

“But that policy can’t work forever. Eventually, consumer prices rise sharply. Then, the game is over… the Fed has to ‘lower inflation expectations’ before it can inflate again. The hocus pocus only has a positive effect, in other words, as long as people are misled… once they catch, the jig is up.”

Invest in commodities and ride out the storm, says Puru Saxena, also in The Daily Reckoning.

“It is interesting to note that since the Federal Reserve started slashing interest-rates in August last year, energy, metals and food prices have gone to the moon, whereas the U.S. dollar and American stocks have plummeted.

“Unfortunately for the U.S. establishment, the ‘cure’ of monetary inflation seems to be going horribly wrong as it is translating into even higher consumer and producer prices. I have long maintained that this decade would belong to commodities and the markets are proving me correct.”