Updated from 1:57 p.m. EDTInitial gold market action was muted in response to the Labor Department's report that the core rate of consumer price inflation grew 0.3% last month vs. an expected rate of 0.2%. But hesitation soon gave way to more bullish fervor, with prices spiking as much as $17 to $647.50 after testimony by Federal Reserve Chairman Ben Bernanke at 10 a.m. EDT. Bernanke indicated that economic growth was already starting to slow, thus raising the possibility that the Fed may take the foot off the brake pedal after next month's expected interest rate hike. "The inflation trends are running slightly above the Fed ceiling," says Edward Meir, an analyst at Man Financial, a commodity brokerage company. But "I think they will probably pause
Indeed, the dollar weakened notably Wednesday as the market seemed to discount the prospects of a pause. The dollar was recently trading at 116.815 yen vs. 117.38 late Tuesday while the euro was at $1.2602 vs. $1.2508 The Bullish Sentiment Index for gold was today at 66%, having been as high as 92% in early May and as low as 53% in early June, notes Rich Ishida, president of MarketVane, a Pasadena, Calif.-based firm that publishes a variety of sentiment indices on the futures markets. He says the indices still indicate that gold is in a long-term bull market despite the downdraft of the past few days. "It could be a good time to buy," he says, adding that the price had not broken the psychologically important $600 support level. On the retail side, small investors are showing their resiliency in the face of huge volatility: Mid-May saw prices over $730, while in June the price dipped to under $570. The U.S. Mint indicates that through July 13 it sold 31,500 ounces of American Eagle bullion coins for the month. Such coins are made of 22 carat gold (91.7% pure) and derive their value from the gold content. That sales figure compares with Eagle sales of 113,000 ounces during June and 36,500 ounces for May. The data, however, are muddied somewhat by the introduction of the 24 carat (99.99% pure) American Buffalo coin, which the Mint started selling on June 27. It says it sold 99,500 ounces during the remainder of June and a total of 26,000 ounces for the first two weeks of July. Virtual Metals' Turner says interpreting the Buffalo sales figures will be tricky for a few months until any pent-up demand is flushed out, but in general, coin sales are a useful gauge of small investor attitudes. He notes that American investors have long desired a pure gold coin and had to buy foreign coins until now.