GOLD

FUNDAMENTALS

Healthy investment demand for the precious metals on continued weakness in dollar and record firmness in crude oil prices pushed the gold to a fresh record high level on Monday. Gold for April delivery ended up $9.20 at $984.2 an ounce on COMEX after climbing to a record of $992.00. The metal surged 5% in February.

The dollar dipped to a new record low against the euro Monday and three-year lows against the yen, but the US currency pared its losses after U.S. economic data came better than expected. The dollar index, which measures the greenback against a basket of six major currencies, was at 73.730, compared with 73.754 on Friday.  The U.S. manufacturing sector contracted in February. The Institute for Supply Management manufacturing Index dipped to 48.3% in February from 50.7% in January. Readings under 50% indicate more firms are contracting than expanding. The market was expecting the index to fall to 47.5%.

The average price of gold will surge 25% on year to US$870 a troy ounce in 2008 after jumping 15% in 2007 to average US$697/oz, according to the Australian Bureau of Agricultural and Resource Economics. In 2008, global gold production is forecast to increase 1.0% on year to 2,465 metric tons, Abare said. Australian mine output in 2008 will fall 2.8% on year to 243 tons, reflecting the closure or expected closure of several mines.

The precious metal prices are surging to record high levels on the back of healthy investment demand as inflation hedge.  Asset reallocation by funds from equities to commodities is also providing support.

TECHNICALS

The prices closed above short term and medium term EMA that supports bulls. Bullish long day pattern of candlestick shows firmness in the market. MACD is showing bullish momentum.  Stochastic is running upwards in overbought region, which warrants caution to bulls. Gold futures are likely to trade volatile with firm bias.

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