FUNDAMENTALS

Gold surged to close at a fresh record high on Wednesday as record weakness in dollar underpinned the prices. Slight weakness in crude oil prices towards the end of the session however contained the gains. COMEX December Gold closed the session at record high levels of $833.50 an ounce with a huge gain of $10.10 an ounce. The contract saw the highs of $828 an ounce during the session.  

Dollar weakened further Wednesday after comments from Chinese official that its FX reserves should take into account strength of other currencies, which market interpreted as move towards dumping part of China's huge USD-denominated reserves in favor of EUR. The dollar index tumbled 0.8% at 75.44.

Hedging by the gold industry continued to fall in the third quarter of 2007, with a reduction of 2.1 million gold ounces leaving the global hedge book at 29.1 million ounces. This adds upside pressure on gold prices. Gold producers who want to increase their exposure to the gold price carry out dehedging. This adds upside pressure on gold prices. The largest reduction was by Australia's Newcrest Mining Ltd., which cut its position by 2.5 million ounces as it begins a program to close out its entire 4.2-million-ounce hedge.

India’s gold imports in October slumped almost 80% on year to estimated 14 tons.

TECHNICALS

Inverted hammer pattern of candlestick shadows hesitation at higher levels. Prices continue to hold the levels above short term and medium term EMAs, which supports bulls. MACD is rising is showing increasing bullish momentum in the market. However, overbought levels of stochastic and RSI warrant caution to bulls.

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