GOLD
HIGHLIGHTS OF THE WEEK:
- China's Jan-Sept gold production rose by 13% on year to 191.456 metric tons, according to the National Development and Reform Commission. The country's top economic planning body in February set the production target for this year at 260 tons, up 8.3% from last year.
- The FOMC voted 9-1 to cut the federal funds rate by 25 basis points to 4.5% as expected. The Fed reiterated its stance that inflation risks remain, singling out commodities as a key inflation driver. Lower rates are intended to boost economic growth, which tends to benefit gold if it generates inflation pressures. Gold is often used as a safe-haven asset against inflation. Dollar hit fresh lows against euro after the interest rate cut.
- Mexican gold production was up 8.6% to 3,971 kilograms in August from the year-ago month the National Statistics Institute.
- Production at Barrick Gold Corp.'s Bulyanhulu mine in Tanzania has been halted by strike. The mine had 11.2 million troy ounces of proven and probable gold reserves at the end of last year and in 2006 it produced 330,000 ounces at total cash costs of $339 an ounce.
- According to the National Australia Bank, gold prices are poised to rise by around 8% on year to average $740 a troy ounce in 2008, and much of the rise will be driven by expected dollar weakness.
MARKET COMMENTARY:
Gold traded volatile during most part of the week before finally recovering smartly on Friday. Volatility in crude oil prices and dollar kept the bullion market uncertain during the period. But record weakness in dollar and historical highs of crude prices then took the prices higher on Friday. Gold for December delivery at COMEX touched the highs of $811 an ounce on Friday and closed the week with a gain of $21 at $808.5 an ounce. Similarly, December gold on MCX ended the session at Rs. 10223 per 10gm on Friday.
FUNDAMENTAL OUTLOOK:
Gold is likely to trade with positive bias supported by strong investment demand.
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