GOLD

FUNDAMENTALS

Gold pulled back from a 28-year high Thursday, retracing after crossing the key $800 mark as a fall in oil prices and a recovery in the dollar pressured the prices. Gold for December delivery on the COMEX closed the session down $1.6 at $793.7 an ounce. The contract traded as low as $786.6 an ounce during the session.

The currency markets digested the 25 basis point interest rate cut by Fed, but slumping stocks undermined dollar sentiment to sent it down against the yen. The dollar index was about 0.2% higher at 76.610.

Gold has diverged from base metals since outbreak of U.S. subprime crisis in mid-August, trend that's likely to remain in 2008, according to

ABN Amro. Investors are flocking to gold, as dollar outlook is weak, high oil prices stirring inflation fears and geopolitical tensions in Middle East back on the boil. Unlike the industrial metals, gold does not face a supply surge or build of above ground inventory.

India, China, Turkey and the Middle East all showed record demand for gold in the September quarter, according to Anglogold Ashanti. Indian demand for gold jewelry and retail investment totalled 317mt, half of global mine output for the quarter and 90% higher than the depressed level of a year ago.

TECHNICALS

The prices continue to hold the levels above short term and medium term EMAs, which supports bulls. Rising MACD in positive region shows increasing bullish momentum. Stochastic has made bearish crossover in overbought region. The overbought levels of RSI warrant caution. Prices are likely to see volatile action.

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