GOLD

FUNDAMENTALS

Gold surged to astronomical high levels on Thursday as dollar weakened sharply on expectations of interest rate cut by Fed after Bernanke’s signals. Gold futures for February delivery at COMEX added 11.90 to close the session at fresh record high levels of $893.60 an ounce. The contract hit a fresh intraday high of $897.30 an ounce. 

Bernake’s remarks pressured dollar against major counterparts on Thursday. The Fed Chief said "In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary”. The dollar index dropped 0.7% to 75.885. Earlier in the day, hawkish comments by the ECB also weakened the dollar. ECB kept interest rates unchanged at 4% for the seventh month in a row in response to accelerating inflation and falling unemployment.

South Africa's gold production fell by 12.7 percent for the year to November, Statistics South Africa said on Thursday. Gold production declined by 8.1 percent after seasonal adjustment in the month between October and November alone. Shaft closures due to safety concerns affected mining production in both October and November.

Continued weakness in dollar on shrinking interest rate advantage of the currency and concerns over economic slow down in US and Japan is increasing investment demand for gold. Goldman Sachs, after forecasting mild recession in the U.S. economy in the second quarter, said on Thursday that there's a 50% chance of recession in Japan, the world's second-largest economy.

TECHNICALS

The prices closed above short term and medium term EMAs, which supports bulls. MACD is running upwards in positive territory, showing increasing bullish momentum. Stochastic is running down in overbought region. Prices are likely to see volatile movements with firm bias.

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