GOLD

FUNDAMENTALS

Gold futures at COMEX plunged in a thinly traded session on Monday as strong dollar and weak crude oil prices pressured the prices. Gold for December delivery on the COMEX surrendered $8.5 to close at $738.7 an ounce. The volumes were low due to the Columbus Day holiday.

The dollar rose against most major counterparts on Monday amid a meeting of European finance ministers to address dollar weakness. The euro has risen to record highs due to a sliding dollar.  Dollar declined sharply on Friday on concern the economy is not growing fast enough to prevent the Federal Reserve from cutting interest rates further. Dollar index rose 0.6% during the session.

UBS has revised up its gold price forecasts for 2008 and 2009 due to the changing macroeconomic outlook, on top of growing evidence the jewellery market adapted to higher prices. It has increased its 2008 forecast to $760 an ounce from $650, while they now expect bullion to average $700 an ounce in 2009 versus a previous forecast of $550.

Meanwhile, Indian demand for gold is seen falling due rising prices and ongoing inauspicious period called ‘Shradh’. During shradh no wedding and other religious ceremonies take place. The period ends on October 11, after which demand might improve.

TECHNICALS

Bearish long day pattern of candlestick shows the dominance of bears. The prices closed below short term and medium term EMAs, which supports bears. MACD is showing decrease in bullish momentum. Stochastic is also favoring bears in normal region. The prices are likely to see movements with bearish bias.

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