GOLD
HIGHLIGHTS OF THE WEEK:
- HSBC revised up 2007 average gold price estimate to $695 per ounce from $680, 2008 forecast to $720 from $660 on flight-to-quality buying, U.S. monetary policy, inflation concerns contributing to USD weakness. Further ahead, HSBC also raised its long-term forecast for 2010-2015 to $600 from $550.
- Meanwhile, according to the Society Generale Gold Hedge Book Analysis, the global gold hedge book is now at its lowest level since 1992 at 32.6 million ounces after 0.98 million more ounces were closed out in the third quarter of the year, and the full 2007 hedge reduction should top 12.86 million ounces. In the final quarter of this year, 1.75 million oz are scheduled to expire. After 2007, the rate of ongoing dehedging suggests an annual volume of roughly 4 million ounces, annually over the next three years.
- Goldman's global markets team has recently recommended in its top 10 trades list for 2008 that investors short gold priced in U.S. dollars in order to capitalize on a gradual relaxation of credit concerns in the financial sector over the coming months and as an avenue to benefit from the prospect of the U.S. dollar stabilizing. Bullion has been one of the main beneficiaries of the financial turmoil that began in August as investors sought alternative stores of value to the weakening U.S. dollar.
- Peru's output of gold declined 11.7% in October compared with same month a year before to 14.111 tonnes. Whereas, Mexico’s gold production fell in September 17.2% to 3.202 tonnes from the year-ago month according to National Statistics Institute.
MARKET COMMENTARY:
Precious metals declined sharply after brief initial firmness during the week as recovery in dollar after recent sustained downtrend and weakness in crude oil prices triggered profit booking towards the end of the month. Gold for February delivery at COMEX climbed to the highs of $844.2 on Monday before dipping to the lows of $785 an ounce on Friday. The contract closed the week with a loss of $42.7 at $789.1 an ounce. February gold on MCX closed at Rs 10120 per 10 gm on Friday.
FUNDAMENTAL OUTLOOK:
Gold is likely to see some more consolidation on weakening crude oil prices, however dollar movements ahead of FOMC meeting might impart some volatility.