GOLD

FUNDAMENTALS

Gold futures climbed further on Wednesday to see the record high levels as weakening dollar and rising inflation concerns increased the investment demand for the precious metals.    April gold on Comex added $12.10 to end at   $961.0 an ounce.

The dollar fell against major currencies on poor durable-goods data and hints from U.S. Federal Reserve Chairman Ben Bernanke for more interest rate cuts. The dollar fell to a new record low of $1.5133 against the euro on Wednesday. The dollar index was at 74.540, down from 74.712 late Tuesday. The index saw the record low of 74.070 during the day. Fed Chairman said Wednesday that the Federal Open Market Committee will remain on course toward implementing additional interest-rate cuts, at least in the near term, although the journey has become more treacherous as prices are rising. The US currency plunged after the statement.

Investment into exchange-traded funds (ETFs) continues to remain strong in the scenario of stagflation in US economy. The latest data showed gold held by New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, hit a record high of 639.44 tonnes, an increase of 30% in the past 12 months. ETFs have made it easier for pension funds and other investors to take positions in gold, at a time when the precious metal is in demand as a hedge against turbulent equity markets, troubles in the property sector and worries about the expanding reach of the credit crunch.

The news of possible IMF gold sales is not concerning investors and the possible 12.9 million ounces sell of gold by the IMF will be done in a careful manner to ensure gold prices do not crash in response.

TECHNICALS

The prices closed above short term and medium term EMA that supports bulls. MACD is showing bullish momentum.  Stochastic has made bearish crossover in overbought region. Gold futures are likely to trade volatile.

Click here to download full report

Reliance Money Disclaimer