HIGHLIGHTS OF THE WEEK:

• European central banks sold around 2 tonnes of gold in the week ended Sept. 21, and now the total gold sales during the third year of the CBGA stands at 443 tonnes, according to a World Gold Council official. Data doesn’t include sales in September by Swiss National Bank.
• Gold dehedging is expected to slow to around 200 tonnes next year, sharply down from an expected 380 tonnes this year as a result of the reduced size of miners' remaining hedge books, according to Abare.
• Investment in gold ETFs slowed during the week to September 26 with net additions of only 167,400 ounces against near 1.78 million ounces earlier this month as the prices soared. The overall ETF holdings have increased 2.35 million ounces this month to 25.2 million ounces.
• Indian gold imports during Jan-Aug are seen matching the 635 metric tons seen during 2005, when the annual figure of 748 tons was an all-time record, according to the WGC. The imports dipped last year during the same period to 349 tons.
• Investment demand for the metal is robust with the dollar failing to hold its purchasing power. The funds increased their net long positions in Comex gold futures and options combined during the week through Tuesday to 189,498 lots, up from 158,809 the prior week.
• Mexico’s gold production increased 5.9% to 3,510 kilograms from July 2006, according to the    National Statistics Institute.

MARKET COMMENTARY:

Gold market ended the week on a positive note as the record weakness in dollar and healthy investment demand for the precious metals pushed the prices higher on Friday. Lingering concerns over geopolitical tensions also increased the appeal of the precious metals as safe haven. Gold for December delivery at COMEX added $11.1 during the week to close at $750.0 an ounce after trading at 27 years high at $752.80 an ounce on Friday. October gold on MCX ended the session at Rs 9589 per 10gm on Friday.

FUNDAMENTAL OUTLOOK:

Gold is likely to trade with positive bias in the scenario of weakening dollar and soaring crude oil prices. However slowing demand for ETFs at higher prices might lead to some intermediate consolidation. 

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