GOLD

FUNDAMENTALS

Strong dollar on positive economic data pressured gold on Wednesday. The temporary rise in oil after OPEC leaves production unchanged, failed to help gold during the session. Gold futures for February delivery at COMEX declined $3.90 to close the session at $803.70 an ounce. The contract saw the lows of $798 an ounce during the day.

The dollar rose against major counterparts, after upbeat U.S. economic data calmed fears of a looming recession and faded the chances of 50 basis point interest rate cut by Fed. Productivity in the US nonfarm business sector increased at a 6.3% annual rate in Q3 and U.S. private-sector employment rose by 189,000 in November. The dollar index rose 0.7% at 76.220.

Ongoing strength in investment demand will push average gold prices up some 11% on the year to $780 a troy ounce, according to the ABARE. The possibility of further interest rate cuts in the U.S., potential for a central banks to reduce their dollar holdings and concerns about instability in U.S. debt and capital markets will encourage demand for gold as a hedge against dollar weakness.

In 2008, global gold production is forecast to increase by 3% to 2,590 metric tons, largely from higher output in China, the U.S. and Australia, according to Abare.

TECHNICALS

The prices closed below short term and medium term EMAs, which supports bears. MACD is showing gradual fall in bullish momentum. Stochastic on the other hand has made bullish crossover in oversold region. The prices are likely to show volatile action with bearish bias.

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