GOLD

FUNDAMENTALS

Gold prices plunged for the second consecutive session on Friday as dollar strengthened against major counterparts dulling the attractiveness of the precious metal as alternative investment. Weakness in crude oil prices late in the session also pressured the prices. Gold futures for February delivery at COMEX declined $6 to close the session at $798 an ounce. The contract saw the lows of  $792.30 an ounce during the session.

Fading chances of further interest rate cut by Fed higher than expected consumer inflation data underpinned dollar on Friday.  The dollar index rose 1.1% at 77.445, its highest level since Oct. 25. Higher inflation would deter Fed to make further cut in interest rates. The precious metal market seems focusing on the currency movements at this stage and thus ignored the higher inflation figures. Higher inflation is often seen as supportive for gold as it increases the investment demand for the metal as inflation hedge. Consumer prices rose 0.8% in November, led by higher prices for gasoline, according to the Labor Department. This is the fastest pace of consumer inflation in more than two years.

Investment demand for gold accelerated in the second half of 2007 after some weakness in first half.  Gold holdings of the world's largest gold exchange-traded fund, streetTRACKS have surged from 464.37 tonnes at the end of June to 615.90 tonnes on December 13.

TECHNICALS

Prices have closed below short term and medium term EMAs, which supports bears. MACD is showing increase in bearish momentum. Stochastic is also heading downward in normal region. Prices may remain range bond with bearish bias.

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