FUNDAMENTALS

Gold futures retreated all the initial gains of the session on Monday as recovery in dollar against major counterparts and weakness in crude oil prices hammered the prices. Gold for June delivery on the New York Mercantile Exchange shed $15 to close the session at $921.50 an ounce. The contract lost $50.60 during the month. But for the first quarter, the precious metal still gained $86.60. The prices are closely tracking the developments in the currency markets at this stage.

The dollar strengthened against most major counterparts on Monday. A stronger-than-expected surge in inflation in the euro zone muted the effects of a small bounce after the slightly better-than-expected Chicago Purchasing Managers Index. The dollar index gained 0.2% at 71.74. The Chicago PMI portrayed business activity in the Chicago region continued to shrink in March, but the contraction was less severe than in February, according to a survey of corporate purchasing managers released Friday. The index was at 48.2% in March compared with 44.5% in February.

Meanwhile, Chile’s gold production rose 3.8% to 3,078 kilograms in February, according to the Chile's government statistics agency.

The precious metals market is in corrective mode and developments in currency and energy market will be crucial for the extent of correction. The physical demand which is subdued at this stage on account of higher prices might rekindle if the prices decline notably. However, as the US economy is showing continued weakness, dollar’s recovery would be short lived, which supports the overall firmness in gold.

TECHNICALS

Gold prices closed below short term and medium term EMA’s, which supports the bears. MACD is heading downwards in negative zone showing bearish momentum. RSI is heading downwards in normal region. The prices may show volatile action.

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