GOLD

FUNDAMENTALS

Gold prices surged past $800 mark for the first time since 1980 on Wednesday after Fed cut interest rates by 25 basis points. Soaring crude oil prices on supply concerns added fuel to the fire. Gold for December delivery on the COMEX added $7.50 to close the session at $795.30 an ounce. The contract traded as high as 800.2 an ounce during the session. In the electronic trade it surged to the highs of $802.5 an ounce.

The Federal Open Market Committee, as was widely expected, voted 9-1 to cut the federal funds rate by 25 basis points to 4.5%. The Fed reiterated its stance that inflation risks remain, singling out commodities as a key inflation driver. Lower rates are intended to boost economic growth, which tends to benefit gold if it generates inflation pressures. Gold is often used as a safe-haven asset against inflation. Dollar hit fresh lows against euro after the interest rate cut. The dollar index fell 0.2% at 76.6.

Mexican gold production was up 8.6% to 3,971 kilograms in August from the year-ago month the National Statistics Institute.

Production at Barrick Gold Corp.'s Bulyanhulu mine in Tanzania has been halted by strike. The mine had 11.2 million troy ounces of proven and probable gold reserves at the end of last year and in 2006 it produced 330,000 ounces at total cash costs of $339 an ounce.

TECHNICALS

The bullish long day pattern of candlestick shows firmness in the market. The prices continue to hold the levels above short term and medium term EMAs, which supports bulls. Rising MACD in positive region shows increasing bullish momentum. The overbought levels of stochastic and RSI warrant caution. Prices are likely to see firmness.

Click here to download full report

Reliance Money Disclaimer