HIGHLIGHTS OF THE WEEK:

• Chinese demand for gold jewelry may increase by about 20 percent this year as rising personal incomes help the nation race ahead of the United States as the second-biggest market in the world, according to GFMS. Gold use in jewelry in China jumped 24 percent from a year earlier to 221 tonnes in the first nine months against 515 tonnes in India and 165 tonnes in the United States.
• 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. 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 the bureau.
• China must acquire more bullion assets overseas because existing mines will run out of ore in six years, according to Zijin Mining Group Co. The country produces more than 200 tonnes of gold per year from mines that only have gold, and will deplete the deposits without discoveries.
• With demand plummeting for IMF loans, the institution is planning to sell 400 tonnes of gold from its 3,217 tonnes of gold stock to invest in income-producing assets to put the institution on a sounder financial footing.
• India's gold imports declined for the second consecutive month from a year earlier as high gold prices dented jewelry demand during the traditional peak consumption season. Purchases in November fell to 12 metric tons from 59 tons a year earlier, according to the Bombay Bullion Association. Imports slumped to 14 tons in October from 68 tons a year earlier.

MARKET COMMENTARY:

Precious metals managed to recouped some of the recent losses despite witnessing a great deal of volatility towards the end of the week. Churning action in crude oil and currency markets kept the precious metals volatile during the week. February Gold at COMEX climbed to $813 on Wednesday before closing the week with a moderate gain of $11.1 at $800.20 an ounce. February gold on MCX closed at Rs 10186 per 10 gm on Friday. 

FUNDAMENTAL OUTLOOK:

Gold is likely to see some recovery on expected weakening in dollar on interest rate cut by Fed, however yearend profit booking might contain the gains. 

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