FUNDAMENTALS

Gold inched higher on the first trading day of the week as weakness in dollar and some recovery in crude oil supported the prices. Gold futures for February delivery at COMEX added $5.60 an ounce to close the session at $794.70 an ounce. The contract shed $42.70 last week.

The dollar fell back against other major currencies Monday, after comments by a Federal Reserve official rose expectations that the central bank will cut interest rates next week. Boston Fed president Eric Rosengren suggested that the foreclosure crisis in subprime mortgages will get worse before it gets better. The dollar index fell 0.3% at 75.940.

The European Central Bank said that it sold 42 tons of gold on Friday, in conformity with the central bank's gold agreement. The agreement limits combined annual sales by E.U. central banks to 500 tons a year until 2009.

Mines in South Africa, the world's top producer of precious metals, will remain shut on Tuesday due to a national protest against mine deaths, with warnings of further action if fatalities continue.

Gold market is likely to remain shaky in a short run depending upon the action in currency market, crude oil prices and economic outlook. However, the metal is still bullish in medium to long term due to its strong fundamentals.   

TECHNICALS

Doji formation of candlestick shows indecision in the market. Prices have closed below short term and medium term EMAs, which supports bears. MACD has just entered in negative region, which is a negative sign. However, oversold levels of RSI and stochastic warrants caution to bears. Gold may trade volatile.

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