GOLD

FUNDAMENTALS

Gold prices decline on Friday as poor economic data and weakness in crude oil prices induced traders to book profits. However, weakness in dollar contained the losses. Gold futures for February delivery at COMEX shed $3.40 to close at $865.70 an ounce. The contract gained $23 during the week.

Poor economic data induced traders to book profit on Friday. According to U.S. government report the unemployment rate shot up to 5% in December. On a seasonally adjusted basis, nonfarm payrolls rose by 18,000 last month, the weakest job growth since August 2003. Economists were expecting payrolls to increase about 70,000 in December.

Dollar plunged further on the last trading day of the week as dismal payrolls data raised expectations of interest rate cut Fed. The weak jobs report puts more pressure on the Federal Reserve to act aggressively to prevent a recession. The dollar index, which tracks the performance of the greenback against a basket of other currencies, fell 0.1% at 75.785.

Gold demand from the jewelry sector is starting to slow on record high prices. Consumers in emerging economies such as India are slowing purchases of gold jewellery and are in some case reported to be selling jewelry in order to cash in on the high prices. Jewelry demand accounts for around two thirds of total gold consumption. But, high investment demand on inflation concerns, geopolitical tensions and continued weakness in dollar, might keep the gold on positive side.

TECHNICALS

Long shadows of candlestick show indecision in the market. The prices closed above short term and medium term EMAs, which supports bulls. MACD is running upwards in positive territory, showing increasing bullish momentum. Stochastic is heading upward in overbought region. Prices are likely to see range bound action.

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