GOLD

FUNDAMENTALS

Gold surged to a fresh 28 years high on Tuesday as a record weakness in dollar against euro and soaring crude oil prices underpinned the prices. COMEX December Gold closed the session at record high levels of $823.40 an ounce with a huge gain of $12.60 an ounce. The contract saw the highs of $828 an ounce during the session.  

The dollar touched yet another record low against the euro Tuesday on renewed concerns over the credit crunch's impact on U.S. banks and markets. The euro traded at $1.4571, its highest level since the united European currency began trading in January 1999. The dollar index dropped 0.5% at 76.05.

Demand for gold ETFs is rising looking at recent rally in the prices. At the end of October, holdings in the world's main gold ETFs totaled a record 27.17 million ounces, according to figures compiled by CPM Group. The Group put the world's gold ETF holdings at 17.88 million ounces at the end of October 2006 and at 20.25 million ounces at the end of December.

China is likely to overtake the U.S. as the world's second-biggest gold producer this year and may beat South within five years according to the country's industry association. Production may rise 8% to 260 metric tons from 240.1 tons in 2006. U.S. production should be about 250 tons this year, where as South Africa produced 134 tonnes inn first six months this year.

TECHNICALS

The prices continue to hold the levels above short term and medium term EMAs, which supports bulls. MACD is rising in positive region showing increasing bullish momentum in the market. However, overbought levels of stochastic and RSI warrant caution to bulls.

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