Gold Outlook

Gold prices bounced back yesterday to close higher, as the Dollar weakened sharply. Oil prices rose moderately, also supporting the advance of the bullion.



International spot gold traded in the range $911.50 - $938.80, and last quoted at $938.30 ($914.70).



According to a US Conference Board release yesterday, US consumer confidence index fell in March to 64.5 from a revised reading of 76.4 in February.



But the report from National Association of Realtors released on Monday had indicated signs of stability in the US housing market in February. According to the report, resale of homes rose 2.9% to a seasonally adjusted annualized rate of 5.03 million. The rise was above expectations, and the first in seven months.



Gold had corrected from record high levels reached earlier last week, along with oil, as the Dollar bounced back moderately from record-low levels versus the Euro after the Federal Reserve cut its benchmark interest rate by 75 basis points to 2.25 percent.



The latest rate cut has been the sixth since last September, and has made the reduction in the federal funds rate to 300 basis points, to the lowest point since late 2004. But many market participants and analysts had anticipated an even more severe cut by the Fed, a full 100 basis points, amid serious concerns regarding a recession in US economy.



Crude oil for May delivery in NYMEX settled at $101.22 ($100.86) a barrel, closing higher for the first time in four days.



The US Energy Department’s weekly oil inventory report is due for release today.



The Commerce Department had reported last week a drop in US housing starts in February by 0.6 percent to a 1.065 million unit annual rate, down from 1.071 million units in January.



The economic worries and a nose-diving dollar had propelled spot gold to record an all-time high of $1030.80 a Troy ounce last week.



In the meantime US Labor Department’s Producer Price Index, which measures inflation pressures before they reach the consumer, rose 0.3 percent in February following a 1.0 increase in January.



The Federal Reserve in a an unexpected move had cut its discount rate for direct loans to banks by 0.25 percent point to 3.25 percent, and launched a new discount window facility for primary dealers, in desperate moves to stabilize financial markets.



The emergency moves by Fed boosted speculations regarding the possibilities for more casualties in the widening US financial crisis.



Adding to the pressure on the greenback, data from the US showed total industrial output fell 0.5 percent in February, much steeper than the expected rate of 0.1 percent.



Another release showed US homebuilders' confidence held steady in March. The National Association of Home Builders (NAHB) Housing Market Index for March remained unchanged at 20.



The US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.



Another release by the US Labor Department showed the initial claims for state unemployment benefits remained unchanged at 353,000 in the week ended March 8. The four-week average of initial claims fell slightly in the latest week, down by 1,250 to 358,500.



Meanwhile, the US Commerce Department reported that the US trade deficit widened slightly in January, up 0.6% to $58.2 billion.



Medium term outlook (Spot Gold)

Bullish above $916; Resistances are $926, $932, $947, $954, $973, $984, $995, $1002, $1022, $1035, $1052; supports $896, $883. Further up-trend is expected above $954.60.


Last day DGCX Gold June traded in the range $921.00 – $944.00 and closed at $941.90.


DGCX Gold June

TECHNICAL OUTLOOK (Intra-day)

GOLD (June) - Bullish above $ 940; bearish below $ 935

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