comex gold outlook

Gold Outlook
30 May 2008 11:15:50



Strength in the dollar and sharp fall in oil prices pulled down gold prices yesterday.



International spot gold traded in the range $902.70 - $873.05 and last quoted at $876.40 ($900.10).



An upward revision to first-quarter growth in the US helped the dollar to advance against the major counterparts. According to the data released by Commerce Department yesterday, real gross domestic product of the US increased at a 0.9% annual rate in the first three months of the year, slightly faster than the previous estimate of 0.6%.



Better-than-expected survey on US durable goods orders also supported the greenback. Data from the Commerce Department showed new orders for US-made durable goods dropped less than expected 0.5 % in April, against the expectation for a 2.8% drop.



But among data from the US Labor market, the initial claims for state unemployment benefits rose modestly 4,000 to 372,000 in the week ended May 24, according to the Labor Department. However the four-week average of initial claims fell 2,500 to 370,500. Also continuing claims rose by 36,000 in the week ended May 17, reaching 3.10 million. The four-week average of continuing claims rose to 3.06 million, up 18,000.



The recent data from various sectors in the US have given mixed hints regarding the economy.



According to the release by US Conference Board on Tuesday, the consumer confidence index fell to 57.2 in May from a revised reading of 62.8 in April.



However the sales of new homes recovered during April for the first time in six months, rising 3.3% in April to a seasonally adjusted annual rate of 526,000, the Commerce Department reported.



Even so, the housing market worries remained. Standard & Poor's reported that the decline in home prices for 20 US metropolitan areas accelerated in March, dropping 14.4% from the past year.



Earlier, the National Association of Realtors had reported a 1 % drop in the resale of houses and condos to a seasonally adjusted annualized rate of 4.89 million in April, from 4.94 million in March.



On last week, the Office of Federal Housing Enterprise Oversight reported that US home prices fell a seasonally adjusted 1.7% in the first three months of 2008, which happens to be the largest quarterly price decline on record.



The minutes from the Federal Open Market Committee's April 29-30 meeting had invigorated worries about the economy. The minutes released last week revealed that the Fed sharply increased its inflation outlook for the current year and downwardly revised the forecast for economic growth for 2008.



According to the latest forecast, headline inflation as measured by the personal consumption expenditure price index would rise to a range of 3.1% to 3.4% this year, significantly higher from its previous forecast of 2.1% to 2.4% in January.



Oil prices finished lower despite an unexpected drop in US oil inventories.



Crude oil July in NYMEX settled at $126.57 ($130.82), after trading in the range $133.12 - $126.11.



The weekly inventory report by US Energy Department’s Energy Information Administration showed an 8.8 million barrel drop in the nation’s crude supplies to 311.6 million, in the week ended May 23.



But according to the EIA, the drop in crude inventories was due to temporary delays in unloading oil tankers along the Gulf Coast, and not the result of increased demand.



Potential supply threats due to geo-political tensions, expected demand from China and OPEC’s unwillingness to increase output despite high prices underpin oil prices.



Another attack on Nigerian oil facilities refocused concerns on immediate supplies. Production was partially disturbed after militants attacked a major oil pipeline owned by Royal Dutch Shell in the Niger Delta on Monday.



Last day DGCX Gold Aug traded in the range $905.30 – $878.00 and closed at $881.70 ($904.00).



Weekly Technical Outlook (Spot Gold)

Above $930 likely to touch $936.50, $945, $955; Supports are $921, $914 and $903. Expecting some correction below $914.



TECHNICAL OUTLOOK (Intra-day)

GOLD (Aug) - Bullish above $ 888.50; bearish below $ 884.00

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