comex gold outlook

DGCX Gold reverses gains on Dollar recovery, fall in Oil prices
10 June 2008 12:23:28



Gold reversed Friday’s gains and fell below $900, as the dollar recovered against the euro and oil prices retreated from the record high levels.



International spot gold traded in the range $908.70 - $890.40 and last quoted at $891.90 ($901.35).



A rise in pending home sales helped the dollar to bounce back. The National Association of Realtors’ April pending home sales index, which is considered as a leading indicator of existing home sales, rose 6.3% in April.



Dollar had fallen sharply towards the end of last week, after the Bureau of Labor Statistics of the US Labor Department reported a more-than-expected rise in the unemployment rate in May to 5.5%, against the expected 5.1%. The total number of unemployed persons increased by 861,000 to 8.5 million in May, after seasonal adjustment, as per the government's Household Survey Data. However, the non-farm payrolls fell by 49,000.



Also according to the release by US Labor Department last week, initial claims for unemployment benefits in the US fell by 18,000 to 357,000 in the week ended May 31. The four-week average of initial claims also dropped, falling by 2,750 to 368,500. Continuing claims fell by 16,000 in the week ended May 24, dropping to 3.09 million. But the four-week average of continuing claims rose to 3.08 million, up 15,250.



The euro had strengthened after the European Central Bank President Jean-Claude Trichet hinted at a possible future interest-rate hike, amid surging inflation pressures in the euro-zone. According to a preliminary estimate by the statistical agency Eurostat, the consumer inflation hit an annualized pace of 3.6% in May, well above the ECB's target of just below 2%.



Eurostat data early last week had shown a slight upward revision of the first-quarter euro-zone gross domestic product, according to which the economy grew by 0.8% against the previous estimate of 0.7%. Year-on-year growth was unrevised at 2.2%.



The ECB on May 5th chose to leave its key interest rate unchanged at 4 %.



The Fed chairman Ben Bernanke in a speech last week had expressed concerns over the in weakness in dollar, and cited it was contributing to an unwelcome rise in US inflation. His comments generated expectations that the Fed might adopt steps to guard against inflation risks.



The Institute for Supply Management's manufacturing index for May rose to 49.6% from 48.6% in April, against the consensus expectation of 48.7%.



According to the data released by Commerce Department, 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%.



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



Profit booking from the record high levels pulled down crude oil prices yesterday. The price of benchmark contract of crude oil in the New York Mercantile Exchange had soared over $10 to a new all-time high of $139.12 a barrel on Friday, recording the biggest one-day gain in dollar terms, as geo-political tensions were ignited by Israel’s threats to strike on Iran over its nuclear programme.



Israel's Transport Minister Shaul Mofaz on Friday had commented that an Israeli attack on Iranian nuclear sites could not be ruled out if Iran continues with its program for developing nuclear weapons.



Crude oil July in NYMEX settled at $134.91 ($138.54), after trading in the range $138.25 - $133.00.



US Crude supplies had dropped by 4.8 million barrels to 306.8 million for the week ended May 30, according to the release by US Energy Department on Wednesday, taking the total fall in supplies in three weeks to around 19 million barrels.



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



Last day DGCX Gold Aug traded in the range $912.00 – $893.70 and closed at $895.50 ($904.60).



Weekly Outlook (Spot Gold)



More correction expected below $887. Supports are $881, $875, $864; resistances $900, $908, $917.


DGCX Gold August


TECHNICAL OUTLOOK (Intra-day)

GOLD (Aug) - Bullish above $ 901.80; bearish below $ 897.00

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