Gold : Ends higher on weak Dollar, recovery in Oil

19 June 2008 11:11:53



Gold pared ended higher yesterday, as the dollar drifted lower and oil prices surged above $136 a barrel.



International spot gold traded in the range $880.45 - $894.10 and last quoted at $893.15 ($881.90).



In the absence of fresh major economic data the dollar continued to cut down the previous week gains, influenced by downbeat Housing sector and industrial production data released early this week.



According to the release by US Commerce Department on Tuesday, Housing starts fell a more-than-expected 3.3% in May to a seasonally adjusted annual rate of 975,000, the lowest level since March 1991.



In another unsupportive data for the dollar, the Federal Reserve reported a 0.2 % decrease in US industrial production in May.



Dollar had eased on Monday due to profit booking, after a meeting of the Group of Eight finance ministers in Japan steered clear of the greenback's recent exchange-rate weakness issue and focused on the rise in commodity prices and the related economic risks.



The greenback had gained sharply last week supported by expectations of an interest rate hike amid rising inflation, and strong retail sales data from the US.



The two-day meeting of Federal Open Market Committee to decide whether to adjust its benchmark interest rate from 2% is scheduled to start on June 24.



Data from the Labor Department showed a rise in US consumer prices at the fastest pace in six months, strengthening the growing expectations for a Federal Reserve interest-rate hike. As per the data, US consumer price index climbed 0.6% in May.



Last week, the US Commerce Department reported a 1 % rise in May retail sales, the biggest increase recorded since November, letting the US currency to add to this week’s sharp gains.



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



The US trade deficit had widened 7.8% in April to a seasonally adjusted $60.9 billion from $56.5 billion in March, according to the report by US Commerce Department on Tuesday. The growing deficit was driven by a surge in crude oil imports, which eclipsed a significant gain in the nation’s exports.



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.



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%.



Oil prices recovered as US crude oil inventories recorded the fifth consecutive weekly decline, as reported by the US Energy Department.



Last day DGCX Gold Aug traded in the range $883.80 – $897.70 and closed at $895.80 ($886.70).



Weekly Outlook (Spot Gold)



Resistances are $874, $884, $890, $899; supports $856, $845. Some recovery is expected above $884.60. If trades below $858, spot gold may move towards $845.



DGCX Gold August



TECHNICAL OUTLOOK (Intra-day)

GOLD (Aug) - Bullish above $ 896; bearish below $ 891

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