comex gold outlook (augest)

Gold pares early losses to close flat
06 June 2008 12:27:47



Gold prices closed relatively flat yesterday, as the dollar’s fall against a stronger euro and a bounce-back in oil prices supported the bullion to recover from the early losses.



International spot gold traded in the range $879.80 - $864.45 and last quoted at $877.35 ($877.65).



The euro 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 on Tuesday 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 Thursday chose to leave its key interest rate unchanged at 4 %.



However, data from the Labor market was supportive for the dollar. According to the release by US Labor Department on Thursday, 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 Fed chairman Ben Bernanke in a speech early this 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 on last Thursday, 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 underpinned 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.



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



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.



Oil prices climbed over $5 yesterday, erasing two days of sharp losses.



Crude oil July in NYMEX settled at $128.22 ($122.30), after trading in the range $121.61 - $128.38.



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 $883.00 – $867.80 and closed at $878.40 ($882.20).



Weekly Outlook (Spot gold)



Spot gold might get good support at $880. Resistances are $890, $903 and $914; supports $870, $859 and $848. Sustaining above $880 may lead to $914.


DGCX Gold August


TECHNICAL OUTLOOK (Intra-day)

GOLD (Aug) - Bullish above $ 882.30; bearish below $ 877.40