Gold continued to record losses in the last two weeks of January, extending an array of losses as $1100 barrier was broken convincingly on the lower side. The benchmark COMEX Gold futures for February fell to its three month low of $1074 an ounce on 29th January as the US dollar continued to maintain its charm and selling pressure continued to erode the yellow metal. The commodity has been behaving like just another asset class in the New Year, succumbing to the risk aversion following a magnificent rally in the US dollar.
China's gold output jumped 11.34% to a record of 313.98 tonnes in 2009, the China Gold Association announced, cementing the country's position as the world's largest producer of the yellow metal. China has dramatically opened bullion markets to active trade in the past decade, including allowing gold to be traded freely on the Shanghai Gold Exchange. �Gold output reached above 300 tonnes for the first time,� the association said on its website, adding that China maintained its position as the world's top gold producer for the third straight year in 2009.
The US dollar has become a force to reckon with for the last few weeks. The US currency hit its highest level in more than six months versus the dollar as strong U.S. data and fears over the outlook for a number of smaller euro zone economies pressured higher-yielding currencies. Fears over Greece's fiscal situation and waning risk appetite lifted the U.S. unit to break under the much awaited 1.4000 levels against the Euro. if the U.S. economy recovers strongly, the Federal Reserve might decide to raise interest rates sooner than initially expected, which would boost the dollar and might cap precious metal prices.
Thus, the rally may continue to greenback as the US economy expanded at an annualised rate of 5.7 per cent between October and December, latest data revealed. The strength of the growth marked a sharp acceleration compared with the 2.2 per cent expansion seen in the third quarter
COMEX Gold dropped for 8th session in a low and ended just above $1080 an ounce, dropping more than 4% for the fortnight. MCX Gold tumbled to near 4-month lows of Rs 16167 before managing to end above Rs 16200, which should act as a key support from here on. The rise in Rupee hindered the upside for the domestic metal futures. The Indian rupee may also prove to be a supportive factor as the dollar strength overseas hurts the Indian unit and makes the domestic assets expensive. On the upside, the important levels to watch out are 16390 and 16500.
