Bullion

Gold fell for a fourth trading day in MCX/ Comex as the dollar strengthened against the euro, eroding the metal's appeal as a hedge against declines in the U.S. currency. Silver also declined.

Fading chances of further interest rate cut by Fed higher than expected consumer inflation data underpinned dollar on Friday. The dollar index rose 1.1% at 77.445, its highest level since Oct. 25. Higher inflation would deter Fed to make further cut in interest rates. The precious metal market seems focusing on the currency movements at this stage and thus ignored the higher inflation figures. Higher inflation is often seen as supportive for gold as it increases the investment demand for the metal as inflation hedge. Consumer prices rose 0.8% in November.

Investment demand for gold accelerated in the second half of 2007 after some weakness in first half. Gold holdings of the world's largest gold exchange-traded fund, streetTRACKS have surged from 464.37 tonnes at the end of June to 615.90 tonnes on December 13.

India's gold jewelry exports rose 13% in the first eight months of the financial year that started in April to $3.87 billion according to the Gem and Jewelry Export Promotion Council. In the financial year ended March, India exported around $5 billion worth of gold jewelry, half of which went to the US.

Technical Outlook:

Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.

Recommendations:

MCX Gold Feb: Sell blow 10150-170 for the target of 10080 and 10020 with stop loss at 10222

silver Technical Outlook:

Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from over bought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 18-day moving average. The upside closing price reversal on the daily chart is somewhat positive.

Recommendations:
MCX Silver March: Sell at 18450-490 for the target of 18310, 18180 and 18050 with stop loss at 18652