GENERAL MARKET CONDITIONS

Three things which so far has yet to happen in 2007, gold has yet to break $850, crude oil has yet to break $100 and euro/usd has yet to break 1.50. Gold and crude oil still have a chance to edge past these markets despite technical bearishness, while euro/usd over 1.50 in the next two weeks is highly unlikely. As far as metals markets are concerned, it is base metals which will be remembered than precious metals as they created historical highs in 2007 only to crash subsequently. It started off with copper, followed by nickel, zinc and lead. Fundamentally, I have never been a base metal bull and my reasoning is that if global growth is to slow down in 2008.

A slowdown in 2008 is getting factored in for base metal prices and when liquidity conditions improve (probably after the first fortnight of January, 2008) base metals will find buying interest. At the moment, in our view there are still huge longs in copper, zinc and lead at higher levels and retail investors are trying to average and get out of their investment in base metals. Once this is over, base metals will consolidate. Please remember that base metals are still way high over 2004 lows. So base metals are still in their multi-year bull cycle. Interest rate cuts by various central banks globally in the second half of 2008 should support base metals. US economy will grow very strongly in the second half of 2008 on lagging effects of interest rate cuts and a weaker currency while the European central bank should start their interest rate cuts after June 2008. Even the Indian central bank should cut interest rates by half a percent in 2008 as inflation falls below acceptable levels.

The volatility in the first fortnight of December, is just preparing traders for things to come in 2008. Day traders are having hell of time as higher volatility means more trading opportunities. Technically gold and silver are in a neutral to bearish zone while crude oil is in a neutral zone. Euro/usd has to break 1.4674 to be in bullish zone while failure to edge past this week will result in fall to 1.41. This is last trading week Christmas and trading volumes will fall from next week as some traders jet off for vacations.

GOLD -- FEBRURAY FUTURE

Double bottom has been formed at $776 and a double top at $818. Gold will trade in wider $790-$814 range for the day. A breakout is in the offing from the current trading range soon

NYMEX CRUDE OIL -- FUTURE

As long as crude oil holds $90-$90.40 downside will be limited and it will target $94-$95.50 once again. Falls below $90 then $87.40 is the target. Investor should sell April/May futures on rise with a price target of $78.