GENERAL MARKET CONDITIONS

Geopolitical risk once again on the surface after Turkish troops entered northern Iraq. This is minor news at the moment as Turkey has a history of entering Iraq but it remains to be seen as to how long Turkish troops remain in Iraq. Markets have more or less ignored this news as they are pre-occupied with prospects of US economy in 2008 and liquidity and higher volatility resulting in medium term traders becoming day traders.

Physical demand from India and China will rise in the first quarter of 2008. Chinese new year demand around mid February should result in higher demand. Chinese retail investors are yet to diversify into gold in a big way, away from equities. Once they start to diversify their investments into gold away from equities, gold demand will zoom in China further luring buyers at lower levels

Gold, silver and copper fell after London PM fixing yesterday. It will be another volatile day with US weekly crude oil inventories dictating crude oil as well as precious metals in the Comex session. The crude oil market will be very sensitive to US crude oil inventories for the rest of the week.

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. Investors should sell April/May futures on rise with a price target of $78.