GENERAL MARKET CONDITIONS

Some sections of the market are betting on a fifty basis point cut by the Fed on 30th January which will result in further gains in gold and silver this week. The rise in gold has resulted in short term money flowing into gold and commodities in general. This week we have the US producer price Index (PPI) and consumer price index (CPI). Even if PPI and CPI come in higher than expected, the fed will choose growth instead of inflation in the short term. The US dollar is headed lower in the short term. Investors will be using declines in gold as an opportunity to go long. If global growth slows greater than expected base metals will fall as surplus widens. However crude oil may not fall as much.

I wonder what will happen to those companies who bought other companies under leveraged buyouts. If the US economy moves into recession, not just Japan even Europe will be affected sooner than later. Some of the buyouts may not be profitable and may have to be sold at lower prices. Although it’s too early to comment on the same, if it happens gold will zoom.

Various central banks by cutting interest rates are adding to liquidity. Even in commodities, base metals investors will switch to precious metals in uncertainty of slower global growth. Crude oil and energies will continue to draw greater investment interest on declines as slower global growth does not mean reduction in energy demand. It will be a volatile week with an overall bullish trend in gold and silver.

GOLD -- FEBRURAY FUTURE -- INTRA DAY PIVOT:$888.0

Only a break of $907 will result in $918 and $938 as the next target. On the lower side as long as $888 and $872 holds, downside will be limited.

NYMEX CRUDE OIL -- FUTURE -- INTRA DAY PIVOT: $90.40

$87-$88 is the support zone for the week while only a break of $95.20 will result in $99 and further once again.

MCXARUN
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