GENERAL MARKET CONDITIONS

Better than expected US January retail sales is positive news for base metals bulls. If the US is able to fend off a recession (which has already been discounted in current base metals prices), all the base metals will out perform precious metals. Crude oil will remain firm if the US avoids recession. However it will not be one way traffic in base metals as investors have memories of last year’s fall. China will remain the key factor for base metals. Once all the snow gets melted and Chinese factories resume normal operations base metals will form a direction as by that time one will be able to estimate the incremental base metals demand caused by heavy snowfall. Chinese factories will also be preparing for the Olympics games in August.

Crude oil prices are floating over $85 a barrel so far in 2008, that too on the time when there is no peak summer demand and there are no hurricanes in the Gulf of Mexico. IEA has reduced its 2008 crude oil global demand forecast to 1.67 million barrels a day. Crude oil demand from countries like India and other nations will continue to rise as prices are subsidized below $70 a barrel. If crude oil prices are able to hold $85 till April, it can rise to $117 and more in the summer. However I’m not a crude oil bull and still expect crude oil to fall to $78 this summer when there is more evidence of reduced global demand.

Gold and silver will be volatile. Silver will continue to outperform gold. There is mild physical demand at lower levels. Spot silver has to break $18.00 by next week for gains. Technically gold is in neutral zone.

GOLD -- APRIL FUTURE -- INTRA DAY PIVOT:$920.30

Gold has to hold $896.80 to prevent a fall to $888 and $878.60. On the higher side a break of $916.10 will result in $924 and $932.0

NYMEX CRUDE OIL -- FUTURE -- INTRA DAY PIVOT: $90.20

Crude oil has to hold $89.56 to be in bullish zone or break $95 for direction.


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