GENERAL MARKET CONDITIONS

Metals and energies have had a historical first quarter in 2008. 2008 returns are (A) Gold 11.64%, (B) Silver 21.17% (C) Crude oil 10.35% (D) Natural gas 29.55% (E) Copper 25.91% (F) Zinc -0.85% (G) Nickel 16.03% (H) Lead 11.98% (I) Aluminum 25.49%. Metals and energies have outperformed equities in the first quarter of 2008. More and more new investors have started investing in commodities and there is more to come. The prime reason has been the slide in the US dollar due to the Fed’s aggressive interest rate cuts and the slide in equities. In the second quarter will metals and energies give the same returns as that of the first quarter? The second quarter will be more volatile than the first quarter. US dollar and US interest rates will be the key. Markets will be looking to the Fed on when they will stop cutting interest rates. We expect Fed’s end June meeting to be the last interest rate cut in 2008. IMF gold sales dates will also have a temporary impact.

Markets sentiment for equities is negative as we move into second quarter. Crude oil demand is generally lower in the second quarter and rises in the third quarter. However crude oil prices are showing no signs of a sustained fall. I expect crude oil prices to fall and then rise. Gold and silver will be volatile. Average weekly volatility will rise over $70 for gold and over $1.75 in silver. Base metals will be supported by expectations of greater demand from China. However if demand does not come up then base metals will fall. Overall base metals will be more volatile than gold and silver in the second quarter.

SILVER -- MAY FUTURE

In April silver is bullish as long as it holds $1630 and $1710 on closing basis targeting $1940 and $2040. Average daily volatility will be over $1.

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