GENERAL MARKET CONDITIONS

A bad beginning to a hopefully another good quarter for gold and silver while base metals are consolidating at the moment. Energy prices continue to show no signs of a sustained fall. The fall in gold and silver are a part and parcel of a long term bull run rally and long term investors need not worry over their investments. In every market the speed of the fall is multiple times faster than the speed of the rise. The common denominator for the fall in commodity prices is the US dollar. The US dollar gained and commodity prices fell. Commodity prices will soon be delinked to swings in currency markets.

Gold and metals prices are bullish but will be very volatile in 2008 and over the coming years. Agro commodity prices will only rise as food security becomes a key issue for every country. Global population is on the rise. The lands which should have been used for growing crops are being used to expand cities or use it for bio fuels which give better returns. The overall area under food crop cultivation is falling every year. This will create severe supply shortages over the coming years with global warming adding to the woes. Take the case of rice, which is the stable food for almost everyone. Rice needs lot of water for cultivation, rice fields have to be water logged for days. Rainfall over the past few years has been skewed. Now a days it rains miserably for a few days. We get the whole months needed rain in a few days and thereafter rains are over. As a result rice and other crops production suffer. One needs to have a diversified portfolio between metals and soft commodities for better returns.

The Asian development bank has said that Asia’s growth rate in 2008 will be the lowest in the past five years. This puts a question mark over the Asian growth decoupling with US slowdown theory. Asian growth will be affected by the US economic slowdown and the decoupling theory may not work. It is for this reason that Asian stocks got hammered in the first quarter.

GOLD -- JUNE FUTURE

Long term bullishness is intact as long as gold floats over $828.30. In the short term gold will be volatile and will be looking to the US dollar for direction.

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