GENERAL MARKET CONDITIONS

Gold will be caught between long term investors who continue to invest in dips with a price target of $1100 to $1300 over the next two to three years and short term bears who are trying to ensure that gold tests $800 and then rises. The downside risk for gold is limited to ten percent to twenty percent from the current prices in the next three to six months. Physical demand for gold will continue to rise unless gold has a sustained fall below $800.

Gold is caught between crude oil and the US dollar. Unless the US dollar has sustained gains and the US economy shows stability, gains in the dollar could well be short lived. Technically the US dollar has room for more gains and gold has more room to fall. Ever since the US sub prime crisis began in August 2007, gold has benefited as an alternate investment (apart from being an inflation hedge). If global equities continues to rise some of the investment which moved away from equities into gold will move back into equities. Further soft commodities and energies have given greater returns than gold. These commodities will give competition to gold in search for alternate investments.

If the US economy recovers then crude oil will rise and test $125 in the short term. Asian demand will remain high. Global central banks have been adding liquidity to the money markets; if every thing was okay then they would not add liquidity. Some under reporting is there. Base metals will be volatile as higher copper prices have forced buyers to reduce inventories. Fundamentally zinc has room for more losses but technically at lower prices the risk to return ratio switches in favor of the buyer.

COPPER -- JULY FUTURE -- INTRA DAY PIVOT: $404.0

Copper has to close below $369 for three to four consecutive days to be in a short term bear phase. LME copper (3 months) has to fall below $7950-$8000 to be in short term bear phase. My contrarian view on copper is that if copper fails to break $410 in May, it will fall to $346 and maybe even $326.

NYMEX CRUDE OIL -- FUTURE -- INTRA DAY PIVOT: $115.90.

Crude oil has to break $120.60 this week else it will fall back to $113.80 and $109.20. A break of $120.60 will result in $125.10.

INDIAN RUPEE (USD/INR)

Arbitrage in the non deliverable forward (NDF) market has resulted in a weaker rupee. Traders are buying cash selling forward as a hedge. Further there is a greater cash demand for the US dollar due to summer holiday travel. This has resulted in importers covering their short term payables on dips. The current weakness in the rupee will be short lived, once the arbitrage demand is over, the rupee will once again gain to 40.25. Intra day 40.88 is the key resistance support while 40.48 is the key support.

MCXARUN
9994500540