GENERAL MARKET CONDITIONS

Metals are tracking the US dollar and nothing else. They sold off yesterday after the inability to rise resulted in profit taking and short sellers coming to picture. If global equities rise further and the US dollar gains over the coming weeks then gold and silver will be affected more in a negative way than other commodities. The prime reason being that short term traders consider gold and the US dollar are alternate investments. Silver will be more volatile as it gets caught between base metals and precious metals. Silver will fall if and only if gold falls and most of the base metals also fall.

Base metals will be volatile unless the exact effects Chinese quake are known. Lead and zinc should trade with a softer bias in the medium term as investors use rises to exit longs and medium term investors shy away from these metals. In 2007 between last week of May and early June nickel formed a top and thereafter crashed. In 2008 it’s just the reverse as Nickel is near the lows but still above 2006 lows. In the medium term as long as LME Nickel (3 months) holds $23200 downside will be limited. One needs to wait for a bottom in Nickel and then invest.

The Bank of England has said that it may not cut interest rates for two years due to higher inflationary pressures even as the sterling finds sellers at higher prices. The US dollar is being supported by expectations the worst in US economy is over while for others the same is yet to come. One needs to use a wait and watch for the US dollar for the next few trading session before making the next move as there could be wild intraday swings. If crude oil prices fall then the US dollar will get a boost. So far crude oil prices have remained immune to US dollar gains.

SILVER -- JULY FUTURE -- INTRA DAY PIVOT $1722.0

If silver fails to close over $1754 for the rest of the month then it will fall to $1544.

MCXARUN
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