GENERAL MARKET CONDITIONS

As expected the US dollar resumed its slide on disappointing economic numbers. If the US economy does not perform then the Fed may continue with its stable interest rate regime which will always be US dollar negative. After the second week of July we will be in a better position to judge whether the US dollar will slide in the third quarter too. Meanwhile Lehman Brothers confirmed that they posted their first quarterly loss ever. Markets will be looking forward to results from other US financial services for a weekly direction on the US dollar apart from the PPI numbers. If these numbers disappoint then another round of US dollar selling will result.

The Indian commodity market is expected to grow by 30 percent and will reach Rs.74,156 billion ($1.73 trillion) in volume by 2010, according to a study by the Associated Chambers of Commerce and Industry of India (Assocham). Assocham found that the Indian commodity market expanded 50 times in a span of five years from Rs.665.3 billion in 2002 to Rs.33,753 billion in 2007 as people's participation in such trade continued to grow. It also noted that Indian commodity exchanges are still at a nascent stage of development as there are numerous bottlenecks hampering their growth. The turnover in proportion to GDP of commodity trade increased from 4.7 percent in 2004 to 20 percent in 2007 and is expected to go up many-fold since commodity markets would remain friendly to subscribers. Gold, silver and crude recorded the highest turnover in the Multi Commodity Exchange (MCX) while in National Commodity & Derivatives Exchange Ltd (NCDEX), soya oil, guar seed and soyabean and in NMCE pepper, rubber and raw jute were the most actively traded commodities on average. Indian investors need to diversify their investment in commodities and reduce their hunger for investing in equities.

GOLD -- AUGUST FUTURE

Gold will continue to trade in a wider $855-$930 range in the short term. At lower prices short selling reduces while over $910 short selling increases. A break out from this range is in the offing soon. We remain bullish on gold in the medium term with a price of $992 by December under the worst case scenario. But before $992 there is an outside chance of $800.

MCXARUN
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