GENERAL MARKET CONDITIONS

The US dollar – crude oil - gold relationship is dictating the metals markets. Base metals fell as Chinese demand remains low before the Olympics. Unless physical demand for gold, silver or any other metal rises along with the rise in prices, there will always be fear of a correction or a slide from the highs. Investment demand can change overnight also. Gold, physical demand is virtually zero. Platinum has also fallen on lack of demand. The lagging effects of higher crude oil prices have now started showing their colours.

Some of the world’s largest sovereign wealth funds are seeking to scale back their exposure to the US dollar in a sign of global concern about the currency. One big sovereign fund in the Gulf has cut its dollar-denominated holdings from more than 80 per cent a year ago to less than 60 per cent, while China’s State Administration of Foreign Exchange (SAFE) has been looking to strike deals with private equity firms in Europe as a part of a strategy to reduce its dollar holdings. Sovereign wealth funds have played a leading role in helping to recapitalise faltering US banks, but have lost money so far on such investments. Continuing market turbulence has further shaken their faith in US policy and policymakers. The current decline of the US dollar will have long term effects by way of declining share of the US dollar in global trade and financial services.

COPPER -- SEPTEMBER FUTURE

$354 is the key support. Resistance $378. A fall below $354 will result in $347 and $339.

MCXARUN
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