GENERAL MARKET CONDITIONS

The Bank of England may come up with a surprise interest rate cut today while the European central bank is expected to continue with its neutral approach and is not expected to give any signals of an interest rate cut in the near future. We expect the Fed to cut discount rates by quarter of a percentage along with interest rates next week, which will start a new phase of US dollar bashing. If the Fed cuts discount rates by quarter of a percentage gold will easily edge past $850 and near $900 as long as $770 holds. Fed cuts will also be bullish for equities and base metals.

As far as base metals are concerned, their inability to edge higher has resulted in more shorts getting created than longs. 2008 is the year of interest rate cuts. Global most of the central banks apart from the Fed will cut interest rates whether in the first half or second half. Interest rate cuts will stimulate retail demand, which will be bullish for base metals. There are concerns that China may have a soft landing in 2008 which may not happen. The Olympics are in China next year. The German economy started picking up after the soccer world cup. Historically there are other instances as well. Chinese GDP is expected to grow over ten percent in 2008. Base metals demand is expected to remain firm and most of them will be able to near 2007 highs.

SILVER -- MARCH FUTURE

Silver needs to break $1474 for $1519. On the lower side as long as $1424 and $1392 are holding downside will be limited