GENERAL MARKET CONDITIONS

Gold and silver fell after the U.S. Under Secretary for International Affairs David McCormick said that the Bush administration would support a sale of roughly 8% of the IMF reserves, or 12.9 million ounces. IMF gold sales could result in some of the long positions in gold getting squared off. The real effect of IMF gold sales will be when they announce the time of sale or the period within which IMF gold will be sold. However the dip in gold will not last long and will be used by long term investors to reenter. Unless gold is in a short term to medium term bear phase gold will not fall. At lower levels there will be greater physical demand. For gold to be in a bear zone four conditions need to be met:

(A) Global equity markets need a sustained rise
(B) Geopolitical risk should not escalate
(C) Global economy remains robust and last but not the least
(D) The US dollar should gain. Even if there is a correction to $850 or $770 in the next few months, it will not alter the medium term bull rally in gold.

There could be some month end profit taking in silver and copper ahead of the March future expiry which could drag prices lower if they do not hold key technical supports. Gold has corrected due to IMF gold sales news. The big question is where is crude oil headed? For the moment it is trading in $96-$101 range which will be broken soon and a new range will be formed.

SILVER -- MARCH FUTURE -- INTRA DAY PIVOT $1796.0

Failure of silver to break $1824-$1844 will result in a fall to $1752 and $1720 and $1688.

COPPER -- MARCH FUTURE -- INTRA DAY PIVOT: $382.0

Copper is bullish over $356.70. Only a daily close below $356.70 will result in $339. Upside is open with $379, $386 as resistances.

MCXARUN
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