GENERAL MARKET CONDITIONS

Saudi Arabia’s Public Investment Fund is in the “final stages” of launching the kingdom’s first sovereign wealth fund (SWF). The SWF would be set up with initial capital of SR20bn ($5.3bn). The amount of investment by Gulf cooperation council (GCC) countries will only rise and is an indirect way of moving away from the US dollar based investments. How much of the money in SWFs will move into gold remains to be seen. GCC counties official foreign exchange reserves will continue to swell as long term bullishness for crude oil prices is on the rise. The size of the GCC SWF will only rise over the coming years and will help to sustain the long term US dollar weakness story.

There is speculation that the Fed may cut interest rates this time and then shift the focus to inflation from growth. The net addition to US non farm payrolls is still negative and may remain in the negative territory for some time. The Fed may pause in June and then cut interest rates from September. Technically the US dollar has formed a short term bottom against the major currencies and should rise. The Fed meeting will be the key, till then day traders and jobbers will prefer to sit on the fence.

It will be a volatile day for gold, silver and copper. If they fail to rise then there will be sellers and key medium term technical support may be broken. On the other hand if they hold the last week low, then they may have bottomed out for the rest of the week.

GOLD -- JUNE FUTURE

Failure of gold to break and close over $931 on Friday will result in fall to $871 and $848.60 in May.

NYMEX CRUDE OIL -- FUTURE

Failure of crude oil to break $121.60 this week will result in a fall to $116.20 and $113.80 this week.

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