GENERAL MARKET CONDITIONS

The inverse correlation between the US dollar and precious metals was at full force yesterday and may continue today also. The market has shifted its focus to growth differentials from interest rate differentials, which is the prime reason for the US dollar’s gain. Precious metals will remain under pressure as long the US dollar gains. Physical gold demand will fall below $845 whereas investment demand for gold will rise below $845. Over the past two years there has been an inverse correlation between physical demand and investment demand in gold. Gold’s rise will be sustainable only when the rise in price is accompanied by a rise in physical demand and investment demand, else the fear of a big fall also increases.

Among the base metals lead looks positive. Nickel, Zinc and Copper are reaching oversold levels and a technical recovery can happen anytime soon. Fundamentally these metals are bearish. Steel prices have fallen nearly ten percent over the past few weeks. We expect steel to pare all its losses after the Olympics.

COPPER -- SEPTEMBER FUTURE -- INTRA DAY PIVOT: $354.0

Failure of copper to break $354 next week will result in a fall to $332 and $319

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