Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold has long been seen as a haven against inflation and the Fed’s announcement earlier this week that it is to inject more than $1 trillion into the US economy was well-received by markets worldwide but also fuelled fears of inflation down the road, hitting the value of the dollar and also prompting a surge in gold prices. The US Federal Reserve is to embark on quantitative easing by buying up longer-term Treasuries for the first time as part of a $1.15 trillion spending spree with the aim of reviving the American economy out of recession. FED will buy $300bn of US government securities, it plans to buy up to $750bn of additional agency mortgage-backed securities and double the agency debt it plans to buy this year from $100bn to $200bn. Gold prices spiked again on the back of the US's move to massive qualitative easing measures. Greenback weakness and inflation are two of gold’s friends, when it comes to pricing the commodity.

The FOMC’s decision to keep the benchmark rate in a spread between zero and 0.25 percent wasn’t market moving; but the announcement that they would actively pursue quantitative easing was. While policy officials have given considerable forewarning to such a move, it nonetheless raises concern about the health of the US economy and its assets

With gold so hot at the moment—SPDR Gold Trust, the world's largest gold-backed ETF, yesterday reported that having added 335 tonnes of gold so far this year its reserves have hit an all-time high of 1,114.6 tonnes. We continue our bullish stance on Gold and Silver.

TECHNICAL VIEW

COMEX Gold has support at $945 and $930 and resistance at $980 and $1000.
Buy MCX Gold (Apr) if prices sustain above 15550 SL 15350 Tgt 15800

COMEX Silver has support at $13.4 and resistance at $14.1 and $14.6
Buy MCX Silver (May) on dips around 22600 SL 22300 Tgt 23000 and 23300

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

The bullion market showed some wild fluctuations during the week. Clearly seeing the narrowest US Trade Balance in six years served to undermine some flight to quality bulls. Gold was battling profit taking by the longs, which might have been somewhat concerned about potential developments from the weekend G20 meeting. With price action choppy the metal may have been underpinned by comments from China's Central Bank warning that the financial crisis may lift gold to record highs. Strong investor flows into gold-backed securities along with currency devaluation concerns may have been other factor providing price support to the metal.

The Swiss franc is one of the traditional safe haven assets, a place where worried investors park money to escape turmoil in other markets. Interest rates are usually low, but Switzerland's conservative fiscal policies and stable economy make it a place where investors attempt to ride out a storm. But the SNB clearly signalled yesterday that it is unwilling to tolerate any further CHF appreciation and acted to sell the currency in the FX markets.

This improves the relative appeal of gold, also a safe haven asset, as it weakens the argument for owning the Swiss franc as an appreciating currency during difficult times. It may also persuade some Swiss-based investors to add to their positions in gold now that the risk of CHF appreciation has been eliminated. Gold did move higher immediately after the SNB intervention yesterday and could benefit further from these moves as investors re-assess their options after this change

China’s Premier Wen Jiabao said he is "worried" about the country’s holdings of US Treasuries and wants assurances that the investment is safe. China is the biggest holder of US debt. Should China or some other significant buyer of US debt announce that they will no longer buy US debt unless denominated in a non-US dollar currency, gold is going to the moon.

The holdings of the SPDR Gold Trust advanced to another record high of 1042 tonnes. The fund now has world's sixth-largest stockpile of gold; overtaking that held by the Swiss National Bank

Technical View

Gold continues to resist any sustained decline, bouncing back quickly from any minor sell off COMEX Gold has support at $900 and $885 and resistance at $965 and $1000.
Buy MCX Gold (Apr) ) if prices sustain above 15450 SL 15200 Tgt 15800

COMEX Silver has support at $12.5 and resistance at $13.5 and $14
Buy MCX Silver (May) ) if prices sustain above 22400 SL 22000 Tgt 22800 and 23000

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold has become wealth insurance. Banks are being nationalized as their central banks increase their physical gold reserves. The world financial system is crashing down before us little by little. The fact is we have entered a depression. Close to 14 trillion dollars has been injected into the financial system

The US GDP news released on Friday was the worst since 1982! The economy shrank at an annualized rate of 6.2% in the 4th quarter of 2008 against the expectation of 5.4%. The U.S. dollar index rose as traders now see it as the only fiat currency with safe haven status because they believe the rest of the world is even worse off than the US heading forward.

The rupee hit an all-time low of 51 per dollar on Friday, taking losses this year to 4.5 percent. The currency had fallen 19.1 percent in 2008. The depreciating rupee is support the Indian Gold prices above 15000 Rs / 10 gm. Prices in India have hit record highs over the past few weeks, partly reflecting a sharp depreciation in the value of the rupee that has made dollar-priced gold costlier.

India has not imported any gold so far in February as high prices dampened demand in the world's largest market for the metal and the outlook in the coming weeks remains downbeat. India, which annually buys 500-700 tonnes of gold, had imported 23 tonnes in last February.

According GFMS, there could be major changes in demand pattern in Gold Demand in 2009 with compare to 2008 due to higher prices. Jewellery Demand is expected to fall by 47% from 2146 tonnes to 2000 tonnes. Industrial Demand is expected to fall by 20% in line with current recession from 437 tonnes to 350 tonnes. But Gold ETF Demand is expected to rise more than 100% from 307 tonnes to more than 700 tonnes.

TECHNICAL View
Five day of declines brought gold prices to nearly 9% under last Friday's $1007 peak, and sent speculators wondering about whether the 'correction' label still applies to this week's action. On the other hand, the metal averaged a monthly price in February, which has not been as high since last year's final tally in March.

From the rally of $820 in Jan to $1007 in Feb, Gold prices have corrected and retraced 38.2% to $930 from highs. Prices are expected to bounce back next week. If prices sustain below $930, we could see the levels of $885. COMEX Gold has support at $925 and $900 and resistance at $962 and $977.
Buy MCX Gold (Apr) above 15650 SL 15400 Tgt 16000

COMEX Silver has support at $12.8 and resistance at $13.35 and $13.75
Buy MCX Silver (May) above 22600 SL 21900 Tgt 23200 and 23500