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