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-- Posted Friday, 5 December 2008 | Digg This Article | Source: GoldSeek.com

GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR

Volumes have fallen in most commodity exchanges and volatility is very high. There is sudden spurt of volatility. Yesterday most of the day comex gold February was trading in $765-$773 range and after London PM fixing gold suddenly rose to $790 only to close at $765.50. Volatility is very high and has kept away most of the traders. Even jewelers are having a tough time coping with the current volatility and some of them sit on very low inventory levels. Demand is normal in India but the current volatility has resulted in wholesalers and retailers sitting on stocks. A physical trader of gold or an importer of gold bars can hedge his risk in the futures markets and other means but there is very limited scope for a jeweler to hedge his risk. Any piece of jewelry does not contain only gold, it contains stones, diamonds etc which cannot be hedged anywhere. Prices of diamonds and other stones have been fluctuating due to volatility in gold prices. Traders, investors and jewelers are getting affected by the high volatility. I do not see the current volatility dying down in the near future.

Automakers in the US are seeking bailout, US lay offs are seen spreading and it seems the lagging effect of the Octobers slide in global stock markets are showing up. Interest rates cuts by the European central bank and the bank of England are over. I do not think they will cut in January. If interest rate cuts do not work, then these banks could also follow zero interest rate policy by March. The US dollar has so far gained on expectation of narrowing down of interest rate differentials. The US should now weaken unless Eurozone, UK and other region economies shrink faster than the US.

TODAY

Gold and silver should break out from the recent consolidation phase and start a new range by next week. US dollar and equity markets are the key factors. Technically gold and silver are in a neutral zone. Merrill Lynch has said that crude oil may fall to $25 a barrel next year on the prolonged global slowdown. There could be weekend short covering in base metals and energies today, one needs to watch the same. Today’s US November payrolls will set the direction for the US dollar for the rest of the month.

COMEX SILVER MARCH

Silver needs to break $979 else it will fall to $888 and $840 while a break of $979 will result in $1025 and $1056.

Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared By Chintan Karnani. Website www.insigniaconsultants.in

-- Posted Friday, 5 December 2008 | Digg This Article | Source: GoldSeek.com

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