Bullion

Precious metals eased on MCX on profit booking following Tuesday's lifetime high of Rs.11,533 per 10 gm. MCX Gold Feb touched the low of Rs. 11102 per 10 gram on correction note and was trading with heavy losses. Similarly MCX Silver March followed the gold movement and registered the low of Rs. 20412 per kg

US-led recession fears knocked precious metals from near record highs overnight, with a steeper correction possible Wednesday depending on how financial markets stand up this session

The U.S. Department of Labor said that consumer prices were up .3% in December and up 4.1% for all of 2007, the biggest annual increase since 1990. Excluding food and energy, prices were up .2% in December and up 2.4% from a year ago. The December eurodollars are steady to higher.

The Mortgage Bankers Association said that its index of mortgage applications was up 28% last week to 906.4, the highest in over three and a half years. The average 30-year mortgage rate dropped to 5.62%, the lowest in over two and a half years.

The Federal Reserve said that industrial production was unchanged in December and up 1.5% from a year ago.

Indian Bullion Spot Market 

Precious metals eased in spot markets following the profit booking in international markets after the recent highs.

·         In Mumbai markets, gold (995) declined by Rs.345 to finish at Rs 11,230/10gm and gold (999) by Rs.245 at Rs 11,280/10gm whereas Silver (.999) closed at Rs 20,395/kg, down by Rs.325.

·         Chennai gold (995) and gold (999) rose by Rs.60 to finish at Rs 11,450/10gm and Rs 11,500/10gm respectively whereas Silver (.999) closed at Rs 20,300/kg, up by Rs.200.

·         Jaipur gold standard slipped by Rs.50 to finish at Rs.11,300/10gm whereas Silver(.999) by Rs.600 to close at Rs.20,000/kg.

·         Ahmedabad gold (995) dipped by Rs.110 to close at Rs.11,210/10gm and gold (999) by Rs.105 to close at Rs.11,370/10gm respectively whereas Silver (.999) jumped up by Rs.225 to close at Rs.20,625/kg.

·         In Delhi bullion markets, gold (995) declined by Rs.350 to close at Rs 11,350/10gm and gold (999) by Rs.230 to close at Rs 11,410/10gm respectively whereas Silver (.999) closed at Rs 20,020/kg, down by Rs.600.

MCX Gold Feb (Daily Chart)

Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Gold Feb: Buy at 11100-11090 for the target of 11280 and 11350 with stop loss at 11065

MCX Silver Mar (Daily Chart)

Technical Outlook:

Momentum studies are still bullish but are now at overbought levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day moving average. The downside closing price reversal on the daily chart is somewhat negative.

Recommendations:

MCX Silver March: Buy at 20400-420 for the target of 20850 and 20980 with stop loss at 20290

US Economy Update

The U.S. Department of Labor said that consumer prices were up .3% in December and up 4.1% for all of 2007, the biggest annual increase since 1990. Excluding food and energy, prices were up .2% in December and up 2.4% from a year ago. The December Eurodollars are steady to higher.

The Mortgage Bankers Association said that its index of mortgage applications was up 28% last week to 906.4, the highest in over three and a half years. The average 30-year mortgage rate dropped to 5.62%, the lowest in over two and a half years.

The Federal Reserve said that industrial production was unchanged in December and up 1.5% from a year ago.  

Currency Update

The U.K.'s Office for National Statistics said that the unemployment rate in September to November was 5.3%, the same as a month ago.

Eurostat said that consumer prices in the Euro area (13) were up 3.1% in December from a year ago, the same as in November.

Australia's Bureau of Statistics said that home loan approvals were up 4% in November, much stronger than expected. Many analysts expect the Reserve Bank to increase the interest rate by a quarter of a percent when they next meet on February 5th. The March Australian dollar is steady to lower.

Machinery orders in Japan were down 2.8% in November, but not as bad as expected.

In an ongoing effort to cool its economy, China increased the reserve requirement for its banks by .50% to 15.00%. It was the 11th increase in the past year.

Expected Economic Data