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R E E K L Y E P O Blow by Blow On R Bullions, T Base metals,

27 JAN 31 JAN 2014

Energy

MAJOR EVENTS
The three key macro-drivers that will have a major influence on gold prices in 2013 would be the US dollar, US Treasuries and the macro data releases that relate to the expected pace of US tapering. US Treasuries: The three-month rolling correlation between gold prices and US 10 year Treasuries became increasingly negative last year (-19.7% over the past year versus -48.9% now and falling to -50%. This relationship currenlty holds the strongest negative correlation in almost 10 years. Gold and Currencies: Gold's relationship with currencies have varied greatly with neutral impact in the case of Indian Rupee while it is negatively correlated to the extent of -22.8% in Japanese Yen and CHF -27.1%. FOMC announcements: FOMC announcements with respect to tapering and interest rates have pushed gold in either ways. The correlation to FOMC announcements since January 2013 is at -66.5% versus 50.8% when looking at the period since 2008. In the case of employment data, the correlation has increased 68%. Spot crude oil prices in the US are rallying again and the US crude oil market is displaying uncanny strength so far this year. Flat WTI prices have rebounded back up above $96/bbl, while the WTI-Brent arb firmed to $11.20/bbl. Regional grades around North America are strengthening, breaking out to the upside. Domestic market tightness could continue for a few weeks and it is expected that WTI could cross $100/bbl in the very short term, as the ramp-up of the Keystone Gulf Coast project could lead to Cushing draws. Yet, much of this recharged strength relates to very low US import levels, a reflection of LLS weakness in 4Q13. With a rebound in US oil prices on the way, a surge in imported barrels may come just as a heavy refinery maintenance season kicks in. At the same time, domestic demand remains firm. Crude oil runs are sitting at record seasonal highs of 15.7 million b/d as margins are supported, in part due a drawdown in distillate inventories on the surge in heating demand. The weather also impacted some refineries, especially in Joliet, Illinois, Detroit and Memphis, but throughput remains high by historical standards. Market response to Indonesian ore export ban has been quite subdued in nickel with prices rallying from $13,680 per ton to$14,595 a ton, a gain of 6.7%. Given that Indonesia accounted for 17% of mined nickel in 2013, this market response may best be described as subdued, with the price increase thus far representing a mere blip in nickel's long-term price charts. A further increase appears likely, but may come in the form of a gradual climb as stockpiles are rundown, with prices expected to increase to US$16,000/t or beyond in 2014. The increase in prices to US $16,000 levels would be dependent on the future evolution of Indonesia's export policy and the ban only represents another step in an on-going debate. Domestically, a legal challenge to the ban has been raised in Indonesia's two highest courts, while early reports of lay-offs and protests in response to the ban are likely to prove fertile ground for opposition candidates in the April 9th legislative and July 9th presidential elections. As Indonesia's current President is nearing the end of his two terms in office, a change in political leadership is inevitable, and the succeeding government's stance on the export ban remains impossible to predict.

Gold: The three macro-drivers to watch out in 2014.

WTI Crude Oil may cross $100/bbl short-term.

Indonesian ore ban impact on Nickel subdued, supply deficit unlikely.

ECONOMIC CALENDER
DATE & TIME
Jan 27 7:30pm 8:30pm Jan 28 7:00pm 7:00pm 7:30pm 8:30pm 8:30pm Jan 29 9:00pm Jan 30 12:30am 12:30am 7:00pm 7:00pm 7:00pm 8:30pm 9:00pm Jan 31 7:00pm 7:00pm 7:00pm 7:00pm 8:15pm 8:25pm 8:25pm

DESCRIPTION
Flash Services PMI New Home Sales Core Durable Goods Orders m/m Durable Goods Orders m/m S&P/CS Composite-20 HPI y/y CB Consumer Confidence Richmond Manufacturing Index Crude Oil Inventories FOMC Statement Federal Funds Rate Advance GDP q/q Unemployment Claims Advance GDP Price Index q/q Pending Home Sales m/m Natural Gas Storage Core PCE Price Index m/m Employment Cost Index q/q Personal Spending m/m Personal Income m/m Chicago PMI Revised UoM Consumer Sentiment Revised UoM Inflation Expectations

FORECAST
56.2 457K 0.7% 2.0% 13.7% 78.1 13

PREVIOUS
55.7 464K 1.2% 3.4% 13.6% 78.1 13 1.0M

<0.25% 3.2% 331K 1.3% -0.1%

<0.25% 4.1% 326K 2.0% 0.2% -107B

0.1% 0.4% 0.2% 0.2% 59.0 81.0

0.1% 0.4% 0.5% 0.2% 59.1 80.4 3.0%

GOLD
TECHNICAL VIEW
MCX GOLD last week showed upward movement and broke its important resistance of 29350 and took resistance around 29700 in support of strength in dollar as well as comex. Now, if it able to maintains above 29700 then immediate resistance is seen around 30000. On other hand if it sustains below 29100 then 28650 will act as major support level.

PIVOT TABLE
STRATEGY
Better strategy in MCX GOLD is to buy above 29700 for the target of 30000 with stop loss of 29200.

S1
29250

S2
28900

S3
28575

R1
29700

R2
30000

R3
30301

SILVER
TECHNICAL VIEW
MCX SILVER last week showed sideways movement, and reversed from its important resistance i.e. 45850 and form reversal candlestick pattern doji. Now, if it maintains above 45900 then it may find next resistance around 46600. On lower side 44000 will act as support for it below which it may drag towards important support zone of 42500.

STRATEGY
Better strategy in MCX SILVER at this point of time is to sell below 44000 for target of 42500, with stop loss of 46000.

PIVOT TABLE S1
44100

S2
43000

S3
41650

R1
45850

R2
46950

R3
48150

CRUDEOIL
TECHNICAL VIEW
Crude oil last week showed continuous four day winning streak and lead towards 6100 mark after breaching the resistance of 5900. Now, crucial point is seen near 23.6% retracement of 6150 which will confirm its bullishness if it close above it. Any correction may drop it towards the immediate support of 6000 while 5900 will act as major support.

STRATEGY
Better strategy in MCX CRUDEOIL is to sell on highs for the target of 5900, with stop loss of 6300.

PIVOT TABLE S1
6000

S2
5888

S3
5750

R1
6150

R2
6275

R3
6425

COPPER
TECHNICAL VIEW
MCX Copper last week showed sideways movement and consolidated around 38.2% retracement and closed below it. Now, if it is able to sustain below 451 then bearishness may drag it towards the support level of 445. On other hand if it maintains above 462 then bullishness will lead it upto 50% retracement i.e. 470.

PIVOT TABLE
STRATEGY
Better strategy in MCX COPPER is to sell below 451, with stop loss of 464 for the targets of 445-440.

S1
451.80

S2
443.50

S3
435.35

R1
462

R2
471

R3
481

DISCLAIMER

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