Comex Gold: Support: 1119 – 1101 - 1089 Pivot: 1131 Resistances: 1149 – 1161 – 1180

Comex Gold Sell @ 1140 Stop @ 1148 Targets @ 1120 – 1100 – 1082

Gold if we look at the chart form November 2009 where the all time high was tested in Dollar term at 1225 $ and after the same have give a sharp selloff and tested the lower level of 1080 $. The sharp sell off some profit booking was seen from the same level and tested the level of 1160 $ which was the 61.8 % retracement of the fall this was the formation of the Left Shoulder. After testing the level of 1160 $ have been in the side way to down side move where the previous support of 1080 was broken and have tested the level of 1044 $ on lower side but sharp buying was seen from the same level again have tested the level of 1142 $ where the neck line can be drawn from the previous level. This is the formation of the Inverted Head & Shoulder pattern and is in the formation of the Right Shoulder. If we look at the fall from 1160 $ have formed the wave formation which was in the five wave down side and on the upside have been in the corrective wave. Stochastic and the RSI are sustaining in the higher zone and is turned flat where if the trading is seen on short corrective move will give the down side intersection which will given a good confirmation of the right shoulder formation. First resistance is high crossing at 1148. Second resistance is the high crossing at 1160 First supports is the low crossing at 1128. Second support is the low crossing at 1115.

Nifty update 22nd Jan 2010

As Expected nifty fails to cross the 5320 Level mark and have broken the lower support of 5200 have given a sharp sell off in market and have indicated the further down side is expected for lower level of 4920 - 4840 max up to 4750 in near term, lower support is seen at 4600 and if reversal is seen from any level above 4750 and sustain trading above 4900 will confirm the short term bottom is placed. some range bound trading is expected above 4700 before the bounce.

Intra day : Nifty opening is expected around 5000 and resistance is seen at 5020 and cross over of 4980 on lower side will open the door for 4940 - 4900 on lower side, and further down side is expected in near term. maintain stop of 5020 on closing basis and can wait for 4900 to 4880 today.

Gold Out Look 2010

GOLD PAST PRESENT & FUTURE Technical overview

Let’s look at the history of gold where it has started from and how it has been performing in terms of technical levels. If we look from the past dated March 1993 where it was trading in the range of 330 $ per ounce and from the same have tested the higher level of 410 $ per ounce on the higher side in Feb1996 with the narrowing in the range of 340 $ to 410 $. From 2006 starting when we have seen some down side move in gold from 410 $ have moved to test 250 $ support on lower side in the year of 1999 September, after testing this level in 1999 ending and again in starting of 2001 have moved side way to upside moving towards the higher level of 410 $. It has formed a Cup and Handle formation as shown in the following figure.


As per the cup and handle pattern break out which leads to the 2- 3 % immediate rallies and after retrace back to the break out level and after testing the same will actually move to the target set by the break out pattern. If sustain trading is seen below the break out point for any reason the pattern becomes invalid. After the break out of the cup on the higher side have formed a handle formation in a way of Flag patter or pennant that slopes down side and the pattern break out confirm the uptrend. In the above chart too we have seen a short side way to down side move after the pattern break out and formed a Flag pattern, where the break out of the bull flag patter confirm the uptrend in market. Over here we have seen a good follow up in the pattern and the target also met as set by the break out given in mid year of 2005.

The difference of the cup which was from the high of 415 $ to the bottom support of 250 $, comes to 165 points when added from the break out point of 415 where the target is set around 580 $ but after taking some short resistance at the same have continue the bull run without the major correction have tested the level of 730 $ which is twice the difference of the height of the cup from the break out point.


From the above chart it has been clearly seen that the break out was seen with the Cup and Handle formation and the fresh rally in Gold History was started in the bull run and have been moving on higher side since then. With the break out it has also started the wave formation, well know as Elliot Wave Theory which we will study in detail.

Elliot Wave Theory and Gold

Basic Definition

In the 1930s, Ralph Nelson Elliott found that the markets exhibited certain repeated patterns. His primary research was with stock market data for the Dow Jones Industrial Average. This research identified patterns or waves that recur in the markets. Very simply, in the direction of the trend, expect five waves. Any corrections against the trend are in three waves. Three wave corrections are lettered as "a, b, c." These patterns can be seen in long-term as well as in short-term charts. The whole theory of Elliott Wave can be classified into two parts: Impulse patterns & Corrective patterns.

The impulse pattern consists of five waves. The five waves can be in either direction, up or down. Corrections are very hard to master. Most Elliott traders make money during an impulse pattern and then lose it back during the corrective phase.

Now lets come to the Gold and its performance after the break out of the cup and handle formation as explained above and the enter of the wave theory. The break out was seen at 415 $ and have rallied upside where it tested twice the target set by the pattern break out and have been in the rally which can be said to be the wave I. Wave I started from the lower level of 415 $ and have moved to test the higher level of 730 $ where the rise was around 315 points and this rise can be taken as the base for the further calculation of the further trend in future. After the rise it entered in wave II the corrective wave and have tested lower level of 558 $ which was almost 50 % retracement level of the wave I and on closing basis was just sustaining above the same but have tested the level of 540 which was almost 38.3 % retracement of the wave I but closing basis was still above the 50 % retracement, indicating a good reversal from the same towards higher level. After the break out above the 690 $ level where it has taken multiple resistance have moved further upside confirming the wave III continuation. The initial stages of the Wave III rally are slow, and it finally makes it to the top of the previous rally (the top of Wave I). Traders are not convinced of the upward trend and are using this rally to add more shorts. For their analysis to be correct, the market should not take the top of the previous rally. Over here we have seen multiple resistance of 700 $ level and as this level was broken there was sharp rise in market where most of the stop was hit and have sharp rise was seen and break out above the previous top indicated the rise in the form of wave III.

Wave III is expected to move in the Fibonacci Ratio which is the calculated on the basis of the wave I, if we look the rise have been exactly to the ratio of 150 % of the wave I from the
lower level of point II at 558 $. The difference of the wave I which is 315 points and if we calculate 150 % of the same which comes to 473 points and by adding the same from the bottom of wave II at 558 $ brings the level of 1031 on higher side. From the lower chart if we look wave III have rose till 1033 $ just above the 150 % level of 1031 $. As per the Fibonacci



ratio of 161.8 % which comes to 1068 $ fails to test and have entered in the wave IV which was again a corrective pattern.


Wave IV started after confirming the top of the wave III at 1033 $ which was 150 % of wave I have been on the down side move and also in its corrective wave pattern of five wave have tested the level of 724 $ on lower side. The correction was sharp and have seen a selling on every rise in the same wave where have seen some buying at certain dip but fails to carry on the rise for uptrend and have moved to test the lower level of 724 $ on lower side. Corrective pattern of the wave IV have been exactly 50 % of the wave I and wave III in combination. If we calculate the rise from the bottom of the wave I of 415 to the top of wave III which is at 1033 $ which comes to 618 points, taking the 50 % retracement of the rise which comes to 309 points and deducting the same from the higher level of 1033 which reaches 724 $ where the gold have tested the exact support on lower side. Reversal was seen from the lower level and entered in the wave V in the impulsive wave which is in uptrend.

Wave IV which competed at 724 $ on lower side have moved upside and have been trading in the impulsive wave where the resistance was seen at the higher level of wave III. The rise from the lower level was in the form of wave i and have given a short correction in the form of down trend formed ii wave have moved upside and have given a break out where the wave iii was seen in action. Lets study the wave V in detail with following chart and predict the near term future performance.

Let us divide the wave V in to two parts, where the starting of the wave is known as internal wave and within the same what the wave formation is formed can be termed as minor wave. Internal wave are denoted as only number by i – ii and so on where as the minor wave are termed in bracket (i) - (ii) and so on.
Let’s study the internal wave of the V wave which has been in the minor wave within the internal wave. Currently its in the minor wave (iv) as a corrective pattern of the internal


wave iii and also in the wave iii have been in the internal wave of wave (iv) which is in corrective form, lets look in the detail with the calculation with the following chart.


From the above chart we have seen wave IV have completed at 724 $ and have been in the wave V. Internal wave in the V wave which started have moved from 724 $ and have tested the level of 1005 $ on higher side. After testing the level of 1005 $ which was at the resistance of the previous top of 1033 $ have been in the side way direction. Wave i is the base for the next wave calculation, where the difference of the wave i is 281 points. After testing the top of 1005 $ which have corrected and tested the lower level of 865 $ have been retraced exactly by 50 %. After testing the same level have seen a bounce back in the iii wave where the calculation of the iii wave can be expected to be raise by 161.8 % of the wave i to the higher level. Calculation of the iii wave of the difference of 281 with the 161.8 % comes to 455 points and adding the same from the completion of the wave ii of 865 $ getting the target of 1320 $ on higher side. Recently it has made a top of 1226 in inter week high and on closing basis have given a close at 1180 $ after which have been in the corrective mode. Wave iii is yet not completed and is in the (iv) minor wave in the iii wave. Minor wave (i) started from the lower level of 865 $ and have tested the high of 980 $ where the difference is 115 points and have corrected till 905 $ in the form of (ii) minor wave which is 61.8 % retracement of the wave (i) on lower side. Calculation of the wave (iii) is expected to be the rise by 161.8 % of the difference of wave (i) which is 115 points, comes to 186 points and adding the same from the lower level of minor wave (ii) at 905
$ where the target comes at 1091 $. Looking at the chart on the weekly basis gold have tested higher level above 1091 $ and tested 1126 $ but on closing basis the closing was seen near to 1091 which was target set by the 161.6 % retracement of wave (i) from the point (ii) level.

Currently it’s in the corrective wave of the minor wave of wave forming (iv) wave where it may retrace by either 50 % of the minor wave (iiii) or may retrace to 38.2 % of the minor wave (iii). If we look at the retracement by 38.2 % then may test 1020 $ on lower side before entering in the minor wave (v) or if the selling pressure continue will retrace by 50 % of


the minor wave (iii) may test 998 $ on lower side, but not expect to trade below 980 $ which is the top of minor wave (i).


If the retracement comes to 1020 on lower side in the form of minor wave (iv) then will enter in the wave (v) where we can expect the target of 1286 to 1320 on higher side let us look how we come to this above target. In the minor wave the difference of the wave (i) is 115 points and if we expect wave (v) to be 261.8 % of the minor wave (i) where it comes to 301 points and adding the same from the lower level of expected 1020 level can test 1321 $ on higher side. To support the target set by minor wave with the inter wave iii target which can be either 150 % rise of the wave i or may be 161.8 % of the wave i on higher side. Calculate the difference of the inter wave i is 1005 on higher side to lower level of 724 $ coming to 281 points. Calculation of 150 % of the same comes to 421.5 and in respect to 161.8 % comes to 454 points. If we add both the figure from the bottom of the minor wave ii at 865 the higher side target comes to 1285 $ with the 150 % retracement and 1320 $ with the 161.8 % retracement.

To be precise with the inter wave iii the near term target is expected to test 1320 $ on higher side with 161.8 % retracement in inter wave calculation and similar with the minor wave (v) calculation with 261.8 % retracement comes to 1321 $.













From the above explanation it was clear that minor wave (v) is expected to test 1320 $ on higher side and after the 100e will come in the corrective minor wave (a) – (b) – (c) which can be tested as shown in the graph where minor wave (a) can test 1155 $, (b) can test 1200 and (c) will move to test 1080 level which will also complete the inter wave iv at 1080 level max this inter wave may test 1040 $ before the reversal in market and may enter in the inter wave v of the V th wave of the larger cycle. If we calculate the target of the internal wave v which can be expected to test 261.8 % of the difference of wave i which is 281 points and the calculation comes to 735 points and adding the same from the lower level of 1080 $ will move to test 1800 $. This level if tested will also complete the largest wave V completion and after that will enter in the corrective wave in the form of A – B – C. Corrective pattern from the higher level we expected at 1800 $ can either be 38 % of 50 % of the entire rally, calculating the same will bring to 1300 $ in the form of A- B – C. Target of 1800 will be tested in the third Quarter of 2010 and by the year end may enter in the corrective form.



Conclusion: We expect some minor correction in market till the lower level of 1020 $ to 998 $ on lower side but not expect to trade below 980 $ and we expect market to move on higher level to test 1320 $ on higher side where the inter wave iii will get complete and after again a short correction in the form of wave iv will move to test 1800 $ to 2000 $ and above in near term. After testing the higher level of 1800 $ will be in the corrective wave to test 1300 $.




Report by: - Rajeev R Darji; (Sr. Research Analyst); Commodity & Currency
Email: - rajeevrdarji@yahoo.com
Contact No: +91-22-42308024, Ext: 240 Cell no: 9820987859

Central banks sit on their bullion reserves

Falling gold sales and loans provide price support; IMF has 400 tons to unload.

The world's major central banks, which hold more than 15% of global gold stockpiles, are expected to reduce their sales or lending of their bullion reserves this year, potentially restricting supplies and putting a floor under gold prices.
Several precious metals consultancies and the industry's main trade group anticipate total sales from major central banks such as France and Switzerland will decline again this year. One estimate projects sales could tumble to their lowest level in at least a decade.
Fewer sales mean gold supplies, which have been retreating in recent years as mining production has weakened, are likely to keep falling short of demand.
As long as investor appetite stays strong - and that's a big question mark, of course - this trend should support prices over the long term.
"Falling central bank sales have been a part of the gradual improvement in the overall balance between demand and supply in the gold market," said George Milling-Stanley, managing director of the official sector at the producer-funded World Gold Council.

"There are a whole bunch of reasons why the [gold] price has been going up, and I think that lower supply has been one of those reasons," he added.
Jon Nadler, senior analyst at Kitco Bullion Dealers, said falling central bank sales "might put a floor of some kind under gold, near $500 or so."
Analysts also anticipate official holders such as central banks will lend less of their reserves, keeping with a trend of recent years. Some analysts say central banks' loans of their reserves to mining companies and private banks contributed to a slump in gold prices in the second half of last year.
Another important milestone for the supply of official gold this year is the International Monetary Fund. The organization has said it plans to sell more than 400 tons of gold to diversify its revenue and strengthen its balance sheet.
Some investors are worried that the IMF sales could pressure gold prices, although the fund has said it plans to coordinate closely with central banks to minimize the impact of this large gold sale.
The IMF's plan could provide a boost in getting central banks to extend an agreement expiring in September to limit how much gold they will sell every year. That deal, called the Central Bank Gold Agreement, has helped restrain central bank gold supplies over the past decade.
In Tuesday's trading, the London afternoon gold fixing, an important benchmark for gold prices, stood at $923.75 an ounce. That's $88 lower than the record high above $1,000 hit about a year ago.

Bank of England's shocker
Central banks sell gold to rebalance their reserves portfolio by reducing the portion of gold. By selling gold, a country can switch into assets with higher return and better liquidity.
For example, Switzerland, which had held the most gold reserves per capita in Europe in 1999, has sold more than 1,300 tons of its gold reserves. Other major sellers in the past 10 years included France, the Netherlands, and the U.K.
Countries like France, where monetary policy is now set by the European Central Bank, still maintains its own central bank. The U.S. hasn't sold gold.

In the past, abrupt selling has sometimes depressed gold prices. The Bank of England's announcement in early 1999 that it was selling part of its reserves helped gold prices slump to a 20-year low. Gold traded at just above $250 an ounce by the summer of that year.
But efforts to coordinate those sales have reduced those shocks. On Sept. 26, 1999, 15 European central banks, led by the ECB, signed the first CBGA to take concerted moves on gold sales.
The banks agreed that in a five-year period, they will cap their total gold sales at around 400 tons a year, with sales in five years not exceeding 2,000 tons. The CBGA was renewed in 2004 for another five-year period. The second CBGA raised annual ceiling to 500 tons and the five-year limit to 2,500 tons.
"There is a general consensus in the gold market that the two successive CBGAs have been a success for the whole market and for central banks in particular," said WGC's Stanley.
Sales slip, slip some more
In the past 10 years, almost all the official gold sales have been from signatories of the CBGA. Their sales have fallen in recent years and are likely to fall further this year, analysts say.
VM Group, a precious metals consultancy based in London, estimated that selling under the CBGA will fall to 150 tons in the year ended Sept. 26. If realized, this will be the lowest number since 1999, when the first CBGA was signed.
The World Gold Council and CPM Group, a New York-based precious metals consultancy, also anticipate official gold sales will fall this year.
Central bank gold sales declined to 279 tons in the 2008 calendar year, more than 200 tons, or 42%, lower than a year ago, according to data collected by GFMS, a London-based precious metals consultancy.
The fall in official sales is a major contributor to the decline in global gold supply in 2008, GFMS data showed. Meanwhile, the portion of official sales in total gold supply also fell to 8% in 2008 from 14% a year ago.

"Central banks that wanted to reduce their gold holdings have sold most of the gold they wanted to sell by the middle of this decade," said Jeffrey Christian, managing director at CPM Group.
But further selling could come from countries that still hold a big portion of gold in their reserves, such as Germany and Italy, according to analysts at VM. Earlier this year, politicians in Germany were talking about selling gold to fund the country's stimulus package.

Borrowing and hedging
Aside from selling gold, some central banks also lend the metal to miners, big banks and funds. Miners borrow gold to sell forward in order to lock in their future revenue. Funds and banks sometimes sell borrowed gold to invest the proceeds in other markets.
Gold borrowed for these two purposes used to have a dramatic impact on the market because it was immediately sold in spot markets, said WGC's Stanley.
VM estimated that total outstanding balance of central bank gold lending was at 2,345 tons at the end of 2008. That's more than the year's total mining production, the major source of gold supply.
Nonetheless, this balance has shrunk consistently since the late 1990s, reducing its impact on the markets. The balance in 2008 fell almost 50% from 2004's more than 4,300 tons, according to VM.
"Gold mining companies have largely stopped selling production as a hedge, and the hedge funds have largely abandoned the practice of selling gold forward as a speculation," said Stanley.
Miners reduced forward sales by 1.54 million ounces in the fourth quarter, the smallest amount for the year, according to GFMS. Gold producers still had 15.52 million ounces left in hedging at the end of the year.
Still, in the short term, gold borrowing can make a shift in prices.
From last August, when the global credit crunch hit the financial industry, bullion banks borrowed "as much gold as was available and executed gold swaps to raise liquidity," VM analysts led by Carl Firman pointed out in a yearly report released earlier this month.
The activity had an "immediate and very marked affect" on gold by holding prices back, even in the wake of strong retail demand for physical metal, Firman wrote in a report.
Gold prices slumped nearly 30% from July's high to below $700 in November. See related story.
By lending gold, central banks can earn interest on it. Unless central banks can lend out their gold, it earns nothing, and the stockpile in fact is a cost in terms of storage and insurance, said VM's Firman in a telephone interview.
Despite some wild speculations, all evidence indicates that the U.S., the biggest gold holder, is not lending gold, said CPM's Christian.
"The people, the gold conspiracy theorists who claim evidence, twist the truth like Uri Gellar twists spoons," said Christian.
More than half of the 8,133.5 tons of gold held by the U.S. is stored in Fort Knox, Ky., according to the Treasury Department. Gold is also stored in West Point, N.Y., and Denver, Colo.

IMF has 400 tons to unload
The second CBGA is expiring in September. Stanley said he expected a new agreement will be signed. William Lelieveldt, an ECB spokesman, declined to comment on the potential renewal of the agreement.
One of the beneficiaries of a third CBGA will be the IMF, which is considering coordinating with central banks to sell 403 tons of gold.
The fund, which holds more than 3,200 tons of gold, ranking the third in the world after the U.S. and Germany, is facing a widening deficit. With the majority of its income coming from interest payment of the fund's loans, the IMF has been looking for other revenue sources.
One of the plans is the creation of an endowment, with major financing for the endowment coming from the proceeds of gold sales.
The IMF acknowledged drawbacks of gold sales, but also said that the sales could "form part of a package approach" and should "subject to strong safeguards to limit their market impact," according to the plan.
The sales "need to be coordinated with the existing and possible future central bank gold agreements," the committee said in the report. By coordinating with the CBGA framework, IMF gold sales "should not add to the announced volume of sales from official sources."
The WGC's Stanley said the IMF is likely to help push through a third CBGA.
"The proposal was designed not just to plug the income gap, but also to put the IMF's finances on a more diverse, sustainable and stable footing for the longer-term, and less subject to the ups and downs of the world economy," wrote Matthew Turner, an analyst at VM, in a report.

Base Metals Technical view As on 18th March 09

Metals: LME copper steady vs PM kerb, last +50 cents at $3,800/ton. Rally likely to run out of steam, prices expected to fall back around $3,100/ton in near term, says ANZ commodity analyst Mark Pervan. Adds recent China data on copper imports, production difficult to digest, blurred by holidays, shutdowns last year due to snowstorms, Sichuan earthquake making interpretation hard to read. Says positive cues fast disappearing; notes jump in China copper output was due to tight scrap, low treatment, refining charges rather than rising demand. Arbitrage with LME discount to Shanghai Futures Exchange now closed.

Energy Technical Forcast for 18 March 09

Weekely Chart as on Monday

Oil fell from a three-month high after U.S. inventories posted a larger-than-expected gain and Japanese refiners processed less crude. U.S. oil stockpiles increased 4.66 million barrels to 349.9 million barrels last week, the most in almost two years, the Washington-based American Petroleum Institute said in a report after the close of trading yesterday. Japanese refiners operated plants at 78.4 percent of capacity last week, down 3.8 percentage points from the week before, according to data released today by the Petroleum Association of Japan.

Trading Call : Crude Oil April Sell @ 2550 Targeting @ 2510 - 2470 - 2425 Stop @ 2575

Bullions Technical Forcast for 18th March 09

Mondays Weekly Chart

Spot gold steady after overnight fall on low U.S. inflation, surge in U.S. housing starts, unexpected bounce in German investor sentiment, which combine to undermine gold's safe-haven appeal, says HSBC analyst James Steel. Outcome of FOMC meeting unlikely to have impact on gold, HSBC doesn't expect change in interest rate policy; meeting to conclude later in global day. IMF officials expect global economy to contract 0.6%, down from sluggish 0.5% growth in forecast made in January. Steel adds slower economy, disinflationary environment consistent with lower gold prices. On plus side, investor demand for ETF remains brisk, but rise in ETF gold holdings may be partly offset by mounting scrap supplies, continuing weakness in global jewelry demand. .

Trading Call : Gold April Sell @ 15080 targeting 15000 - 14950 - 14860 S/L @ 15160

Silver May Sell @ 21630 targeting 21500 - 21370 - 21240 S/L @ 21740