Tuesday was another busy and choppy days for the metals markets, particularly

the base metals as problems with Select meant a large jump in volume on the floor of the LME.

Sentiment, however, remained largely negative as speculators continued to reduce their exposure amid

concerns of sluggish economic activity in Europe, after the UK reported a contraction in Q4 GDP, and

speculation of further monetary tighten by the Peoples Bank, possible over the Lunar New Year.

In addition traders were also mindful of President Obama's State of the Union address and today's

FOMC announcement. The result led to a bearish days for metals with gold and silver testing to fresh

multi-week lows of $1322.80 and $26.58 while copper, ally, lead and zinc touched their lowest since

December, although lead and tin closed positively with lead still supported by near-term tightness.

The broader financial landscape reflected the more cautious tone with both the Dow and S&P500

closing little changed. In the currencies despite gaining against sterling the dollar remained under

pressure against the euro, which touched a two-month high; the Dollar Index settled down 0.2%.

A limited volume of economic data today will show Italian Retail Sales and US New Home Sales; the

minutes of the last Bank of England MPC meeting could also proving interesting given yesterdays GDP

reading. However, the focus will be primarily on the FOMC, and while no change to interest rates is

expected, traders will be looking to Bernanke's statement for signs of change to quantitative easing, and

whether the $600bn QE2 programme is sufficient or possibly a QE3 is needed.

The mix of slow economic activity in Europe; likely rate increase by China and bearish short-term

technical outlook seems likely to keep the metal sector under pressure in the coming sessions. Whether

the metals have pulled back enough to tempt sufficient bargain hunting support remains to be seen,

however given the scale of long exposure the likelihood is the metals will have to whether more

downside in the short-term.

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