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-- Posted Tuesday, 18 February 2003 | Digg This Article
April Gold: Close = $344.3, -$7.9
In just a couple of weeks gold has dropped from a high near $390 to a low today of $343, that’s a drop of almost $50! The rally that began over a year ago may not be over, but recent action has certainly spooked many longs off their feet. Market dynamics are such that they discount or anticipate events, and when an event doesn't occur in conjunction with what was anticipated markets become disappointed. In this case, it appears the gold market anticipated we'd be closer to military action in Iraq, and a seemingly accommodating and placating tone from the U.N. and other world leaders has temporarily disappointed gold bugs. Additionally, perhaps gold was moving up on the premise of further anticipated dire stock market and dollar performance. Yes, stocks have dropped and the Euro is holding the dollar on the ropes, but perhaps the magnitude of such moves was less than anticipated. We seemed to have experienced an example of "buy the rumor and sell AHEAD of the fact". Gold bulls have watched prices move over $120 higher in just about a year, so when they had a chance to bailout and pocket the substantial profits, they took it, especially given that there was a lack of fresh dramatic catalyst to propel prices further. The outlook in the geopolitical arena appears as chaotic as ever, but apparently the nervousness regarding a war with Iraq was somehow assuaged and therefore gold prices slumped. But, with prices now about $45 off their highs, it's likely new buyers will gain some courage and step up to the plate once again. We were thinking that some buying might occur in the $350 area, but this was not the case. Oil prices remain nervously at lofty levels. Venezuela is just about off the radar screen in terms of when they’ll be a global player in crude again. In the event of an effort to forcibly disarm Iraq, the threat of another scorched earth tactic from Iraq is a high probability, and the market is certainly aware of this and remains cautious aware as it ratchets higher. The recent sell off has been deeper than we anticipated, but that’s what markets do…what you don’t always think they will. However, the deep correction may be just the medicine the bulls need to repair technical indicators. After all, lower prices will ultimately lead to higher prices according to supply/demand laws. And, the cloud of uncertainty regarding Iraq and the war on terror will be entrenched in the headlines for some time, all the while keeping gold nervously supported. Look for the $400 area as a target. Meanwhile, thank goodness we have those gold puts as a hedge to our futures contract. Be sure to watch TradeScope daily, and remember, futures and options offer flexibility as one can just as easily be short or long any market. Each contract/option = 100 ounces, a $1 move in a futures contract = $100. Contact me anytime to discuss strategies to fit your needs.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
March Silver: Close = $455.5, +2.0cents
It appears silver does have a mind of its own as it made its own rules today and traded higher, opposite of gold. Recently silver has trailed gold but relationships between markets aren’t always perfect correlated. Overall however, with few fresh internal fundamentals surfacing to press the silver market one way or another, silver is finding direction from gold. The dip in gold that we expected is deeper than we thought. These lower prices might serve to attract buyers into the yellow metal and infers that the white metal may have found support as well. Remember the bearish seasonal, wherein from approximately 2/5 to 2/25 silver has fallen an average of about 18 cents? Well, it appears to have worked like a charm this year. Each contract/option = 5,000 ounces, a 1-cent move in a futures contract = $50. Contact me anytime to discuss strategies to fit your needs.
To open an account and receive trading recommendations on silver futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
-- Posted Tuesday, 18 February 2003 | Digg This Article
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