-- Posted Tuesday, 25 February 2003 | Digg This Article
April Gold: Close = $352.4, -$4.0
As the fortunes of the dollar come and go, so too does the price of gold. The inverse relationship between the US dollar and gold hasn’t lost a step. The dollar was up about 30 points, and in sympathy gold sold off. Of course gold doesn’t take marching orders only from the dollar, a European Central bank was also rumored to have sold off some reserves, exacerbating the weakness in gold. However, this sale had been planned for several years and was mostly discounted by the gold market, and isn’t likely to have a long lasting impact.
The Dow was hammered once again and challenged the low near 7600 from earlier this month. With US consumer confidence hitting a 10-year low, investors and the economy are clearly distracted by Iraq. Considering money is flowing out of equity funds, where will it be going next, into gold? Surely gold has benefited from poor equity performance, and the proof is in the $120 move over the last twelve months. But, how much steam remains in the golden boilers? Perhaps we could see prices over $400 quite soon?
On a humorous note, Saddam suggested a live televised debate with President Bush to argue his case. You have to hand it to Saddam’s timing and creativity! A second U.N. resolution to disarm Iraq is up for a vote soon, and the timetable for ousting Saddam seems to be weeks away. As U.K. Prime Minister Blair has said, it is absurd to continue with weapons inspections as the inspectors are not detectives or on a treasure hunt. The burden is upon Iraq to prove it has destroyed its WMD, but it’s clear that Iraq is blowing its last shot at a diplomatic solution. Yes, gold was a bit lower today, but as this dicey situation ripens, gold prices are more inclined to remain buoyant. It’s difficult to see a large amount of short gold positions establishing themselves during such an affair.
Recall our musing about escalating energy prices, the struggling economy, and perhaps additional rationalization to attract investors to gold? Well, a recent USA Today article by Barbara Hagenbaugh confirms our thoughts…that these high prices are bound to strangle many consumers who are already operating on tight budgets.
“Natural gas prices jumped nearly 40% and heating oil costs hit their highest level on record Monday, developments that point to increases in already bloated home-heating bills.
Residential heating oil prices are up 50% from a year ago, when the average winter heating oil bill was $642, the Energy Department says.
''Higher natural gas and heating oil prices will cut more into consumer budgets,'' says Jim Williams of WTRG Economics, an energy consultant. ''If you are old enough to remember, it is time to bring out that sweater that President Carter used to wear while encouraging us to turn our thermostats down.''
''We're in a weak recovery as it is, and this is just one more headwind in an economy that is facing many headwinds,'' says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.
Dark clouds hover over the question of Iraq, likely keeping gold nervously supported. Stocks are lethargic and consumer confidence is terrible. Gold may attract investors purely by default! Look for the $400 area as a target. Meanwhile, hang onto those gold puts as a hedge to the futures. 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.
May Silver: Close = $465.6, -7.2-cents
It’s too bad there isn’t much more to silver’s story, but with few fresh internal fundamentals surfacing silver is finding direction from gold. The gold dip we expected was deeper than we thought, but now that gold seems to have stabilized a bit, silver too appears ripe enough to attract new buyers. Indicators such as slow stochastics have turned higher and prices are trading above moving averages. Look to the 480 area as resistance, but it’s doubtful the resistance will be strong enough to keep a lid on prices. 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, 25 February 2003 | Digg This Article
