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-- Posted Friday, 7 March 2003 | Digg This Article
April Gold: Close = $350.9, -$6.0
The name Bin Laden conjured up the ghosts of market volatility and upon the rumor that two of his sons were captured the gold market sank like a tank! Gold collapsed by as much as $10 in only a few short minutes! This drop off is certainly proof that a “terror premium” or “uncertainty premium” has been built into gold prices. Obviously the capture of two of Bin Laden’s sons, or even the capture of Bin Laden himself, has nothing to do with the internal supply and demand fundamentals of gold, as we know gold is partially an emotional metal. During his news conference, President Bush cemented his resolve to disarm Iraq either with or without force. He is forcing the hand of the U.N., but some U.N. members are basically saying they’ve backed away from their prior commitment to support resolution 1441. Powell spoke before the U.N. council saying that Iraq is only barely and grudgingly complying with inspectors, if at all, and that basically they are in material breach of 1441. There is an ultimatum…another one…of sorts that the Security Council will perhaps soon vote on, which would give Iraq one final week to disarm. As usual, France and a few others say that they not only won’t back up their original stance in resolution 1441, but nor will they support this subsequent resolution, which is really only clarifying the first one already unanimously passed by U.N. members. U.S, Britain and others say it’s not necessary to get the blessing of the entire U.N. to disarm Iraq. Talk about a game of politics! Saddam is just sitting there and he’s got the entire world bickering with each other! Meanwhile, gold has mostly been driven higher amidst all the moody and frenetic geopolitical chaos. Unemployment data showed it’s at its highest level since November of 2001, with the jobless rate at 5.8%. This isn’t the best of news for an already damaged financial sector, but equities did fend off the bad news. Perhaps the relatively good news of progress on the war on terror counterbalanced the bad economic data, or perhaps the market had already discounted the data. In any case, the US dollar took another hit today and stocks remain weak. Also, don’t expect to see the Bush administration rush to buoy the dollar, especially after the way France and Germany have snubbed the U.S. After all, if the EC gets too strong EU exports could suffer. It’s just a thought, especially for those who believe in premeditated political and economic warfare as a means for revenge. Anyway, the dollar is trending lower, the economy and stocks are floundering, and higher energy prices are strangling the economy, so perhaps gold will resume the uptrend soon. The major dip was perhaps the beginning of a buying opportunity, as the overall trend remains higher. As we referenced, the chart did predict a bit of nearby weakness, and it still looks a bit foreboding at the moment with prices below averages and having formed a bearish engulfing line. Based on a large bearish head and shoulders pattern, one might assume there are more weak longs to clean out through the $340 area, maybe then the uptrend can resume. A close over $360 during consecutive sessions is likely to target $400. Gold prices do appear to have recently found a floor in the $345 to $355 region. On consecutive closes below $343 the bulls might consider bailing out and waiting for prices to ripen before charging back. Meanwhile, hang onto those gold puts as a hedge to the long futures.
May Silver: Close = $468.8, +1.5-cents
This week we made a stab through the 470 area, thanks mostly to the buoyancy of gold. The silver market has been choppy as of late but in similar fashion to gold, there is a large head and shoulders that has formed over the last four months, which is bearish. Of course technical formations don’t always work, and if prices did dip below 450 it doesn’t infer they’ll plummet, but the pattern is something to keep in mind. Having said that, over the next year there is plenty of potential for this market to rally and get through 500. Those of you long in the 460 area as per TradeScope should be able to lock in profits. On a close above 475 look for new highs, and if prices chug along the low road, look to the 443 area as major support.
-- Posted Friday, 7 March 2003 | Digg This Article
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