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-- Posted Monday, 10 March 2003 | Digg This Article
Gold & Silver Review of 3/10/03
April Gold: Close = $354.8, +$3.9
After the dramatic sell off late last Friday on rumors that Bin Laden’s sons were captured, the rumors turned out to be unfounded, and today gold recovered about half of those losses. As we mentioned earlier, this erratic pricing is certainly proof that a “terror premium” has been built into gold prices. Obviously all this has nothing to do with the internal supply and demand fundamentals of gold, clearly revealing that psychological and emotional factors are propelling gold to and fro.
There is a deadline of March 17 for Iraq to disarm and comply with U.N. resolution 1441, which received a unanimous vote last Fall. However, France has backed away from their original “yes” vote and is simultaneously on a campaign to convince other U.N. members to do the same. The U.S may or may not get the necessary 9 votes for the latest resolution to pass, but France would veto a passed resolution anyway, China would too, and perhaps Russia also. Regardless, with Iraqi drone planes found (the ones Blix conveniently passed over in his recent report and which violate 1441), and with banned bombs capable of delivering biological agents recently discovered, the U.S is more determined than ever to disarm Saddam. Until something happens in this landscape, gold will remain nervously supported by emotion. Consider that there are reports that Saddam has sent troops to oil fields with explosives, that ditches are being dug around Baghdad under the assumption that Saddam will flood them with oil and ignite them to create a smoke screen. Consider that banned bombs reconfigured to deliver chemical or biological agents have been found in Iraq, and that videotapes of banned bomb tests have been found, it’s apparent that Saddam is in material breach 1441. There are also reports that many Iraqi soldiers will be wearing U.S. uniforms and commit atrocities against the Iraqi people in order to stir up a frenzy of public opinion against the U.S. So, with multiple variables to account for, it’s anyone’s guess as to exactly how the conflict will play out, and that is exactly why gold remains somewhat supported by nervous traders. Equities are slithering lower as worries over the cost of an imminent war persist. It’s likely that the unknown tangible cost of the war is weighing on the economy. But more than that, perhaps the threat of war is simply a distraction to the public and a good excuse for people not to spend or invest. The US dollar has slid against the EC and this has also supported gold recently. The inverse relationship isn’t perfect, but it does still seem to exist. The dollar is trending lower, the economy and stocks are floundering, and higher energy prices are tightening the noose around the neck of the economy. Last week charts predicted a bit of nearby weakness and prices collapsed on Friday. Bears appear ready to pounce with prices barely above moving averages, and there is still a bearish engulfing line from last week. 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. However, prices are also forming a symmetrical triangle. 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 region. On consecutive closes below $343 the bulls might consider bailing out and waiting for prices to ripen before charging back. 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 = $468, -.80cents
As much as silver has rallied lately, it certainly hasn’t kept pace with gold. Yes, we recently made a stab through the 470 area, thanks mostly to the buoyancy of gold. However, silver has been choppy as of late and 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. 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 Monday, 10 March 2003 | Digg This Article
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