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-- Posted Thursday, 3 April 2003 | Digg This Article
June Gold: Close = $325.7 -$4.7
The good news for gold bulls is that prices are getting cheaper, in fact were at levels not seen since last December. Favorable coalition progress in the war is providing encouragement for investors to exit gold and perhaps look to paper assets. All the markets, tangible or not, have one eye on the war developments…perhaps one and a half…and another on economic data. Employment numbers released today were the worst in 11 months. Stocks were initially higher thanks to an optimistic war outlook, but employment data knocked them off their stool for a bit, however, stocks eventually did rally again. If there were a new twist to the gold story I’d love to relate it to all of you, but the song remains the same with gold moving inversely to the progress in Iraq. Investors are rightfully concerned about other hotbeds of turmoil that could overflow anytime and anyplace. With the war on terror far from over, with employment numbers sour, with major airlines teetering on bankruptcy, with nervous consumers nervously tightening their wallets, with the US dollar coming back to earth, with corporate earnings continuing to mostly disappoint, with little room left for the Fed to ease, with burgeoning trade and budget deficits, etc., it's easy to see how higher gold prices remain in the cards. But, day-by-day and week-by-week, gold could drift anywhere in sympathy with the war or a terrorist act. Taking a look at what others are saying, the authors of the Aden Forecast focus on macroeconomic trends, and I’d have to agree with their current outlook. They see the US dollar heading for further weakness, and by default that infers gold will rally. Here are a few comments from the article “Cashing in on Foreign Currencies” on marketwatch.com:
Over the past two years, for example, the dollar dropped 23 percent against the euro. During that time, stocks have plunged and gold has soared along with the foreign currencies.
We believe these trends will continue.
The war with Iraq has been pushing the dollar down in recent months -- but the dollar was falling long before Iraq was headline news.
Record low interest rates, a sluggish economy, record trade and budget deficits, a deflating stock bubble and lower confidence have been the main culprits causing dollar weakness.
The war's added fuel to the fire and if it drags on, it'll keep downward pressure on the dollar. But even if it ends quickly, the dollar will have these other fundamental issues affecting it.
In fact, loss of foreign confidence alone could drive the dollar much lower.
Most people don't realize that foreigners hold $7 trillion in U.S. assets and they're not happy about watching their dollar assets deteriorate. They've already started moving out of dollars and into other currencies.
Do your best to follow the longer-term trends, initiate positions with a favorable risk/reward ratio and try to filter out the static. It's not possible to predict the daily change of tide regarding the war or what else may erupt on the geopolitical landscape, just as one can't always correctly forecast market direction on a short-term basis. Over the last couple of months gold has retraced, but could this be a correction in an otherwise bull market? In spite of recent strength in stocks and the US dollar, the bigger trend in those markets is lower. Therefore, in the long run, one can expect gold to continue to attract attention from buyers. Prices are not yet above the 5, 10 and 20 period moving averages, but when gold closes consecutively above those averages look for continued strength. Meanwhile, prices are a choppy mess. Be sure to watch TradeScope daily. Remember, with futures and options one can be short or long, feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
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 = 441.3, +1.1-cents
It remains awfully messy out there, technical indicators were oversold, then they turned higher, now they are indifferent. If long, exit on a close below 438 and look to buy at even lower prices. The next resistance area is now 451 or so. Certainly there is room to rally but only on the shoulders of a willing gold market, which means silver bulls will need the dollar to drop. Take note that the bullish seasonal, where in 12 of the last 15 years May Silver has rallied from approximately March 18 to April 4 an average of about 11-cents, is almost over. 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 Thursday, 3 April 2003 | Digg This Article
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