-- Posted Wednesday, 16 April 2003 | Digg This Article
June Gold: Close = $326.30, +$.80
With the major combat in Iraq now apparently over, Bush may not only focus on domestic economic issues, but turn his eyes toward Syria. A major terrorist was captured in Iraq and an oil pipe illegally pumping oil from Iraq to Syria was allegedly discovered. One thing is certain, the foreign affairs landscape is assuredly going to remain vibrant, to say the least, and perhaps gold could remain cautiously supported.
On the domestic economic scene, earnings numbers were generally “ok”, and even tech giants Microsoft and Intel did ok, but investors weren’t impressed across the board. The Dow took a shellacking today, as of this writing it was down almost 200 points, the S&P was off almost 20 points and the NASDAQ 100 slid 5 points. The CPI was in line with expectations and grew a meager 0.3%, which is the lowest figure in 37-years. Of course that’s not altogether great news as this makes it difficult for businesses to raise prices and many won’t be able to compete purely on price. Recall however, that the CPI doesn’t include food or energy components, which has never made sense to me because I sure felt the low “consumer” prices at the gas pump! In any case, energy prices have come off their peak and you’re probably already noticing lower prices at the pump. Gold traders can’t seem to piece together so many interwoven variables into a coherent outlook for the yellow metal, which is why we’re seeing prices channeling.
There was an interesting article in the Financial Times today by Kevin Morrision. He talks about hedge funds and what their strategies have been and are likely to be. He mentions that many are now short in various markets, but the consensus still remains somewhat bullish for gold:
“CFTC data show that hedge fund positions in oil, natural gas and copper have switched from net long positions, which indicate that funds expect prices to rise, to a net short positions, which indicates that funds expect prices to fall. Only their positions in gold remain long, indicating their expectations that further price rises in the precious metal could be on the cards.
In addition, the number of investors holding gold futures contracts both long and short on Comex, which is owned by Nymex, have halved since gold hit a six-year peak of $388.50 a troy ounce on February 4.
John Reade, precious metals analyst at UBS Warburg, said that, at the peak, Comex gold futures positions accounted for about 14m ounces, or about 10 per cent of annual supply and demand globally.
The liquidation of gold futures is one of the factors behind the precious metal's price fall to a four-month low last week of $319 an ounce, although it has since partly recovered to $325 an ounce.
However, investors remain net long in gold, suggesting that the price could rise as it benefits from lingering political uncertainty surrounding the war in Iraq and sluggish global economic growth.
Mr Reade said that speculative interest from Japanese investors was high in early February, with 4.5m worth of long positions on the Tokyo Commodity Exchange (Tocom), compared with 2.5m at present.”
What does all this mean, how do we interpret this, and should we really care what every other “investor” is doing? After all, following the crowd of “investors” is what sucked the life out of many wallets beginning in March of 2000!
Do your best to follow the longer-term trends, initiate positions with a favorable risk/reward ratio and try to filter out the static. With prices having fallen somewhat consistently over the last couple of months, is the correction over? 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, aggressive bulls that bought in the low 320’s are doing just fine, but should move stops to at least breakeven levels. Gold appears to be on the razors edge right about now. 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.
July Silver: Close = 449.9, -3.8-cents
We’re now about 20-cents off of the lows from last month, and for the first time in a while. A few days ago we broke out through the 450 area but have since come back to where we started. The chart shows technical indicators are now mixed, so if long, exit on a close below 448.50. The next resistance area is near 464, which is the bottom of a recent gap. Certainly there is room to rally, but recent history has shown us that silver will be more apt to rally only on the tail of a gold rally. 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 Wednesday, 16 April 2003 | Digg This Article
