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-- Posted Wednesday, 30 April 2003 | Digg This Article
June Gold: Close = $339.5 +$5.5
Just when bears thought it might be safe to tiptoe back into the pits, the bulls sucker punched them, driving prices $7 higher on an intra-day basis. The primary catalyst behind today’s rally was that the US dollar ran through sell stops and sank to new contract lows against the EC. There was lots of action in other sectors as well: eurodollars ran higher, stocks gyrated on both sides of unchanged and energies corrected and spiked higher after sinking to fresh five-month lows yesterday. Greenspan is speaking before congress, but as usual he won’t spill the beans in relation to the future direction of rates. He says the “economy is positioned to expand”, but isn’t it always? What is clear though is that stock investors were too frightened to dig in and take their stance at the plate today, perhaps due to trepidation over what Greenspan may or may not say, or perhaps they’re still a bit shell-shocked from the slump in the dollar. The two-year downtrend in the dollar is persisting, and until that scenario flip-flops, we’ll see gold supported. I mentioned yesterday that if equities were to shine again, gold would struggle. However, if the dollar keeps getting clobbered, it will be difficult for stocks to find their legs and gold bulls would benefit. Recent consumer confidence data was encouraging, and if consumers start putting their wallets to work, we could see optimism spread, but the disclosure today of accounting errors at Tyco International didn’t help matters any. I’d rather not speak in such conditional language, but we’re faced with so many murky markets that it’s tough to see clearly through the muck. There is still much to be optimistic about in regards to the US economy. We referenced yesterday how energy prices had plummeted about $15 in the last couple of months. Well, make that about $14, as prices rallied over 100 points today. In any case, the big uptrend in crude that was in progress over the last couple of years has seemingly been nullified. If crude continues to slide, this will be a HUGE boost to the economy as it amounts to what is essentially a tax cut for everyone. Also note that the Bush administration doesn’t seem to be giving up on the tax relief component of their economic stimulus plan. If a substantial and meaningful relief bill were to make it to Bush’s desk soon, it’s more likely than not that equity markets will see that as beneficial, and so will consumers. Of course there is no way to predict if we’ll be hit by another huge terrorist attack which could undermine any economic progress, but over the long haul the economy will shine once again. Meanwhile, gold can easily move $30 or $40 higher any given week, heck, just look at the rally today. However, if gold is to approach $1,000 and beyond like so many continually promise it will, the monetary/financial/equity environment will have to spiral into a dark abyss to encourage that kind of action. Open interest in June Gold has increased, possibly indicating new buyers are making an entrance into the gold ring. Over the last week and a half gold consolidated between 330 and 335, but prices are now above the 50-day moving average. If long with TradeScope, be sure to follow along and keep stops tight. Yesterday we said “Daily charts show an inverted head and shoulders formation, which is bullish, and will target the 347 area”, we’re still looking to 347. Support is near 329. 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 = 465.2, +8.7-cents
After running to a high near 469 late last week, prices stalled, but today they gapped higher and are challenging the recent high. Yesterday I mentioned, “All the buying that drove prices higher doesn’t appear to have been buyers with a strong bullish conviction”, this may still be the case as it’s likely buyers today mostly did so only on the coattails of gold. Whatever the case, the action was quite favorable to bulls today, in spite of the fact that technical indicators just yesterday were indifferent at best. It just goes to prove that indicators, charts, fundamentals, etc., are never 100% foolproof. Action formed a doji star and we’ll have to wait until tomorrows close to determine if it’s an evening or morning star. Look for prices to break through 470, with 455 the next support level. 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, 30 April 2003 | Digg This Article
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