We began the week at $342 and ended $7 higher, with most of the gains being realized on Thursday.  The impetus behind the jump in gold prices was the weaker US dollar, which was prompted by numerous factors.  The Fed implied they may not be averse to lowering rates sometime soon, the ECB left rates unchanged, and lethargic economic data and equity performance weighed down the dollar and it fell through sell stops, which exacerbated weakness.   The dollar is at four-year lows and its weakness is currently the driving force behind gold’s strength.

Gold bulls have been the benefactor of buoyancy provided by a weakening economy, lousy job market, government deficits, poor consumer confidence, decreasing equity markets, reduced foreign investment, and of course the threat of lower rates, among other variables.  However, a weaker dollar isn’t necessarily a black spot on the economic picture, as at some point exports and trade will be positively stimulated.  Besides, the DX is falling from levels that were perhaps inflated to begin with, it’s merely searching for a new trading range of equilibrium. 

Earlier this week we were suggesting that corrections in gold could offer openings to establish bullish positions, and we did get a small pullback and I know some of you bought near 341 as I took the orders!  However, we certainly didn’t anticipate such a one-day surge, but isn’t that what markets make a habit of doing…surprising us?  Quick moves are almost impossible to act rationally upon while in progress, you should always have open orders in place to remove clouded emotion from the equation.  Also, to gain a broader perspective, always keep in mind the weekly and monthly charts.

Prices are well above moving averages but technicals are getting increasingly overbought.  Prices are top-heavy for the moment and odds would favor a correction to repair the indicators and help attract fresh buyers.  As a caveat though, indicators are not foolproof as overbought/sold conditions can persist and prices can continue to advance/decline.  Volume and open interest are following prices higher although they are also exhibiting signs of peaking.  If long with TradeScope, keep your stops fairly close behind prices.  If long, don’t rest on your laurels, pull some profits off the table, prepare for a swing lower and get ready to add at better prices.  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.
 
July Silver:  Close = 480, -.20-cents

For the week silver finished 1.5-cents lower, but there was some volatility in the mix to keep us from falling asleep.  I was reading through Refco’s research regarding the World Silver Survey 2003 and came to the same conclusion as the authors; that silver is likely going to remain in a wide range through the remainder of the year.  Of course it doesn’t take much courage or brains to profess such an innocuous outlook, but that’s the way they see it, and I’d have to agree.  I won’t go into all the details here, but let me know if you want a copy of this research.  Anyway, silver rallied late in the week alongside gold, all thanks to a weaker dollar of course.  Look for 468 as the next support level and 484 as resistance, but mostly look for silver to ape gold.  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 Friday, 9 May 2003 | Digg This Article