|
-- Posted Tuesday, 11 May 2004 | Digg This Article
June Gold: Close = $377.2, -1.5
Due to the release of optimistic employment data and other strong economic numbers, and under the premise that the Fed has shifted its bias towards tightening, the US dollar is at its highest level in over six months. Therefore, what was once a limping gold market has now found further catalyst to seek out lower prices over the last few sessions.
Recently China has taken the seemingly counterintuitive step of tightening lending requirements to inhibit economic overheating, and this sent traditional commodities, industrial metals and therefore gold and silver, reeling lower. Can China really micromanage that effectively? It's not likely, and such a burgeoning powerful economy will continue to have an appetite for commodities regardless of internal attempts to engineer slow growth.
The Fed may not be as anxious to raise rates as we might think, especially considering energy prices aren't likely to substantially retreat anytime soon. Also, equities just had their worst week in several years, and this could drive wounded gold bulls back into buying mode. In fact, Richard Russell was just quoted in a MarketWatch article saying that he's bearish equities and that gold is an "insurance policy" in such circumstances.
The economy is clearly charging along in somewhat “normal” fashion, yet the only thing not normal in this environment are the negative short-term rates. Consumers are in high debt and must keep spending, not saving, to drive GDP. According to Barron’s, personal bankruptcies are at an all-time high, which means that with rates hovering at historical lows, people have gorged on financial leverage. Furthermore, Barron’s also interviewed top money managers and I believe the consensus was 80-90% bullish on equities. If everyone is already bullish, who is left to buy?
Looking at the charts, the head and shoulders pattern played out well for gold bears. Now, some technical indicators such as stochastics are exhibiting bullish divergence, but they aren’t quite oversold yet. Perhaps a dip of another $10 lower is in the cards, to the mid 360 range, and until then, if you’re really aggressive, you could nibble in this area if you just have to be long. Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; 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 = 552.3, -24.2
On April 2, July Silver hit a high of 8.36, and on May 11 it hit a low of 5.50, which is a decline of almost $3.00 in just about a month! Now THAT is some volatility! During this time not a whole lot has fundamentally changed in the silver supply/demand situation, but traders and prices don’t always focus on reality but rather expectations and perceptions.
We had mentioned that aggressive buyers could go lightly into silver just below the 6.00 area, and looking back that would not have worked. But we also said not to get over confident, as there’s nothing keeping prices from testing 5.70 again. Well, not only did prices test 5.70, they blew through that level! Having said that, bulls with a strong conviction might once again attempt to dabble and enter, this time near 5.50. If prices continue against you, don’t become paralyzed and hang onto losses larger than you intended, always keep stops in place. Remember, 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 Tuesday, 11 May 2004 | Digg This Article
Previous Articles by Altavest Worldwide Trading, Inc.
|
