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-- Posted Tuesday, 31 January 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +4.40, SILVER +14.00
London Gold Fix $569.80 +9.40 LME COPPER STOCKS 97,600 metric -125 tns COMEX Gold stks 7.318 ml oz Unch COMEX SILVER stks 124.7 ml oz Unchanged OVERNIGHT ACTION: 18 year highs in Japan, 25 year highs in the European action. GOLD: Typically the presence of rising interest rates is viewed as a dampening effect for gold but under the current conditions, the investment interest seems fixated on a longer term theme. Apparently investors are concerned about the inability to control energy prices and with the political uncertainty last week expanding from Iraq and Iran to include the Palestinian situation, we can understand the steady flow of money into gold and other precious metals. Some traders are even concerned that a Natural Gas situation between Russia and some of its former satellite countries might erupt into something significant. With more ETF news in the headlines this morning (predictions on the recent rate of flow into gold were raised to 120 tons in the last two months) it is clear that the investment theme will continue to play loudly. However, it is our opinion, that the real driving force behind the gold rise starts with the prospect of inflation and that fear is indeed wrapped tightly in the whole energy problem. Some might also suggest that the changes at the Fed, in the Chairmanship and more importantly in the open market committee might lead to a less aggressive inflation battling style. In the end, a number of mostly unrelated themes continue to drive the market and the gold market might not be as overbought as one might think. In addition to the net spec long declining in the latest COT report, it should also be noted that the commercial long as a percentage of open interest sits at just over 20% after posting a modern time low around 17% late in 2005. Back in 1996/1997 the commercial long as a percentage of open interest was in excess of 70% as that is when hedging reached a crescendo. Therefore, commercial or hedge players apparently don't see prices to be high enough yet to begin prompting aggressive forward sales activity. In short, the market is certainly capable of extending the gains, but we just don't think that the April gold will be able to get above $600 prior to the March options expiration. SILVER: The silver market continues to show leadership and should be poised to rise toward the $10.00 level. Critical support in the March contract comes in down at the quasi double top of $9.80 and with the sharp upward extension overnight, we suspect that more follow through gains are expected. While the forecast that ETF interest in silver could effectively generate 4,500 tons of implied demand is a long term best case estimate, the sheer magnitude of the forecast increase has to be feeding more spec buyers into the market. Unless the economic outlook deteriorates significantly, we suspect that the bulls will simply retain control over this market. In fact, until the gold/silver ratio suggests that silver has caught gold and returned to the relationship seen last June, we expect silver to generally lead the precious metals complex to even higher levels. METALS TECHNICAL OUTLOOK 1/31/2006 COMEX SILVER (MAR) 01/31/2006: The rally brought the market to a new contract high. Rising stochastics at overbought levels warrant some caution for bulls. The cross over and close above the 18-day moving average is an indication the longer-term trend has turned positive. A positive setup occurred with the close over the 1st swing resistance. The near-term upside target is at 991.3. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 985.5 and 991.3, while 1st support hits today at 969.5 and below there at 959.3. COMEX GOLD (APR) 01/31/2006: The crossover up in the daily stochastics is a bullish signal. Momentum studies are trending higher but have entered overbought levels. The major trend could be turning up with the close back above the 18-day moving average. Market positioning is positive with the close over the 1st swing resistance. The near-term upside objective is at 574.6. The next area of resistance is around 573.1 and 574.6, while 1st support hits today at 568.0 and below there at 564.3.
To those of you who have emailed or commented on the daily commentary regarding price manipulation: our daily comments are strictly to provide our customers and subscribers with news, which may influence the markets marginally on a day-to-day basis. This is not the forum to address price manipulation.
There are multitudes of ways in which one can participate in a bullish or bearish perspective in the metals complex. Mining shares as well as purchasing bullion are just a few. Another investment of choice is through futures and/ or options on futures contracts. If you have traded, then you will be able to appreciate the brokerage service that Nell Sloane and Group can offer. If you have not, and wish to learn more about it, please feel free to contact her staff so that they can forward you some educational literature for your review. Please contact Nell Sloane or a member of her team at 800 238 2610.
-- Posted Tuesday, 31 January 2006 | Digg This Article
***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Hartfield Management, Inc. is strictly prohibited.
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