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-- Posted Friday, 31 March 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -2.80, SILVER +4.00
London Gold Fix $584.00 +$4.50 LME COPPER STKS 121,915 ml tns +625 tns
GOLD stks 7.526 ml oz -102 oz COMEX SILVER stks 125.0 ml oz +408,351 oz OVERNIGHT ACTION: International gold rose in a catch-up rally overnight but early US action is somewhat softer. GOLD: OUTSIDE MARKET DEVELOPMENTS: The list of metals markets making some kind of historical high is long and even stretches into obscure metals few people are even familiar with. Some commodity markets are rising purely off the influx of fund money, while others are getting an inflationary spillover impact. We would not suggest that all the recent gains in a market like Orange Juice (to the highest level since 1991) are without direct fundamental cause, but we would suggest that the recent sharp slide in US Treasury bonds was in fact the result of rising inflationary pressures. Gold bulls that thought the rally from $413 to $550 was the result of inflation were probably wrong, because the rally from $252 to $400 was a rejection of deflationary pricing, the rally from $400 to $550 was a combination of renewed investment demand, fund buying interest and a measure of flight to quality. However, the rally from $550 to the mid $600 price level will probably be fueled by additional fund buying, but perhaps more significantly by inflation and flight to quality buying. While the Dollar isn't lower today, it has been persistently weak and is expected to track even lower, so it should not be a major negative influence on the metals markets today.
INTERNAL MARKET DEVELOPMENTS: In addition to a wide variety of metals market rising in sync with the gold market, we also see a much more prevalent inflation dialogue in the market place. With the ECB indicating that they recently completed sale of 57 tons of gold in a "program" many would consider that story to be a negative, but since the ECB also suggested that they had no plans to sell any more gold the impact of the story is potentially reversed. In other words, the ECB could sell gold more gold under the 2 year agreement allowing such sales, but apparently they won't sell any more gold in the second year of the agreement. Since the market has been reportedly fueled by end of quarter fund buying interest and today is the last day of the quarter, the trade is expecting to see some follow through buying. However, some in the trade are fretting the presence of profit taking from those that have managed exceptional returns on the long side of gold over the last month. On the other hand, inflation expectations rose this week and that might become the new favored headline for gold instead of fund interest. The June gold comes into the action this morning fresh off another new high overnight and the market is certainly seeing plenty of factors providing it with support. With the US Treasury market sensing inflationary pressures, it is possible that the end of quarter buying mentality is replaced by more of an inflationary buying tilt. However, it is end of quarter and a number of longs have jumped in and chased this market higher. We might also add that a lower Dollar and a $4.30 setback off the overnight high could be cause for some weak handed longs to bank some profits. So we don't get a wave of e-mails from readers, we are not calling for an end of the uptrend but in writing a daily comment, we have to present the potential impacts for "today". In fact, the fundamentals have done nothing but improve for gold this week, especially with Iran indicating that they would not halt Uranium enrichment. Initial resistance is seen at $593 and $596, with close in support seen today at $587.5. SILVER: OUTSIDE MARKET DEVELOPMENTS: Like the gold market, the silver market has also managed a fresh new high for the move overnight but has also recoiled rather significantly from the highs. However, as mentioned in the gold coverage, the inflation tilt clearly surfaced this week and one might also suggest that flight to quality interest is rising, given the developments in Iran. With a wide range of metals or metals alloys making significant historical price moves this week, it would not seem like silver is operating in a vacuum that is being driven exclusively by fund buying. On the other hand, talk that an ETF fund had secured 120 million ounces of silver to back their fund position, is certainly a sign that the funds presence was significant to the latest pulse up.
INTERNAL MARKET DEVELOPMENTS: Some traders might be concerned that the silver market is overbought and it is likely that COT report readings due out after the close today will show a fresh record spec and fund long position. In fact, when one considers that the market has exploded upward since the last COT report was measured, we have to think that a new record spec long position was registered. However, if there is a rising tide of global trading interest in silver, it is only logical to assume that old records will be consistently broken. The fact that silver prices are coming into the regular US trading hours some 22 cents below the overnight high, could serve to weaken the resolve of some bulls into the end of the quarter, especially when one considers the anticipated readings from the positioning reports. After an overnight pulse to $11.94, the silver market appears to be a little overdone from a short term perspective. However, the current trend is pretty solid and the Press is sure to carry the fact that May silver almost managed to break the $12.00 per ounce level overnight. With the silver partially overbought, the Dollar higher and the end of quarter looming, one has to expect some back and fill action on the charts but the real test of a bull market is the level of buying interest that comes in on weakness. Initial support in May silver today is $11.66 and resistance is seen up at the overnight high and at even numbers of $12.00. One can't rule out a temporary failure of the $11.66 support zone but as long as oil prices are firm and Iran is in the news, we doubt that silver prices will give back a large portion of this week's gains. METALS TECHNICAL OUTLOOK 3/31/2006 COMEX SILVER (MAY) 03/31/2006: The rally brought the market to a new contract high. Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The gap upmove on the day session chart is a bullish indicator for trend. The market's close above the 2nd swing resistance number is a bullish indication. The next upside objective is 1198.4. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1185.8 and 1198.4, while 1st support hits today at 1146.3 and below there at 1119.4. COMEX GOLD (APR) 03/31/2006: The market rallied to a new contract high. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. Follow through buying looks likely if the market can hold yesterday's gap on the day session chart. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside target is 594.8. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 591.9 and 594.8, while 1st support hits today at 581.5 and below there at 574.1.
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 Friday, 31 March 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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