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-- Posted Monday, 3 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.50, SILVER +8.00
London Gold Fix $585.50 +$1.50 LME COPPER STKS 120,675 ml tns -1,250 tns
GOLD stks 7.575 ml oz +49,617 oz COMEX SILVER stks 125.0 ml oz -43,787 oz OVERNIGHT ACTION: Japanese gold starts the quarter firm, while European gold managed minimal gains. GOLD: OUTSIDE MARKET DEVELOPMENTS: To start the new quarter gold would seem to be fighting a bit of an uphill battle against a rising US Dollar, which has suddenly returned to the vicinity of the last two weeks highs. The strength in the Dollar is quite a departure from the overt weakness seen in the Dollar for most of last week. However, the gold market is initially seeing strength in other metals markets and is also seeing strength in the energy complex, which has typically been supportive to gold prices. Even early equity market action seems to be supportive of the gold market this morning, which is a little surprising considering the negative sentiment in the stock market at the end of last week.
INTERNAL MARKET DEVELOPMENTS: With a positive early track in prices, the gold market looks to be only partially impacted by the string of US economic reports due out from the US this morning. Overnight the gold market seems to have taken dialogue from the OPEC President as supportive to gold prices, as the OPEC President overnight expressed concern about rising oil prices and the potential exaggerating impact of US gasoline prices, on the world price of oil. With a favorable Japanese Tankan survey release overnight, the trade also sees a very critical gold consuming nation gathering momentum, so at least early in the session today it would appear that the macro economic tilt is giving the bulls more information than the bears. As already suggested, the gold market seems to be poised to start the 2nd quarter with a positive tilt and considering the breadth of external and internal information, we have to think that spot gold will indeed make a run at the psychological $600 level in the coming sessions. Ongoing strength in energy prices is perhaps the most critical element in a continued run in gold prices, but the rise in oil prices can't become so strong that growth is undermined. In fact, the perfect storm for gold might be steadily rising energy prices and a world economy that is registering just enough growth to keep the threat of higher interest rates in check. If it were not for the strength in the Dollar today, the gold would be looking ultra strong, but as it stands, we suspect that June gold will be able to respect close-in support of $584 and in turn test resistance up at $592.1. The March 28th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 123,257 contracts, with the Non-reportable position net long 32,065 contracts for a combined net long of only 155,000 contracts. With the combined net long record coming in at 227,566 contracts, back in October of 2005, it is clear that gold retains additional buying capacity. SILVER: OUTSIDE MARKET DEVELOPMENTS: While a higher Dollar is somewhat discouraging to silver, it is possible that generally positive international equity market action, a higher gold market, a favorable set of Japanese economic readings and generally stronger base metals price action, ends up being major countervailing force. Many traders think that the positive equity market action is even more critical to silver prices, than the strength in oil prices, as silver seems to be getting a large portion of support from the expectation of investment flow than it does off the expectation of inflation type buying.
INTERNAL MARKET DEVELOPMENTS: Like gold, the silver market is seeing a positive start to the new quarter and that is somewhat supportive of the bull case, as some traders were expecting the market to take a breather after the overly aggressive run up into the end of the 1st quarter. Despite the intense speculative interest in silver recently, the silver market has yet to register historically overbought positioning levels and that should be of some comfort to the bull camp. It seems that the comments from the OPEC President overnight were taken as a positive by the international metals trade, which means that silver prices look to start the quarter out firmer and mostly in an environment alive with fresh headline developments. As we have already suggested, the higher opening this morning is positive because it thwarts the profit taking mentality that some players wanted to associate with the end of quarter last Friday. However, the silver market is seeing very favorable macro economic news flow overnight and is also seeing positive action from both precious and base metals markets. We also think that higher equity market indications and the comments from the OPEC President serve to extend the investment interest in silver, despite its rising price structure. With the March 28th Commitment of Traders with Options report showing the Silver Non-Commercial position to be net long only 50,600 contracts and the Non-reportable position net long only 21,948 contracts, the silver market probably comes into the action today still below the record long position of 97,636 contracts that was posted back in March of 2004. In other words, this market retains buying capacity and is getting the internal and external information to extend the pattern of gains. Those that saw our 1.29 profit stop on the long May $10.25 call position touched at $1.27 on Friday, should look to re-enter the long side, with the purchase of a July silver $13.00 call at 39 cents. METALS TECHNICAL OUTLOOK 4/3/2006 COMEX SILVER (MAY) 04/03/2006: A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is now at 1122.7. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1166.8 and 1181.6, while 1st support hits today at 1137.3 and below there at 1122.7. COMEX GOLD (APR) 04/03/2006: Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The market's close below the pivot swing number is a mildly negative setup. The next upside objective is 589.1. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 585.3 and 589.1, while 1st support hits today at 578.3 and below there at 575.2.
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.
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-- Posted Monday, 3 April 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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