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-- Posted Tuesday, 4 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -3.90, SILVER -7.00
London Gold Fix $585.00 Unch LME COPPER STKS 116,200 ml tns -4,475 tns
GOLD stks 7.573 ml oz -2,409 oz COMEX SILVER stks 125.0 ml oz -UNCHANGED OVERNIGHT ACTION: Weaker action in Tokyo and London despite a lower US Dollar. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the US Dollar was a touch lower this morning, the magnitude of the declines didn't seem to discourage overly aggressive profit taking in the early international gold market action. It is likely that lower oil prices off Iranian indications that they will negotiate on Uranium enrichment, served to undercut gold this morning from the inflation and flight to quality perspectives. Providing support to gold this morning is the fact that the IMF raised it 2006 global economic growth forecast to 4.9% from a milder 4.3% and in the process the IMF also raised Chinese growth to a much more significant 9.5% from 9.0%!
GOLD MARKET FUNDAMENTALS: As suggested before, the gold market doesn't seem to be finding much support from the lower Dollar and with the rest of the metals also showing some profit taking type action in the early trade today it would seem that the bear camp has an early edge in sentiment. There was a forecast overnight that predicted a gold supply and demand surplus in 2006 and that suggests that rising prices are potentially expected to pull out more supply or that high prices are eventually expected to discourage some gold demand in 2006. With the minimally negative spin from the gold surplus forecasts and a slightly lower oil market this morning, at least part of the profit taking action overnight seems to have a fundamental basis. However, given the stellar IMF global growth forecasts, it is possible that the recent investment buzz toward gold remains entrenched. With the market initially showing some weakness and at least a couple outside markets giving off partially negative action, we suspect a little back and fill mentality will prevail early today. While the news that Iran will negotiate on the Uranium issue is a negative, that should not serve to totally undermine the market. Similarly with oil prices a bit softer this morning, we suspect that some would-be buyers are set to step back from the fray until prices become a little more attractive. Therefore, a decline to close-in support on the charts of $586.8 basis the June contract might be in order. We doubt that the US economic reports today will have much impact on, but we do think that the stronger IMF growth forecasts go a long way toward entrenching the idea that gold is indeed a bull market and that the spot price of gold will soon test the even number $600 level. Somewhat lower support comes in off the February high of $585 but a really solid bull market should find buyers on the anticipated weakness today. SILVER: OUTSIDE MARKET DEVELOPMENTS: Lower gold and copper price action this morning is given a little more significance by the reversal in the stock market on Monday afternoon. On the other hand, a stronger global growth forecast from the IMF overnight for 2006 seems to enhance the idea of ongoing investment interest flowing toward silver in 2006. Some silvers traders this morning suggested that copper price action today, could be more important to the silver market, than the gold market action. It is also possible that a slightly weaker energy market tone gives the sellers a minor assist in the early action today.
SILVER MARKET FUNDAMENTALS: Recently the headline flow on the ETF situation has been slow and with the general metals environment this morning giving the bear camp more hope than the bull camp, it is not surprising that the early action today is giving off a liquidation tilt. In general, the trade continues to speculate that rising ETF demand will serve to crimp silver supply and in turn justify the recent sharp rise in silver prices with a tightening of the physical supply and demand situation. Many traders also think that spiraling oil prices and geopolitical issues are contributing to the general upward track in silver prices, but the geopolitical influences this morning are apparently tempered slightly by overnight events. With the silver market stalling below the recent highs and the rest of the metals markets showing some profit taking action this morning, one can't rule out a temporary slide in prices. Near term close-in support in May silver comes in at $11.66 and then again down at $11.50 but we doubt that the lower support will be tested in the wake of the IMF global growth forecast. In fact, to see investors back away from silver and send silver prices sharply lower might require a significant decline in the equity and energy markets! Certainly the silver market got a little ahead of itself from a short term technical perspective in the March 29th to March 31st run, but a couple days of quasi consolidation action should be enough to balance the trade technically and in turn lay the ground work for an eventual move to an even higher trading range. METALS TECHNICAL OUTLOOK 4/4/2006 COMEX SILVER (MAY) 04/04/2006: The rally brought the market to a new contract high. The crossover up in the daily stochastics is a bullish signal. 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. With the close over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside target is at 1198.1. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1189.3 and 1198.1, while 1st support hits today at 1163.8 and below there at 1147.2. COMEX GOLD (JUN) 04/04/2006: The market rallied to a new contract high. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 600.2. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 597.4 and 600.2, while 1st support hits today at 591.2 and below there at 587.7.
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 Tuesday, 4 April 2006 | Digg This Article
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