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-- Posted Wednesday, 5 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -2.20, SILVER -6.00
London Gold Fix $583.85 -$1.15 LME COPPER STKS 113,925 ml tns -2,275 tns
GOLD stks 7.573 ml oz, Unchanged COMEX SILVER stks 125.0 ml oz, Unchanged OVERNIGHT ACTION: Tokyo gold down off a rising Yen, European gold marginally weaker and Chinese gold was also lower on reports of profit taking. GOLD: OUTSIDE MARKET DEVELOPMENTS: With energy prices remaining weak for a second session, the Fed downplaying the near term threat of inflation yesterday and world equity markets softer overnight, it would seem like the outside environment today favors the bear camp to start today's session. With the exception of copper, the rest of the precious metals are also showing lower early action this morning. One might also suggest that talk yesterday of Chinese currency reserve diversification away from US Debt, would seem to improve the potential for increased gold holdings at the Chinese central bank.
GOLD MARKET FUNDAMENTALS: While the gold market had already slipped into a light profit taking posture ahead of the opening on Tuesday, it would seem that the spin from the Fed speeches yesterday favored the bear camp in gold. With the Fed suggesting that inflation was well contained, some gold bulls were disheartened but countervailing the "well contained inflation" talk from the Fed, is the fact that the Fed also hinted it was near the end of the interest rate hike cycle. On the other hand, with the gold market seeing several moderately bullish price projections (in the last 24 hours) from well known European banks, it is clear that the long term bullish case in gold is being enforced in the mainstream headlines. Overnight, a Swiss bank suggested that tight supply fundamentals in the metals are likely to remain positive for 2 years. Therefore, it would seem like sentiment in the market place remains positive, even if near term price action has been suggesting otherwise. While the profit taking action looks to control prices in the early going today, the trade remains fairly upbeat toward longer term prospects. As mentioned before, the Deutsche Bank projection of $700 for gold yesterday was joined overnight by an even more aggressive forecast for $1,000 gold prices at an Australian Gold Conference and therefore it is clear that investor sentiment on a global basis, remains very bullish toward gold prices. With the market seeing signs of change in Chinese currency reserve holdings (at the possible expense of US debt instruments) it would seem like gold is seeing a number of potentially favorable fundamental developments that should stand up against the partially undermined near term technical condition. However, we can't rule out more minor weakness today in the face of potentially lower oil prices and a disjointed currency trade. Near term support should be somewhat solid at $586.7 and the near term liquidative tilt could be thrown off easily this morning with a rise back above $591.8 basis the June contract. Traders should continue to be long through June call options as the big picture trend remains up. SILVER: OUTSIDE MARKET DEVELOPMENTS: Unfortunately for the bull camp, outside market action remains somewhat negative for silver early today. In fact, the stock market is choppy, oil prices have extended yesterday's weakness and the gold market is also lower and that would seem to favor the bear camp. It would appear that silver will continue to get some indirect support from the strength in the copper and zinc prices, but that impact would be more significant, if the headlines were a little more upbeat toward global growth. In the early going today, the currency impact on silver is negligible.
SILVER MARKET FUNDAMENTALS: Apparently a well known Swiss Bank has suggested that the silver market will see favorable supply and demand conditions for the next two years and that has provided the market with some resistance against the recent profit taking tilt. Furthermore, with both copper and zinc markets remaining at or into new high ground, the investment theme for silver is expected to remain in the headlines. In fact, with the Press still carrying fresh stories overnight on the expanding number of investment vehicles in silver, it would seem like the "ETF" issue will continue to pull players toward the silver market. While May silver has made a new low for the move overnight, the market doesn't appear to have an aggressive liquidative tilt in place. We suspect that the Credit Suisse prediction, of a multi-year bull market in silver, will serve to embolden would-be buyers and in the process discourage some sellers. However, the outside influence from the gold market remains a little negative and the impact from the currency market is unclear. While we suspect that May silver could fall back down to the even number $11.50 support level, we do not think that the market is overly vulnerable to sustained declines. In fact, given all the favorable long term headlines, we have to think that price declines will steadily increase speculative buying interest and in effect result in a quick reversal at some point in the coming two sessions. In order to throw off the slightly negative early tilt today, the May silver only has to regain $11.73. Traders should continue to hold longer term call positions in silver. METALS TECHNICAL OUTLOOK 4/5/2006 COMEX SILVER (MAY) 04/05/2006: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 1189.4. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1181.3 and 1189.4, while 1st support hits today at 1164.8 and below there at 1156.4. COMEX GOLD (JUN) 04/05/2006: Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. The market setup is somewhat negative with the close under the 1st swing support. The near-term upside objective is at 597.1. The next area of resistance is around 593.3 and 597.1, while 1st support hits today at 587.8 and below there at 586.0.
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 Wednesday, 5 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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