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-- Posted Thursday, 6 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +7.10, SILVER +32.50
London Gold Fix $595.50 +$11.65 LME COPPER STKS 113,300 ml tns -625 tns
GOLD stks 7.573 ml oz, Unchanged COMEX SILVER stks 125.0 ml oz, Unchanged OVERNIGHT ACTION: Significant strength overnight off renewed investment buying interest. GOLD: OUTSIDE MARKET DEVELOPMENTS: Surprisingly the Dollar doesn't appear to have contributed to the upward motion in gold overnight. With the rest of the precious and base metals also rocketing higher, it would seem like the metals are the benefactors of ongoing broad based investment and outright speculative interest. Energy prices are probably providing some support to gold this morning, while the track of the world equity markets probably isn't an issue.
GOLD MARKET FUNDAMENTALS: Apparently the investors/Funds have decided to increase their holdings of metals in the overnight action, as prices have leapt to new highs and seem to be in the midst of a wave of concentrated buying. It would seem like a combination of trends is channeling money into the metals, but the two most important themes seem to be the potential rotation away from US denominated assets and the ever present potential that rising oil prices might cause paper assets to devalue. In other words, the metals are benefiting from financial considerations but those considerations aren't exactly inflationary yet. With US unleaded prices seemingly on their way to the January highs and the OPEC basket price already hitting fresh all-time highs this week, it is clear that the oil market is throwing off uncertainty. While some players might suggest that the gold market is building a massively overbought long position, the classical technical indicators aren't excessively overdone yet. With the June contract punching through the psychological resistance zone of $600.00 overnight, it is possible that the funds were simply gunning for the even numbers, but it would seem like the market has pretty solid momentum. As long as the market doesn't fall back below the psychologically important $600 level into the close today, we suspect that the price action is going to stimulate even more buying. In fact, the gold bugs must be fired up as a result of the action this week and with the headlines rife with coverage on the run up, we suspect at even more fresh buying is set to enter the fray. We doubt that the COT report will register a new record long spec position in the upcoming report and we would also suggest that this run is probably too strong to be stopped by simple technicals. In our opinion, the talk about diversification away from the Dollar and US debt is a huge benefit to gold and with the additional outside support being thrown off by the oil market, we expect more gains ahead. Traders should continue to hold a long June gold 580 call for a position play. SILVER: OUTSIDE MARKET DEVELOPMENTS: Certainly the strong upward motion in gold is providing silver with a lift, but we suspect that the "on-fire" copper and zinc price action is also giving silver a kick from the industrial demand theme. It is also likely that the silver market is being indirectly lifted by the ongoing anxiety being thrown off by the energy markets.
SILVER MARKET FUNDAMENTALS: While there is much debate on whether or not the Index funds and other investors have actually altered the supply and demand mix in silver, it is now very clear that a huge and potentially sustainable rotation is underway and that will probably change the supply scenario. In the mean time, the gains look impressive and sustainable because of the coordinated interest in all of the metals. In other words, the silver is benefiting from a wave of investment interest that is apparently fanned by ongoing growth, energy market uncertainty and the prospect of inflation and flight to quality. With the $12.00 level easily violated overnight, the $12.00level is now thought by many in the marketplace to have become some form of support. As long as the ECB and US jobs data reconfirms a growing economy and oil prices continue to increase the odds of pass through inflation, it would appear that the metals will remain in favor. As suggested already the silver market managed to zip right through the $12.00 price level and it would seem like the market has very little vulnerability. As suggested before, the next historically critical level in the silver market on the upside, basis the July silver is $15.43, which was the contract high in the July contract back in 1983! Certainly the COT report long is rapidly expanding but we don't get the sense that the market is bought out, even if a new record spec long has been reached. In a big picture sense, more of the "world" might now be involved in silver than at any time in the past and therefore, prices and positions should probably make news records! We now suspect that the $12.00 level has become support in the May silver, with July silver support seen at $12.02 and then again down at $11.90. METALS TECHNICAL OUTLOOK 4/6/2006 COMEX SILVER (MAY) 04/06/2006: A crossover down in the daily stochastics is a bearish signal. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The close above the 9-day moving average is a positive short-term indicator for trend. The market tilt is slightly negative with the close under the pivot. The next downside objective is 1145.4. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1182.3 and 1192.4, while 1st support hits today at 1158.8 and below there at 1145.4. COMEX GOLD (JUN) 04/06/2006: 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 daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 599.0. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 596.0 and 599.0, while 1st support hits today at 588.9 and below there at 584.6.
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 Thursday, 6 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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