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-- Posted Friday, 7 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +1.00, SILVER +9.00
London Gold Fix $597.00 +$1.50 LME COPPER STKS 112,700 ml tns -600 tns
GOLD stks 7.573 ml oz, Unchanged COMEX SILVER stks 124.4 ml oz,
-554,488 oz OVERNIGHT ACTION: Tokyo gold rose to a 25 year high overnight while European gold was also positive. GOLD: OUTSIDE MARKET DEVELOPMENTS: The Dollar has extended yesterdays gains again in the overnight action but that only appears to have restricted the bullish bias slightly. However, energy prices are also weak this morning and many players are bracing for an important US employment report. While seeing a strong payroll reading could point to good future demand prospects, the initial impact on gold could be bearish from a strong US payroll number, as that would probably lift the Dollar even further. However, the big picture force in the metals is fund buying and not necessarily the ebb and flow of the currency markets. It might also be noted that the platinum market is lower this morning and that suggests a little less coordinated strength in the metals than has typically been seen this week. The market will also see the US ECRI inflation gauge released this morning and that could mean some back and forth price action in the early going today.
GOLD MARKET FUNDAMENTALS: Apparently the international trade has continued to keep the gold market well bid overnight and the overnight bullish bias remains in place as the market is confronted with a series of fundamental reports from the US. However, with some spot prices overnight reaching 25 year highs, it is likely that the Press will continue to trumpet the yellow metal as a hot topic and that should attract even more trading and investment interest. So far the June gold has managed to respect the $600 even number price zone on the charts but many traders have yet to label that level as a solid support zone. The June gold contract did manage to post another new high of $603 overnight and that could give off the impression that upside momentum is still present. In the end, two of three critical outside factors start the session out in a slightly negative posture for gold and it is possible that a number of traders will hang on the sidelines until after the sweep of US economic data from the US. Gold Market Guidance: As we have already suggested, the currency impact today might be negative, the impact from energy prices might also be negative today and the market is partially overbought from classic technical parameters. However, the upward track in prices is well entrenched and the market has at least initially followed up the big run up on Thursday, with a slight extension this morning and that suggests to some players are willing to pay up for gold at higher levels. In our opinion, the physical buying track isn't an ultra critical key component of the bull case, but we suspect that the best payroll report outcome for the bull camp, is too see a payroll that is at or above expectations. In fact, the best payroll report is one that points to ongoing growth but isn't so strong that the Dollar is lifted aggressively. Certainly the COT report readings after the close today will show a significant spec and fund long (and there still isn't a way to determine what the Index long position is) but we doubt that the gold market will be considered bought out because of the COT report. With all the new methods to invest and trade gold, it is our possible that there are more holders of gold now than there has ever been in history! Some might see that as a negative, but we see that as a sign of a continuing trend. Near term critical support in the June contract comes in at $600 and then again at $596.9. The trend is up, continue to hold long calls, those that are long futures could sell a call against that position to cushion the position against the unemployment report. SILVER: OUTSIDE MARKET DEVELOPMENTS: Once again the copper market is providing the silver market with some outside support as that market again rose to new all time highs. Unfortunately, world equity markets are mixed to lower early today and that is potentially a minor negative to silver. However, with the gold market positive and the trade seeing signs that the Japanese economy is perhaps strong enough to hike interest rates and with the US payroll numbers also expected to show ongoing growth today, we have to think that the basic fundamental case in silver will remain supportive into the start of the Friday session.
SILVER MARKET FUNDAMENTALS: While the trade hasn't seen recent dialogue regarding the actual physical supply and demand situation in silver, we have to think that expanding interest in new investment vehicles is serving to tighten or at least draw down supply. With both gold and silver in some cases dominating Press coverage again overnight, there might continue to be a steady flow of fresh buyers to the market. With the May silver apparently entrenching itself above the potentially psychologically important even number zone of $12.00, the recent upside breakout appears to be given some credibility. It also seems like the overall global economic outlook remains positive and that theme could be given an additional lift by the early US numbers this morning. However, traders should not be surprised to see a temporary adverse impact this morning from the Dollar/gold relationship, as the Dollar seems to be on a bit of a recovery and that could temporarily overshadow the recent persistent flow of fund and spec buying in silver. The July silver has extending the upward thrust overnight and given the clear strength, it is possible that negatives from the payroll report/Dollar action could be ignored. It is also likely that the market will see the payrolls as a positive and de-link from the currency relationship. In fact, with the metals markets getting the usual heavy flow of positive headline coverage again overnight and the gold market making a fresh 25 year high early today, the bull camp should maintain control and possibly extend the gains. Those that are long futures and are concerned about the impact of the payrolls, could look to sell a call against the long futures as a "temporary" hedge. Selling a call on a further rally today might also make sense as a hedge against the upcoming COT report reading, as that report could show the small spec and fund long position to have reached a record level and that might cause a slightly weaker opening next Monday. However, we remain long term bullish toward silver and short call positions should probably not be undertaken unless they are done in conjunction with long futures. Initial support in the July silver contract comes in at $12.185 and then again at $12.14. Top of the up trend channel is seen at $12.34. METALS TECHNICAL OUTLOOK 4/7/2006 COMEX SILVER (MAY) 04/07/2006: The market rallied to a new contract high. The daily stochastics gave a bullish indicator with a crossover up. 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. 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 near-term upside objective is at 1218.6. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1213.8 and 1218.6, while 1st support hits today at 1195.3 and below there at 1181.7. COMEX GOLD (JUN) 04/07/2006: The market rallied to a new contract high. Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The gap upmove on the day session chart is a bullish indicator for trend. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The next upside objective is 602.7. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 601.6 and 602.7, while 1st support hits today at 597.8 and below there at 595.0.
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 Friday, 7 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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