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-- Posted Monday, 10 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +8.30, SILVER +35.00
London Gold Fix $597.50 +$.50 LME COPPER STKS 111,800 ml tns -900 tns
GOLD stks 7.573 ml oz, -98 oz COMEX SILVER stks 124.4 ml oz,
Unchanged OVERNIGHT ACTION: Sharply higher action with silver reaching a new 23 year high. GOLD: OUTSIDE MARKET DEVELOPMENTS: From last week, the gold market continues to be partially undermined by the new found strength in the US Dollar. Deservedly so, the Dollar is being lifted by the prospect that the US Fed might indeed have to continue hiking interest rates beyond what was expected prior to last week's US Non-farm payroll readings. In addition to a currency undertow created by the Dollar, the threat of over-tightening by the US Fed might also be considered a slight negative to gold. However, it does not seem like the external drag fostered by the action in the Dollar is consistent enough or strong enough to trip up the investment based interest in the precious metals complex.
GOLD MARKET FUNDAMENTALS: In a big picture sense, the gold market should be cheered by the strength of the US monthly payroll readings and the fact that a number of global economic zones are showing a positive growth bias, as that could facilitate ongoing physical interest as well as investment demand in gold. Unfortunately, seeing a commitment by central banks to reign in inflation, with higher rates could restrain the bull. However, in the end, the path of global economic growth is very conducive to the bull camp in gold, even if growth is periodically challenged by monetary policy. Apparently there is enough flight to quality, investment or outright speculative interest present in the market to put prices right back to the recent highs and in a market that is driven heavily by speculative sentiment, a return to new highs could mean that even more money begins to chase gold even higher. In our opinion, unless the June gold makes a very bad technical trade with a slide back below $596.9, the bull camp will retain control over prices. While the April 4th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 136,097 contracts and the Non-reportable position to also be net long 42,082 contracts, the combined spec and fund long position was only 178,000 contracts. In short, the gold market still doesn't appear to be bought out, as the record combined spec and fund long positioning was 227,000 contracts forged back in October of 2005, when June gold was trading at only $493! In other words, the market is apparently capable thrusting to even higher levels without tapping itself out of speculative buying fuel. The next upside targeting in June gold could be $609, with the top of the channel seen early this morning up at $603.4. Apparently the funds are aggressively looking for opportunities in markets other than oil, and the gold market is apparently going to be a benefactor of an ongoing wave of investment interest. SILVER: OUTSIDE MARKET DEVELOPMENTS: Apparently the silver market is benefiting from the same wave of investment interest as the gold market this morning, with the silver market in some measures, reaching the highest price level in 23 years. Therefore, it is clear that the silver market is being lifted by aggressive fund buying interest that is being motivated by sharp gains in the energy and copper markets. Some players have suggested that given the run ups in copper, platinum and energy prices, that silver pricing is simply too cheap. In short, the macro economic environment seems to be favoring silver and the Dollar and the stock market don't seem to be prepared to hold back silver as was seen last Friday morning!
SILVER MARKET FUNDAMENTALS: Traders are suggesting that the implied demand for silver is rising and that the silver market as a result, is now anticipating a tightening of supply. As in other metals markets that have seen a significant appreciation in prices, it is now possible that silver workers will attempt to press for increased wages or improved benefits. In fact, with silver prices getting close to doubling (since August of 2005), we suspect that some wage renegotiation is being considered. However, so far the silver market has seen less labor strife than any other key traded metal market. While some might suggest that silver has overdone short term technical readings, the market doesn't seem to be hindered by that concern in the early action this morning. In fact, the opening salvo in prices this morning is such that the bear camp appears to have been thrown back on its heels. Surprisingly the silver market didn't reach a new record combined spec and fund long reading of 97,635 contracts in the most recent COT report reading. However, the April 4th Commitment of Traders with Options report did show the Silver Non-Commercial position to be net long 50,226 and the Non-reportable position to be net long 24,002 contracts for a combined spec long of 74,228 contracts. On the other hand, July silver did manage to post another 46 cents in gains to the highs last week and therefore the net spec long in the COT report is probably understated. As we have suggested a number of times, the breadth of speculative and investment interest in silver might be more spread out and diversified than at any time in history (more global) and that would seem to discount the idea that this market is about to run out of buying fuel. Near term upside targeting in July silver is seen at $12.75 and close-in support is seen at $12.29. METALS TECHNICAL OUTLOOK 4/10/2006 COMEX SILVER (MAY) 04/10/2006: The market rallied to a new contract high. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1229.3. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1218.5 and 1229.3, while 1st support hits today at 1195.5 and below there at 1183.3. COMEX GOLD (JUN) 04/10/2006: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The close above the 9-day moving average is a positive short-term indicator for trend. The close below the 2nd swing support number puts the market on the defensive. The near-term upside target is at 603.3. The next area of resistance is around 597.6 and 603.3, while 1st support hits today at 587.8 and below there at 583.8.
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 Monday, 10 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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