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-- Posted Tuesday, 11 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +3.90, SILVER +21.50
London Gold Fix $599.50 +$2.00 LME COPPER STKS 112,350 ml tns +550 tns
GOLD stks 7.573 ml oz, -96 oz COMEX SILVER stks 124.0 ml oz,
-394,406 oz OVERNIGHT ACTION: Asian metals higher again, with spot gold attempting to hold above the $600 level. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is a touch weaker this morning there doesn't appear to be a definitive trend present in the currency markets and that could leave the currency influence on metals muted in the action today. However, energy prices are firmer again this morning with nearby crude oil futures reaching up toward the psychologically important $70.00 level and that could provide some support to the metals. In a partial offset to the bullish spin from the energy markets, early equity market action is weak and copper prices were showing some profit taking.
GOLD MARKET FUNDAMENTALS: With a gold story showing up on the front page of the Wall Street Journal this morning and that article touting the fact that gold has become a mainstream investment, it is clear that the investment buzz is favoring the metals markets. The bulls should be cheered by the fact that gold is being lumped in with both an energy based trading theme and a natural resources investing theme. Perhaps even more significant, is the fact that the WSJ article this morning, highlights the large amount of Institutional money flowing toward gold. While the stock market hasn't exactly benefited from the much stronger than expected profits at Alcoa, that company seemed to suggest that they made a strong profit despite exploding costs normally associated with inflationary conditions. In short, the global economy seems to have enough momentum to pass on higher costs and that should be seen as a positive for gold. We might also note that the Chinese Trade surplus overnight rose to $11.19 billion and that shows a strong economy in China and could hint at the potential for increased Chinese Central bank buying of gold as currency reserves in China continue to swell. In short, the bull camp would seem to have more themes going its direction than the bear camp. The trade sees the markets ability to consolidate above the $600 level as a very positive development and with a number of outside forces also supporting the bull case, we suspect that the up trend is set to continue. In fact, with such convincing Press coverage, we suspect that investors and traders will continue to push money toward this market. Near term critical support in the June gold comes in at $601.5, but the trade will be watching spot gold and the $600 level very closely. While we don't think that the uptrend is set to end anytime soon, those long gold futures might consider selling a May gold $625 call this morning for 350 points, as a way to bank some profits on the futures. The May gold $625 calls have only 14 days until expiration and June gold has risen almost $60 an ounce in the last month! Those looking to enter fresh longs might have to wait for a correction back to $596.8 or wait until the $600 support zone has entrenched itself more securely before getting long at that level. Our long term objective for gold isn't clear, but as long as oil prices rise and the global economy continues to move forward, we suspect that gold is set to rise further. SILVER: OUTSIDE MARKET DEVELOPMENTS: As suggested in the gold commentary this morning, the rise in energy prices seems to be providing some spillover buying in silver but silver could be held back by the slack action in some of the base metals and by the slightly lower global equity market action. However, with the favorable metals article in the Wall Street Journal this morning, it would seem like the macro economic environment in silver continues to favor the bull camp.
SILVER MARKET FUNDAMENTALS: So far, there hasn't been that much concern that soaring silver prices will pinch physical demand in silver. In fact, it seems that higher prices continue to stimulate investment demand in silver. At times, it would seem like speculative and investment demand is running so hot, that the silver market is running on pure emotion instead of classic fundamental analysis. It should be noted that brokerage firm this morning, upped its silver price targeting to $14.00 an ounce and that probably adds to the speculative momentum. So far, significantly higher prices haven't pulled out extra supply onto the market (at least in the classical sense) and with the expansion in investment demand thought to be reaching historical levels, it is likely that implied demand is materially impacting the supply numbers in a very bullish capacity. With the July silver contract flaring up above $13.00 overnight and recoiling back 25 cents from that high, it would seem like a blow off move was made. Some traders think that once the ETF begins to trade, that silver will fall back in the same fashion as gold, but we might also add that gold eventually managed to recover from that temporary setback and quickly return to a bull market status. In our opinion, the up trend is well established and capable of sustaining, as many companies seem to be passing on higher commodity costs and that suggests current conditions can extend. However, as we also suggested in gold, those long silver could consider selling a $13.25 May call for 22 cents as a hedge against a temporary pause in prices. The May calls have only 14 days until expiration, but selling the call will put those long futures out of the market on a rally to $13.47! METALS TECHNICAL OUTLOOK 4/11/2006 COMEX SILVER (MAY) 04/11/2006: A new contract high was made on the rally. Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. If yesterday's gap higher on the day session chart holds, additional buying could develop this session. 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 target is 1276.0. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1269.0 and 1276.0, while 1st support hits today at 1243.1 and below there at 1224.1. COMEX GOLD (JUN) 04/11/2006: 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. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside objective is at 606.8. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 604.8 and 606.8, while 1st support hits today at 598.8 and below there at 594.7.
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.
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 Tuesday, 11 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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