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-- Posted Wednesday, 12 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -0.50, SILVER -0.50
London Gold Fix $596.75 -$2.75 LME COPPER STKS 111,750 ml tns -600 tns
GOLD stks 7.573 ml oz, Unchanged COMEX SILVER stks 124.7 ml oz,
+600,728 oz OVERNIGHT ACTION: Minor strength in Asian gold was seen early Wednesday but there was talk that high prices have discouraged some buying. GOLD: OUTSIDE MARKET DEVELOPMENTS: The US Dollar is slightly lower this morning but the track in prices isn't definitive and may not be a noted influence on gold prices this morning. With some world equity markets overnight playing catch-up to the ultra weak action seen in the US market on Tuesday, we suspect that some would-be buyers of gold are being put off by the threat of a softer economic outlook. However, one might also note that part of the recent pressure in the equity markets, has reportedly come off the threat of commodity price inflation and not specifically slowing growth therefore the equity market influence could still be seen as a supportive element for gold. Lastly, oil prices this morning are mixed to weak and that might also be considered a minor negative. In conclusion, outside markets simply look to be less significant in today's gold market action.
GOLD MARKET FUNDAMENTALS: With the gold market sitting nearly $60 an ounce above the March lows and a surprising $90 an ounce above the December 2005 lows, we can understand the story out of Singapore this morning about high prices dampening some physical and jewelry demand. However, it should also be noted that the same markets reporting injured demand overnight, still managed to push into positive ground in the early going today. While many acknowledge that a big portion of the gains in gold came initially from money looking to insulate against the potential ramifications of rising oil prices, the secondary buying wave (from late December 2005 to present) seemed to come from a pure investment theme. Now it would appear that inflation or flight to quality buying interest is beginning to surface in the stock market and that could serve to put gold in yet another upside adjustment. Some would suggest that the threat of inflation was a significant portion of the rally from the beginning, but only recently have financial markets given the inflation theme a true consideration! In conclusion, the bull camp does seem to have a broad spectrum of issues in its court, but to continue to dominate, the bull camp might have to see sentiment hold together in the equity market. The US Trade Deficit report today should be supportive of gold unless that report causes US stock prices to extend yesterday's washout. As suggested already, the gold market could be on the cusp of playing the inflation card and that could provide the market with a fresh lift. However, it is still possible that the profit taking mentality from Tuesday could cause an additional setback in prices, in the event that the equity market continues to slide off the prospect of economic slowing. We suspect that the June gold will attempt to respect close-in support of $597.2 but even lower support down at $592.6 can't be ruled out. It is possible that the Dollar is poised to slide early in the session in the wake of the Trade Deficit reading and for that reason it is likely that gold will show some initial strength and in the process truncate the liquidative pattern from yesterday. The up trend hasn't run its course yet, but the bull camp is temporarily vulnerable. Therefore, look to sell the May gold 610 call for 550 and use that money to buy the June gold 610 call for 970. If the market corrects, the short May call should decline quickly and in turn defend the June premium. SILVER: OUTSIDE MARKET DEVELOPMENTS: While silver didn't show that much interest in the action of the Dollar yesterday, the Dollar was initially undermined in the action yesterday and yet silver still managed to rally. It was also clear that the silver market yesterday was battling against the weakness in the equity and copper markets and today that impact looks to be less significant. However, we do get the sense that the net balance of the outside market impacts, is still partially undermining to silver, but that undermine doesn't appear to be as "intense" today. In other words, the silver might be left to its own fundamental and technical devices in today's trade.
SILVER MARKET FUNDAMENTALS: While there have been some signs of rising stock levels, it is also clear that some players are deciding to take possession of silver in more permanent holdings and with the sharply rising interest in silver related products, it would seem that overall demand and commitment to silver remains strong. With the stock market supposedly coming under intense liquidation yesterday, as a result of inflationary concerns, it is possible that silver is now set to get a more direct flow of flight to quality buying interest. In a partially negative note, a silver Company (Pan American Silver) announced a public offering that was attempting to raise up to 137 million Dollars, which that company suggested would be used for the construction and development of a silver project in Argentina. However, it would still seem like the pace of expansion in implied silver demand, is set to outpace the prospect of rising physical supply and that could leave the balance of the fundamentals favoring the bull camp. The silver market certainly performed better than the rest of the metals in the action Tuesday and silver still finds itself this morning within striking distance of the recent highs. In fact, some players looked at the choppy to lower early action in gold yesterday and concluded that silver was a better horse than gold, in the event that the metals extend their upside run even further. We have to conclude that the silver market will be without the drag of the currency impact, but in the event that the macro economic outlook is pulled down, the overall edge held by silver over gold might be reduced. Near term close-in support in May silver is seen at $12.60 and then again down at $12.48. Those not in silver could attempt to capitalize on near term profit taking potential and simple corrective action, by selling May just out of the money calls and buying slightly further out July silver calls. Sell $13.25 May calls for 18-20 and buy the July $13.50 calls for 60 cents. METALS TECHNICAL OUTLOOK 4/12/2006 COMEX SILVER (MAY) 04/12/2006: The market rallied to a new contract high. The daily stochastics gave a bearish indicator with a crossover down. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is now at 1227.1. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1278.0 and 1299.0, while 1st support hits today at 1242.1 and below there at 1227.1. COMEX GOLD (JUN) 04/12/2006: The market rallied to a new contract high. 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. The daily closing price reversal down is a negative indicator for prices. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 608.8. The next area of resistance is around 603.6 and 608.8, while 1st support hits today at 595.2 and below there at 591.9.
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, 12 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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