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-- Posted Thursday, 13 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -2.00, SILVER -5.30
London Gold Fix $597.00 +$.25 LME COPPER STKS 111,650 ml tns -100 tns
GOLD stks 7.572 ml oz, -196 oz COMEX SILVER stks 124.7 ml oz,
Unchanged OVERNIGHT ACTION: Initial weakness in International markets doesn't seem to be the result of currency action. GOLD: OUTSIDE MARKET DEVELOPMENTS: With generally favorable global equity market action, a modestly weaker Dollar and a higher copper trade being seen in the early going today, the gold market can't blame outside markets for the initial weakness in prices. On the other hand, energy prices are a touch weaker this morning and that could serve to discourage some flight to quality or inflation players.
GOLD MARKET FUNDAMENTALS: While the gold market hasn't exactly tracked tightly with scheduled economic information, the gold market seemed to be lifted by the better than expected result from the US Trade Balance report yesterday. It also appears that the gold market is positively correlated with the US equity market and therefore the scheduled numbers from the US could have a positive impact on gold prices this morning. In general, the market is expecting a favorable US retail sales report but the expectations for the University of Michigan Consumer Sentiment readings are expecting little change so the influence from the reports might be minimally supportive to gold. The gold market continues to get a very favorable flow of headline coverage, with the Wall Street Journal this morning posting an extensive article today that details the bull case in gold and generally suggests that the trend has long term capacity. In the near term, it would seem like the market is seeing some profit taking action to start the last session of a holiday shortened week and that weakness seems to have been the result of reports of scrap gold sales in Singapore. In short, it appears that high prices have now fostered talk of lower jewelry demand in Asia and now have resulted in some scrap supply being pulled into the market. However, flight to quality tensions toward Iran are beginning to surface in the market dialogue. While the gold market is somewhat mired in a $604 to $597.1 trading range, we are not inclined to predict a major failure, partly because the Press coverage seems to be capable of propping up the market. We also think that a certain amount of consolidation was needed after the run to even number $600. In fact, after a $68 rally from the March lows to the recent high, the market deserves and probably needs to consolidation. Due to the consolidation or pause in prices we continue to advocate calendar spreads (selling up front calls and buying back month calls) as a further correction or simple time decay can reduce the cost of buying partially inflated longer term call premium. On the other hand, the gold market might need a little better global equity market action to rise to and sustain an even higher price zone. While the market has shown sensitivity to inflation and flight to quality issues, the main stay of the bull camp is still rising investment and physical demand and that requires an upbeat macro economic view. Posture for more gains but concede that prices are likely to chop. SILVER: OUTSIDE MARKET DEVELOPMENTS: With the US equity market showing some recovery action yesterday and the copper market unrelenting in its charge higher, it would seem like part of the outside market influences for silver are set to end the week, in a more supportive posture than they were at the beginning of the week. However, the gold market is starting out soft this morning and the silver market is still tracking closer to gold and the financial aspect, than it is to the more physical/commodity related focus usually associated with copper and other base metals markets.
SILVER MARKET FUNDAMENTALS: While silver hasn't correlated tightly with the US equity market, it is clear that this market has made more significant upward thrusts on days in which the equity market and the outlook for the economy were upbeat. At times the gold market and its focus on the Dollar have undermined silver and in some cases gold and the Dollar have pulled silver prices back from record levels. Therefore, the silver market doesn't exist in a vacuum. On the other hand, the silver market seems to be getting a very steady flow of fresh buying and has generally been able to forge a pattern of higher lows this week. Given the amount of favorable Press coverage on silver, the market seems to suspect that silver supplies are tightening off a persistent expansion of "implied investment demand". While the inability to sustain above the $13.00 level is disappointing to some longs, the market was certainly overdone and possibly in need of a corrective balancing. However, it does seem like the silver is attempting to buck weakness in gold and hold above critical support on the charts of $12.60 basis the July contract. On the other hand, it would not be surprising to see the July contract temporarily slide below $12.50 but the hallmark of a solid bull market is the markets ability to see buyers surface on weakness. The big picture situation in silver continues to favor the upside, but a little more definitively bullish action from the stock market might be welcomed by the bull camp, as that could truncate the current liquidative or corrective posture. METALS TECHNICAL OUTLOOK 4/13/2006 COMEX SILVER (MAY) 04/13/2006: Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is now at 1246.0. The market is giving an extremely overbought indicator with the RSI over 90. The next area of resistance is around 1276.8 and 1287.9, while 1st support hits today at 1255.9 and below there at 1246.0. COMEX GOLD (JUN) 04/13/2006: 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 close over the pivot swing is a somewhat positive setup. The next upside objective is 606.8. The next area of resistance is around 604.1 and 606.8, while 1st support hits today at 598.5 and below there at 595.7.
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 Thursday, 13 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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