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-- Posted Tuesday, 18 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +1.50, SILVER +13.00
London Gold Fix $616.75 +1.5 LME COPPER STKS 111,300 ml tns -350 tns
GOLD stks 7.623 ml oz, +965 oz COMEX SILVER stks 124.7 ml oz,
Unchanged OVERNIGHT ACTION: Ongoing strength overnight, as markets closed on Monday play catch-up. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is mostly unchanged this morning, the oil market remains supportive to the bull camp in gold. Fortunately for the bull camp, the US equity market handled the new high in oil prices somewhat impressively yesterday, as equity prices did manage to recover away from new lows for the move posted in the wake of the initial pulse above $70.00 in crude oil. On the other hand, there continues to be ongoing geopolitical anxiety toward Iran and the metals trade will also be presented with a fresh look at inflation in the US PPI report this morning.
GOLD MARKET FUNDAMENTALS: With the Wall Street Journal carrying two front page stories on oil today and the commodities section of the Journal carrying an article on gold, it would seem like the bullish buzz toward the gold market is alive and well. In the overnight action, gold appeared to extend the upside run from Monday, with some of the previously closed markets playing catch-up and other markets simply adding to the list of new highs. Apparently some Press outlets are suggesting that gold might be seeing inflation buying ahead of the US PPI report this morning. It would seem like the majority of the buying over the last month, has come from pure investment interest, with rising oil prices and the geopolitical uncertainty associated with high oil prices the primary driving force for the bulls. Therefore, actually seeing the US PPI report spark renewed inflation concerns, could add fresh buying interest to the equation today. Expectations call for a +0.3 to +0.4% increase in the PPI, but the real focus of the day should be whether or not the "excluding food and energy" reading also points to inflation. In reality given the ongoing "media buzz" fund buying interest will probably reach an even higher pitch today, in the event that the PPI is considered by the trade to simply propagate "inflationary expectations". In other words, an "at expectation" or above reading in the PPI this morning probably leaves the bull trend intact. With a fresh overnight high of $622.3 in June gold it would seem like the trade is buying the rumor ahead of the US PPI report. Therefore, traders might expect some minor "buy the rumor, sell the fact" action in the wake of the PPI report. On the other hand, it would certainly seem like soaring oil prices are indeed beginning to result in some pass through inflation and as long as the PPI is above +0.3 in either the headline or core rate, we suspect that buyers will pick up fresh longs on any post report profit taking. In conclusion, there are just too many bullish potentials for the bulls not to retain an edge. Near term critical support in the June gold today is seen at $615, but many technicians are predicting that the next stopping point for June gold is up at $650. SILVER: OUTSIDE MARKET DEVELOPMENTS: The early direction from the gold market today is only marginally supportive, but that minor assist is enhanced by ongoing strength in oil prices. We also suspect that silver is seeing some anticipatory buying ahead of the US PPI report. On the other hand, the spillover support from another big surge in copper prices this morning could be quite significant for silver, as copper prices have already risen 14 cents above last weeks closing value and that is accentuating the expectation for improved physical demand in silver. In other words, the residual spillover from the rather surprising Chinese 1st quarter GDP growth of 10.2% is still reverberating through the metals markets.
SILVER MARKET FUNDAMENTALS: Apparently the bullish mantra in the silver market is partly the result of pure investment interest and partly the result of hopes of soaring physical demand. With the Press rife with talk of the gold/silver ratio, we have to think that some silver buyers are stepping into silver, as an alternative to paying up for gold at 25 year highs. Therefore, it would seem like the bull camp in silver remains diversified in its buying rational and that probably explains the nearly historic pace of recent gains. So far, the market really hasn't fully recognized that soaring investment demand (paper demand) is serving to tighten supply and demand projections significantly. Even if the pure investment demand is maturing as a fundamental force in the silver market, it is possible that silver thus far has seen only casual inflation buying interest. Therefore, the PPI report this morning is potentially another window of opportunity for the bull camp. The overnight high of $13.68 would seem to leave the bias pointing up, but near term support might not be found until $13.38 basis the May contract. In the end, the amount of Press coverage on the metals is simply impressive and the ability to continue to carve out new highs is seemingly facilitating the bull market mentality. In other words, as long as the outlook on the economy isn't ruptured by soaring oil prices, or the talk of an overly aggressive US Fed (in their efforts to knock down inflation) we have to think that the path of least resistance will continue to point up. Near term targeting in May silver is seen at $14.00 and close-in support in the May contract is seen at $13.50 and then again down at the aforementioned $13.38 support level. METALS TECHNICAL OUTLOOK 4/18/2006 COMEX SILVER (MAY) 04/18/2006: The market rallied to a new contract high. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. The gap up on the day session chart gave a bullish indicator and more follow through could be seen this session. The market's close above the 2nd swing resistance number is a bullish indication. The near-term upside target is at 1359.0. Caution is warranted with the RSI over 90, as the market may be limited on further gains The next area of resistance is around 1351.0 and 1359.0, while 1st support hits today at 1322.1 and below there at 1301.1. COMEX GOLD (JUN) 04/18/2006: The market made a new contract high on the rally. The daily stochastics have crossed over up which is a bullish indication. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. 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. The market's close above the 2nd swing resistance number is a bullish indication. The next upside objective is 627.9. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 624.7 and 627.9, while 1st support hits today at 612.9 and below there at 604.3.
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.
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-- Posted Tuesday, 18 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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