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-- Posted Friday, 21 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -0.10, SILVER -29.00
London Gold Fix $623.50 -21.00 LME COPPER STKS 118,000 ml tns -425 tns
GOLD stks 7.511 ml oz, Unchanged COMEX SILVER stks 124.7 ml oz,
Unchanged OVERNIGHT ACTION: Follow through selling continued with silver still leading the complex. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is somewhat put off from the strength that was seen on Thursday, by news this morning, that Sweden will lower its Dollar holdings, the currency market impact on gold today doesn't appear to be strong enough to totally countervail a bearish overnight tilt. Ongoing weakness in oil prices is a negative to gold today but that impetus is probably offset by the generally positive spin being thrown off by the stock market and the mostly up beat global economic outlook. However, despite a generally positive global equity market spin this morning, gold shares aren't exactly signaling an end to the profit taking wave.
GOLD MARKET FUNDAMENTALS: Certainly the aggressive break in prices yesterday undermined a portion of the investment interest in gold, but with gold holding up relatively better than the silver market, (in the most recent washout) some traders think that gold will now return to the leadership role in the precious metals complex. While the market is fretting additional spec and fund liquidation into the opening today, the overall bullish fundamental condition appears to remain intact, with the US Fed recently pointing to ongoing physical gold demand from new buyers in China and India, the global economy apparently expanding and inflation periodically present in the market's consciousness. The flight to quality issue also remains in play, with significant historical currency issues present and significant Middle East and Africa tensions playing in the background. Therefore, while there continues to be a feeling of vulnerability circulating in the Press this morning, the fundamentals in general don't advocate a wholesale sustained purge in prices. On the other hand, a number of technical violations were seen on the charts yesterday, and therefore the technicals could be considered an opposing force to the fundamentals today. With the gold market not even taking out this week's lows in the apparent debacle yesterday, we suspect that gold has regained a measure of leadership capacity in the precious metals complex. As suggested already, the overall macro economic condition continues to favor the bull camp, even if the technical condition was partially wounded yesterday. However, as we will continue to suggest, the overriding focus of the long term bull player remains forward progress in the global economy and periodic concerns for inflation. Certainly the silver market was ahead of itself with the gains of the last week, but with a fresh 6 year high in the Dow and oil prices sitting just below fresh historical highs, the pre-existing bull theme still seems to be present. However, in the near term, the market might need to re-establish some credibility with a couple days of consolidation. Near term critical support is seen at $620 and then again down at $615.9. However, a rise above $627 could turn the tide on the bears this morning. Traders should get long this market but in a protected fashion (long futures and long puts). SILVER: OUTSIDE MARKET DEVELOPMENTS: As suggested in the gold commentary this morning, the outside influences on silver this morning should be mostly supportive but perhaps not significant enough to countervail technical conditions in silver today. However, seeing another round of new highs in global equity markets during the session today, could serve to mitigate the liquidative tilt that seems to remain in place from the debacle yesterday. Fortunately for the bull camp in silver, the copper market is showing renewed strength this morning and that means the industrial or base metals influence on silver is a little more supportive today. One might also suggest that slightly lower oil prices this morning is a slight negative to silver prices, but as long as the equity markets and the outlook for the economy are positive, the negative influence of oil prices, on silver is probably mitigated.
SILVER MARKET FUNDAMENTALS: Some players might suggest that the fundamental case in silver never really justified the massive run up in prices and the washout on Thursday, appears to give some credence to that argument. However, there has certainly been a dramatic expansion in the number of ways investors can hold silver in the last year and that has served to increase the implied demand for silver, which in turn did tighten the fundamentals. The big question going forward is, whether or not investors will be easily deterred or will even more investors step in and take ownership from those throwing in the towel? The trade continues to wait on government authorization of yet another form of silver investment and that authorization could be the catalyst for renewed long interest in physical silver and silver futures. However, the Press this morning is trumpeting the potential for the two biggest daily price declines ever, and that certainly leaves the bullish fundamental argument in question, at the start of the session today. Certainly the downside extension this morning leaves the silver market vulnerable and the first few hours of trade today will be very critical. However, the July silver market has already displayed an ability to reject a portion of the additional overnight slide, but as of this writing, the market had not regained the prior day's close. Outside forces are still supportive and the gold market is attempting to provide some positive sentiment to silver. However, traders probably shouldn't rule out a further slide to more significant chart support of $11.65 basis the July silver. On the other hand, silver call options remain somewhat expensive and the proper course of action might be to get long with some type of options protection. In other words, buy a July silver 12.00 put for 80, then buy a July silver at $12.49 and then sell a July silver $15.00 call for 45 cents. METALS TECHNICAL OUTLOOK 4/21/2006 COMEX SILVER (JUL) 04/21/2006: A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's short-term trend is negative as the close remains below the 9-day moving average. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is now at 1057.5. The next area of resistance is around 1384.9 and 1537.5, while 1st support hits today at 1145.0 and below there at 1057.5. COMEX GOLD (JUN) 04/21/2006: The market made a new contract high on the rally. The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The outside day down is somewhat negative. The close below the 1st swing support could weigh on the market. The next downside objective is 591.0. The next area of resistance is around 640.3 and 659.9, while 1st support hits today at 605.9 and below there at 591.0.
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 Friday, 21 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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