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-- Posted Monday, 24 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +1.90, SILVER +14.00
London Gold Fix $634.00 +10.50 LME COPPER STKS 117,450 ml tns -550 tns
GOLD stks 7.696 ml oz, +185,061 oz COMEX SILVER stks 124.8
ml oz, +145,059 0z OVERNIGHT ACTION: Minor gains overnight, as the markets look ahead to the UN Iranian deadline. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the G7 calling for a stronger Yuan, the US Dollar under significant pressure and at times this morning reaching the lowest level since September 14th, there appears to be solid currency market support for gold prices today. While oil prices have started out weak this morning, the talk of sharply rising retail gasoline prices seems to have mitigated the initial bearish impact from early lower crude oil prices. In short, the combination of uncertainty on the currency front and uncertainty off global oil prices looks to underpin the precious metals at the start of the new week.
GOLD MARKET FUNDAMENTALS: While last week's recovery in silver was impressive, the action in gold last Thursday and Friday was perhaps even more impressive. In fact, in the face of a debacle washout in silver, extremely soft oil price action and talk of a broad based commodity fund liquidation threat, the gold market seemed to weather the selling bout exceptionally well. Certainly the gold and silver markets were technically overdone (according to classical technical analysis) and even in the strongest of bull markets it is typical to see corrections, but the compacted and aggressive nature of the setback last week, would seem to reduce the dominance of the bull camp and probably hints at even more volatility ahead. However, there would appear to be plenty of flight to quality issues ahead, with the Iranian deadline looming, Venezuela moving to nationalize oil production and the base metals markets again forging new historically high prices. In the end, as long as the global equity markets avoid significant selling, it would seem like investors will continue to see the metals as a hedge against inflation and a hedge against macro economic uncertainty. The April 18th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 132,001 contracts, with the Non-reportable position also net long 44,921 contracts for a combined spec and fund long of nearly 177,000 contracts. However, the net increase in the spec long for the week was only about 4,000 contracts and with the record spec long position up at 227,566 contracts, it would seem that this market has yet to become historically overbought. While the gold market failed to rise above last week's high, it has made a good attempt at new highs this morning and that should embolden the bulls after last week's volatility. While we assume that the path of least resistance is up, we can't rule out some option expiration volatility in the coming two sessions, but as long as equity prices stay strong and energy prices hold together, we assume that the buyers will out number the sellers. Near term critical support is seen at $625.8 and an upside breakout is forged with a trade back above $638.3. SILVER: OUTSIDE MARKET DEVELOPMENTS: With somewhat positive action in gold and copper this morning and the US Dollar lower, it appears that the silver market will start the week out with a slightly positive tone. However, after last weeks near debacle washout, the silver market might need consistently positive global equity market action and or an improved view toward the global economy to fully put the recent technically based backlash to rest. However, there continues to be a significant amount of economic uncertainty in the currency and oil markets and many traders think that will leave the silver market in a beneficial enough position to attract ongoing investment interest. Given the nearly historic rally in copper end last week and the slight extension in copper prices again this morning, the Press coverage is probably going to be rife again with suggestions that gold and silver are also due to run toward new all time high price levels. The biggest threat to the bull camp in silver this week could be slowing fears off economic slowing off ultra high retail gasoline prices.
SILVER MARKET FUNDAMENTALS: While the argument might be a little suspect, some traders think that soaring base metals prices justify a significant upward extension in silver prices. Certainly, seeing the silver market "get beyond" last week's concentrated setback easily, could end up attracting fresh buyers to the market, but one should expect a portion of the current long position to remain on edge and capable of liquidating positions quickly, in the event that various technical chart levels are violated on the charts. One might also look ahead to comments from the Fed, later in the week, as some Fed members have already suggested that soaring gold and silver prices might be the result of physical buying by new consumers in China and India. Therefore, unless there is cause to fear a broad based economic slowdown, it would seem like the silver trade will continue to expect ongoing capital flow toward silver. The April 18th Commitment of Traders with Options report showed the Silver Non-Commercial position to be net long 41,592 contracts, with the Non-reportable position also net long 26,468 contracts, the combined long was only 68,000 contracts. With the combined record spec long positioning seen up at 97,635 contracts and the market finishing last week below the level where the last COT report was measured, and the market racking back aggressively last week, it would seem like the silver market comes into the action this week less vulnerable to technical selling. However, the magnitude of the concentrated washout last week probably pushed some weak handed longs from the market and has scared others. In conclusion, for the bull camp to retain firm control over prices this week, might require July silver to hold above a critical trading zone of $12.64. Other critical points to watch on the downside are $12.60 in the May and $12.54 in the July contract. METALS TECHNICAL OUTLOOK 4/24/2006 COMEX SILVER (JUL) 04/24/2006: Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. A negative signal for trend short-term was given on a close under the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next downside target is now at 1201.5. The next area of resistance is around 1352.0 and 1377.5, while 1st support hits today at 1264.1 and below there at 1201.5. COMEX GOLD (JUN) 04/24/2006: Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is now at 619.7. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 641.9 and 645.4, while 1st support hits today at 629.1 and below there at 619.7.
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 Monday, 24 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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