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-- Posted Thursday, 27 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -1.50, SILVER -13.50
London Gold Fix $636.50 +5.75 LME COPPER STKS 117,950 ml tns Unch tns
GOLD stks 7.696 ml oz, -64 oz COMEX SILVER stks 124.2
ml oz, -601,773 oz OVERNIGHT ACTION: Favorable sentiment overnight toward gold but little price change. GOLD: OUTSIDE MARKET DEVELOPMENTS: In the overnight action, the headlines were rife with talk that money fleeing the Dollar continues to flow toward gold and select currencies. The Press cites global geopolitical issues, Iran, and oil fears, but surprising most discussions on the strength of gold have left out strong economic growth. Over the last 36 hours, the chain of favorable economic headlines has been quite significant and in some cases the economic readings could almost be considered explosive. However, with the Chinese unexpectedly hiking interest rates to cool their economy (the first in 18 months), oil prices showing the third day of weakness and the US Dollar seeing a bounce off the Chinese news and ahead of the US Fed Chairman testimony today, it is clear that the outside market forces are going to start the session out today dragging down the gold market. Unless the Chinese start an aggressive interest rate hike campaign, China's rate news may only dampen sentiment temporarily, since the level of global growth should underpin gold and should serve to alleviate the commodity fund liquidation threat that has been seen periodically in the month of April.
GOLD MARKET FUNDAMENTALS: Unless the Chinese start a rate tightening cycle, the fundamentals and outside conditions seem to point to an ongoing expansion of physical gold demand. A one time hike in Chinese rates may only have a minor impact on global growth, given the strength in the US economy and should keep investors flush with cash. Therefore, we have to think that demand, (physical and implied demand) will continue to tighten the balance sheet in gold. From the production side, there is a story this morning that reiterates a production increase at a Saudi mine by later this year and early next year but yesterday it seemed that only 1 company out of 5-6 reporting companies, was able to show an increase in production. Certainly seeing significantly higher gold prices is eventually going to pull up production, but the point is that production still appears to be rising slower than the quickening of investment demand. In fact, from the news overnight it would seem that investment demand is being facilitated by a pick up in flight to quality demand, as money leaving the Dollar is apparently finding its way to gold. Apparently international Press outlets are a little more concerned about the Iranian nuclear showdown than the US outlets and that is keeping interest in gold and the precious metals high. While China's rate hike may bring on more profit taking near-term in the gold market, in the end the strength in the global economy is likely to continue and provide a bullish environment for gold. The market is starting out with a softer tone, and may be vulnerable to a deeper correction off the Chinese news. A number of economists continue to be surprised in the global growth rate, especially in the face of generally rising oil prices. However, seeing oil correct temporarily and the Chinese rate hike takes some of the zing out of the bull case as the Chinese attempt to slow the torrid growth rate of their economy. However, unless the Chinese start hiking rates aggressively, world growth is likely to remain strong and therefore, gold will likely remain in an uptrend. But with the gold market being overbought from a short term perspective it might need to consolidate in a $645 to $620 range, before pulsing up to an even higher range. With the Fed Chairman speaking today, players should continue to be on the defensive. SILVER: OUTSIDE MARKET DEVELOPMENTS: As suggested in the gold coverage this morning, the surprising hike in Chinese rates has at least psychologically dampened the outlook for global growth and dented bullish sentiment. However, unless the Chinese begin to hike rates aggressively, the outlook for the global economy still looks pretty good. Over the last week, the economic readings have indicated a stronger performance than most had forecasted. However, even though portions of the US equity market managed to rise yesterday, the macro economic outlook isn't so bright, that it has catapulted silver back to its highs. Some players are concerned that the US Fed dialogue today, might try to temper inflation expectations or threaten higher interest rates and that seems to have put silver somewhat off balance early today, especially with the unexpected hike in Chinese rates.
SILVER MARKET FUNDAMENTALS: In short, silver seems to need more fundamental help than gold, platinum or copper, as silver prices remain well below their April highs, while the rest of the metals market are into new highs or sitting within striking distance of new highs. In other words, it would seem that there is a slight speculative difference in silver, since the April highs. Certainly silver outperformed the rest of the metals in late March and early April and that could simply mean that the corrective balancing in silver is taking longer. It is possible that recent private supply and demand forecasts in silver painted a slightly less bullish position than market expectations had hoped for and that is causing silver to drag behind the rest of the complex on the recent recovery attempt. However, since the Press is playing up talk of money flowing from the Dollar, to the metals, the Iranian situation is keeping flight to quality ideas alive and the global economy is moving forward, it would seem like the logical bias in silver continues to favor the bull camp. As suggested in the gold coverage, the metals might be temporarily held back by the Fed's Bernanke this morning and the Chinese rate hike news. The Chinese news has likely tempered the bulls outlook on global growth and any indication from Bernanke that rates are headed higher could further put pressure on silver today. Therefore, we can't rule out a continued chop in a $12.00 to $13.00 range basis the May and an $11.80 to $13.10 range in the July, as the market solidifies prices. However, broad market conditions are improving and while weaker oil prices might temporarily dampen inflation expectations, seeing slight softer oil prices probably allows the economy to gather even more momentum. Chances are that silver finds support within 30 cents of the 10 cent lower early peg today, and that over the coming week, the top of the consolidation zone might be set up at $13.45 in the July contract. Those that are long futures, long a put and short a call, should only be looking to exit the short call for a moderate profit, leaving the rest of the position in place. METALS TECHNICAL OUTLOOK 4/27/2006 COMEX SILVER (JUL) 04/27/2006: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The close below the 9-day moving average is a negative short-term indicator for trend. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is 1226.8. The next area of resistance is around 1322.4 and 1340.7, while 1st support hits today at 1265.5 and below there at 1226.8. COMEX GOLD (JUN) 04/27/2006: A bullish signal was given with an upside crossover of the daily stochastics. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside target is at 651.3. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 647.9 and 651.3, while 1st support hits today at 636.1 and below there at 627.6.
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, 27 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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