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-- Posted Friday, 28 April 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +4.70, SILVER +20.00
London Gold Fix $638.25 +1.75 LME COPPER STKS 117,725 ml tns -225 tns
GOLD stks 7.696 ml oz, Unchanged COMEX SILVER stks 123.5
ml oz, -699,818 oz OVERNIGHT ACTION: Higher Asian action supposedly inspired by increased physical gold buying. GOLD: OUTSIDE MARKET DEVELOPMENTS: Apparently seeing the potential for a US rate hike pause, is more important that seeing Chinese rates hiked for the first time in 18 months. With the US Dollar forging another low for the move this morning and hitting the lowest level since September 6th of 2005, the currency bias in the gold market would seem to be supporting gold. With world equity markets weaker in the wake of the Chinese hike and the energy markets also weak, it would seem like the outside influences for gold will be a slight drag on prices into the last trading day of the month.
GOLD MARKET FUNDAMENTALS: While outside influences might attempt to hold back gold today, it seems like the market generally remains in favor with investors. In fact despite the significant price appreciation, it would seem like activity at the production level is plodding along, as if there is only a marginal incentive to increase output. In South Africa, 3 of the top 4 gold producers are expected to come in with lower production (partly because of seasonal labor influences and partly because of other technical restraints). We have also recently noted that global gold production has yet to respond to higher prices and that should give the bull camp hope for a longer reign over the bears. From the investment front, demand looks to stay strong as the Iranian/US conflict is channeling a steady flow of bullish headlines toward gold. However, other players seem to be interested in gold because of the lack of global slowing in the face of historically high oil prices and rising interest rates. With the trade also noting strong physical buying in Asia overnight and also making note of new investment vehicles in the metals arena, the metals should remain in mainstream Press coverage. In conclusion, gold seems to have plenty of issues to keep prices well bid in the last trading session of the month. It is impressive that the metals markets shook off the potential negative influence of the Chinese rate hike and it is also impressive that the market is discounting the slide in oil prices. However, it seems that gold continues to behave like more like a physical commodity market than many realize and therefore the prospect of ongoing growth, even in the face of higher interest rates seems to have emboldened the bull camp. In fact, seeing lower oil prices ahead might even be seen as a development that allows global growth to overcome the slowing influence of higher interest rates, especially since interest rate moves typically take a long time to impact activity, while lower oil prices are factored into the economy rather quickly. On the other hand, investor interest in gold is also expected to remain strong, as currency related buying off the erosion in the Dollar is still underway and some are even worried about a banking crisis in China. Finally with Fresh IAEA commentary due out today regarding the Iranian nuclear situation, we suspect that gold will see yet another supportive element in the headlines. With gold prices coming into the action this morning just below the highest close of $642, and the market attempting to consolidate above $625, the bulls still seem to have an edge. However, it would do the bull camp a lot of good to finish the month strong, especially after the extreme two sided volatility in April. Critical pivot point support today is seen at $635.5 and then again at $621. In order to rise to an even higher level today, the gold market might have to see geopolitical anxiety issues accelerate. SILVER: OUTSIDE MARKET DEVELOPMENTS: While the copper market is showing renewed strength this morning, the copper market has been exhibiting historically high volatility and that is at times undermining bullish sentiment toward silver. With the implementation of another silver investment vehicle there continues to be a positive buzz in the Press toward silver and in the wake of the Chinese rate hike yesterday, the silver market certainly needed something positive to take the focus away from the fear of slacking Chinese commodity demand. With world equity markets somewhat softer this morning, the macro economic influence on silver could be seen as partially restrictive of the early strength in silver prices.
SILVER MARKET FUNDAMENTALS: With the Press rife with headlines suggesting that silver investing has come into the mainstream, the idea that implied demand is tightening the balance sheet in silver is given more credence. With the extreme two sided trade in the copper market and the Chinese rate hike there is certainly some cause for concern in the physical demand sector, but for the time being, there seems to be more than enough evidence of strong investment or paper demand to countervail any letdown in the physical sector. Overnight there are some lofty predictions of just how much inventory or stocks might be required to meet the "new" investment demand. One fund has suggested that investment interest in the next 18 months could effectively tie up 15% of global silver inventories! In short, the bull items seem to outnumber the bear items, but the bears are hoping that talk of softer Chinese commodity demand (off the rate hike) or simple month ending profit taking will step up to control prices today. A number of traders have suggested that $12.00 pricing in the May silver will be a critical price pivot zone today. Certainly the talk about the activation of the Silver ETF will initially inspire the bull camp, but the question is, will the new investment vehicle in silver live up to its lofty expectations? Private forecasts suggest that ETF's are already imputing an 11.2% demand into silver or 97 million ounces and that is already a significant impact. In our opinion, the market is still entrenched in the bull track but it might take a close today above the bull/bear line of $12.31 basis the July silver, just to see silver leave the week in a patently strong position. We would look to the copper market early today for guidance, as a strong close in that market would seem to downplay the negative influence of the China rate move and in turn allow the silver trade to bask in the glow of the new ETF wave. In our opinion, a close above $12.75 today will set the silver market up for a retest of the contract highs next week. METALS TECHNICAL OUTLOOK 4/28/2006 COMEX SILVER (JUL) 04/28/2006: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market back below the 18-day moving average suggests the intermediate-term trend could be turning down. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside target is now at 1175.2. The next area of resistance is around 1305.8 and 1362.1, while 1st support hits today at 1212.3 and below there at 1175.2. COMEX GOLD (JUN) 04/28/2006: The rally brought the market to a new contract high. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. The market tilt is slightly negative with the close under the pivot. The near-term upside objective is at 655.6. The next area of resistance is around 645.9 and 655.6, while 1st support hits today at 626.7 and below there at 617.3.
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.
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, 28 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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