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-- Posted Monday, 1 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +6.40, SILVER +35.00
London Gold Fix $638.25 +1.75 LME COPPER STKS 117,725 ml tns -225 tns
GOLD stks 7.696 ml oz, -98 oz COMEX SILVER stks 123.6
ml oz, +115,812 oz OVERNIGHT ACTION: Iranian dialogue has rekindled speculative buying interest overnight. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is only marginally lower this morning, it would seem like outside market developments will generally be supportive of gold today. With the US floating some hard line commentary toward Iran and Iran suggesting that the UN would not "dare" declare sanctions against them, (because of the impact on oil prices) it would seem like geopolitical tensions are set to escalate. It should also be noted that in addition to supportive oil prices early today, the gold market is also seeing solid support from significantly higher silver, copper and platinum prices that were at least partially spawned by favorable Chinese demand projections. We also have to think that dovish comments from the US Federal Reserve Chairman last Friday, continue to provide speculative interest to the long side of the gold market.
GOLD MARKET FUNDAMENTALS: In addition to talk of strong ongoing physical metals interest in China in the 1st quarter, the gold market continues to see equal measures of support from flight to quality and inflationary themes. Apparently the gold market sees the chance for a pause in the US rate hike pattern as a development that could foster increased physical demand and could also allow inflation a foothold. With the gold market seeing soaring investment demand in the silver market, it is possible that gold continues to catch a ride from the coattails of silver, which is seeing expectations for soaring implied demand. In fact, with the new high overnight, the gold market continues to temper the overdone talk that was given credence by the violent corrective action in Mid April. In conclusion, the gold bulls apparently have several ongoing fundamental themes in their favor, a falling Dollar, ongoing global growth, anxious geopolitical concerns and uncertainty off spiraling oil prices. If the silver ETF market continues to provide significant bullish buzz to the precious metals markets, we suspect that a series of new highs will be seen this week. However, the April 25th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 128,083 contracts and the Non-reportable position also net long 41,609 contracts for a combined spec and fund long of 169,000 contracts. In our opinion, this market should be able to sustain fresh buying action even in the event that the combined spec and fund long reaches a new record spec long in excess of 227,000 contracts, as new and old investors seem to be set to pile into gold. In fact seeing the added support from the Iranian standoff this morning would seem to put gold in the most favorable fundamental position in the last 30 years and therefore a new all time high in the spec long position is in our judgment justified. In fact, with Iran thumbing its nose at the UN and suggesting that the US would not dare impose sanctions, because oil prices would explode, seems to be a fairly significant historical event that casts a dark shadow on paper assets! Therefore, one has to expect gold to remain well bid, with a series of new highs expected and the potential for a $680-$690 trade this week. SILVER: OUTSIDE MARKET DEVELOPMENTS: While a weaker Dollar, higher oil and soaring gold prices are supportive of silver this morning, the silver market might garner the lion's share of strength from its internal fundamentals. However, one should not underestimate the broad market support that could continue to flow toward silver, especially in the wake or significant overnight gains in the copper and platinum markets. Even the equity market seems to be showing some positive action this morning, and that suggests that the overall view toward the global economy remains positive, which in turn seems to project strong ongoing physical demand for silver. In conclusion, the bulls are lucky to be able to pick from various bullish themes this morning and it is also clear that the bull camp continues to ride a wave of support from outside markets.
SILVER MARKET FUNDAMENTALS: It would seem like the Bull camp is set to push prices back to the old highs off a combination of hope for soaring implied demand, flight to quality and basic commodity fund buying. With the Press trumpeting the tightening of supply from the demand side of the equation and the geopolitical uncertainty also providing the metals with a fresh impetus this morning, some traders are suggesting that silver might be more attractive than gold, because it comes into the action this morning 73 cents below its April highs basis the May contract. Last week, the silver market could have been held back by fears of slowing in China (following the surprise Chinese rate hike) but apparently figures out on Chinese 1st quarter metals demand this morning point to a strong continuation of past demand patterns and that seems to have accentuated the macro economic buying interest in silver. Given the combination of partially overbought technicals, and mostly bullish fundamentals, the silver trade looks to be capable of significant volatility ahead and that in turn could also mean extremely wide daily trading ranges. Furthermore, US economic numbers today are generally expected to point to consistent ongoing growth and that also looks to favor the bull camp. The stunning interest in the Silver ETF on Friday, rekindles speculative interest in silver, with 2.342 million shares traded on the first day of trade in the new instrument. Furthermore, with a single fund already supposedly holding 20.9 million ounces (as suggested on their website over the weekend) it will be very critical to see what happens over the coming sessions, as traders will be given a clue as to how much investment money is capable of flowing toward silver. In other words, the market is going to get a feeling on the potential influx of money from the new vehicle. The question that needs to be answered is will the flow be significant but short lived, or significant and long lived. The later significant and long lived, would really light up prices. While the April 25th Commitment of Traders with Options report was probably understated, it showed the Silver Non-Commercial position to be net long only 35,253 contracts, with the Non-reportable position net long 25,770 contracts for only a modestly overbought condition. In our opinion, there are more than enough issues to justify the largest spec long position in modern times and therefore, we won't assume this market is bought out until the COT figures have exploded through the old record long levels! Initial targeting is the April high of $14.84 in the July silver and near term support is seen at $13.64. METALS TECHNICAL OUTLOOK 5/1/2006 COMEX SILVER (JUL) 05/01/2006: Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The market now above the 18-day moving average suggests the intermediate-term trend has turned up. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside objective is 1206.5. The next area of resistance is around 1433.0 and 1486.5, while 1st support hits today at 1293.1 and below there at 1206.5. COMEX GOLD (JUN) 05/01/2006: A new contract high was made on the rally. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The next upside target is 670.0. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 663.5 and 670.0, while 1st support hits today at 645.4 and below there at 633.6.
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 Monday, 1 May 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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