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-- Posted Tuesday, 2 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +0.00, SILVER -5.50
London Gold Fix $657.75 N.A. LME COPPER STKS 117,550 ml tns -175 tns
GOLD stks 7.611 ml oz, -85,082 oz COMEX SILVER stks 123.6
ml oz, -48,423 oz OVERNIGHT ACTION: Mostly unchanged overnight action despite higher equity and energy prices. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the gold market isn't getting much in the way of clear direction from the currency markets this morning, a higher oil market and firmer early indications in the US equity market would seem to facilitate the bullish growth and inflation combination that has generally prevailed over the last two months. However, while gold showed some minor early gains this morning, silver, platinum and copper were showing signs of weakness in the early going today and that could eventually serve to undermine gold. It is possible that slightly less dovish interpretations of US Fed dialogue from yesterday afternoon will be seen as an undermine to the precious metals complex, as the markets recently saw the US "on hold expectation" as an offset to the move last week to raise Chinese interest rates. In short, the outside market impact on gold today is mixed to slightly bearish early this morning.
GOLD MARKET FUNDAMENTALS: With the US equity market higher in the face of higher oil prices and concern for Iran still present, we have to think that the outlook for implied investment demand remains supportive. From the physical front, Gold Fields did manage to report a rise in earnings, but also noted that production fell by 2% in the reporting period and that continues a pattern of lower production at the major producers. It was also noted that costs of production was on the rise at Gold Fields but due to sharply higher flat prices for gold, most miners are seeing improving overall earnings results. News overnight that Bolivia nationalized its oil and gas businesses, is another example of the global "oil grab" that is taking place and the ongoing geopolitical uncertainty that is present in the headlines. In addition to the Bolivia news, major news outlets are carrying a prediction that crude oil prices could hit $100 per barrel next winter, and with a US Fed member yesterday again acknowledging the threat from ultra high energy prices, we suspect that gold is due to remain in vogue at the investment level. Apparently reports of Japanese selling overnight have been downplayed into the early US opening, as June gold was showing an early opening bid of $1.50 higher and that is made more impressive by the fact that silver was showing early weakness. With an increase in margin rates the trade might see some light long liquidation but overall the macro economic conditions look to countervail mechanical trade considerations. In the end, a series of second tier US economic reports this morning probably won't significantly impact gold today, unless the reports are much stronger than expected and that in turn resurrects the Dollar from a lackluster or slightly lower early trade. We are impressed that gold is higher this morning in the face of weakness in silver and copper prices, but we suspect that higher oil and firmer equity prices as well as talk of lower gold production has allowed gold to break off from the weaker tone in the rest of the metals markets. IN fact, seeing the gold market hold so close to the recent highs is indicative of a market that remains well bid and in favor. With the Iranian situation unlikely to go away quickly and the Dollar mostly in a perpetual slide, we have to think that more new highs are due in gold later this week. However, one can't rule out a little back and fill action on the charts, before the market mounts its next pulse up move. Near term support in the June gold is seen at $661 and then again up at $660. Top of the up trend channel in the June gold now comes in at $666. SILVER: OUTSIDE MARKET DEVELOPMENTS: With the copper market a little softer overnight, we can understand the minor weakness being shown in silver in the early action. However, we suspect that scheduled US economic reports, higher oil prices and a firmer US equity market will somewhat favor the bull camp in the first few hours of trade today. However, fresh hawkish dialogue between a reporter and the Chairman of the US Federal Reserve seemed to undermine the rather optimistic view toward Fed rate policy that was held after the recent Fed testimony to Congress. On the other hand, while the view toward US and Chinese monetary policy is turning a little negative, the overall investment environment for metals remains supportive. In fact, with Bolivia nationalizing oil and gas interests in that country overnight, it is clear that energy supplies are still presenting significant uncertainty to the global economy!
SILVER MARKET FUNDAMENTALS: Given the slightly weaker overnight silver market action, a set of positive scheduled US economic reports might be needed just to truncate the generally weaker price action seen in the industrial/precious metals sector (copper and silver) this morning. However, with the US equity market managing a rebound from the late Sell-off Monday afternoon and oil prices higher this morning we suspect that most investors will continue to view silver as a flight to quality instrument. However, it would seem like the silver market is at least partially undermined by talk of higher interest rates and slower growth and therefore, the silver market might pay a little more attention to the US reports scheduled for release this morning than the gold market. In short, silver is still being impacted by the financial market considerations, but it primarily remains a physical commodity and might tend to correlate with the copper market rather than gold in the near term. While the silver market hasn't managed to return to its highs, as the gold market has, we continue to see signs that implied demand for silver is on the rise. With the Silver ETF seeing a second day trading volume of 1.48 million shares and some market players out on holiday Monday, we have to think that the positive investment bias will continue to prevail in silver. In fact, with higher early gold, higher equity prices and stronger oil prices, all silver might need to rekindle upside action, is a slightly favorable set of economic readings. We suspect that July silver will see close in support at $13.78 but near term resistance of $14.03 is apparently restraining the market in the early going today. In the end, seeing equity prices recover and the outlook for the global economy remaining positive, should mean that the silver prices will continue to claw back toward the old highs. METALS TECHNICAL OUTLOOK 5/2/2006 COMEX SILVER (JUL) 05/02/2006: The crossover up in the daily stochastics is a bullish signal. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's close above the 9-day moving average suggests the short-term trend remains positive. The close over the pivot swing is a somewhat positive setup. The next upside objective is 1448.3. The next area of resistance is around 1425.5 and 1448.3, while 1st support hits today at 1367.5 and below there at 1332.3. COMEX GOLD (JUN) 05/02/2006: A new contract high was made on the rally. Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 668.2. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 664.3 and 668.2, while 1st support hits today at 656.1 and below there at 651.7.
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 Tuesday, 2 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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