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-- Posted Wednesday, 3 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +11.00, SILVER +26.50
London Gold Fix $657.75 N.A. LME COPPER STKS 116,150 ml tns -1400 tns
GOLD stks 7.33 ml oz, -277,163 oz COMEX SILVER stks 123.6
ml oz, +3,010 oz OVERNIGHT ACTION: Follow through gains again reportedly off renewed Japanese buying. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar isn't necessarily fostering the strength in gold this morning, it would seem like Asian buyers are keen on purchasing the metal off the continued escalation of the Iranian standoff. Overnight the Iranians, (which are making sure to keep the world updated on their nuclear progress) suggested that they had almost enriched enough uranium to begin fueling reactors and that has in a way created urgency by those opposing the Iranian actions. With the Royal Bank of Australia moving to hike interest rates overnight, it is possible that some would-be buyers were put off from fresh action. However, with the stellar gains overnight in gold prices it wouldn't seem like many buyers were discouraged by the rate move. At least early today, oil prices look to be supportive to gold and the trade might see a very significant impact from energy prices today in the wake of weekly US oil inventory figures. On the other hand, with fresh 6 year highs in the Dow yesterday, it still doesn't appear that ultra high oil prices are serving to derail the US economy or for that matter the world economy.
GOLD MARKET FUNDAMENTALS: At least for the time being, it would seem like rising oil prices and rising equity prices are going to continue to coexist and that seems to be a beneficial environment for gold. In fact, under current conditions the gold market is surprisingly able to garner physical, investment and flight to quality buying interest and that is probably why the market has been able to post $6 to $10 an ounce daily gains without necessarily having a specific event or focal point. As it stands, the investment interest continues to run strong and from stories in Indian and Chinese newspapers, the higher price of gold seems to have stimulated or even validated the metal as an attractive investment. Apparently the gradual move to higher global interest rates has yet to be seen as a barrier to gold, possibly because the efforts are coming slow and appear to be measured moves. In short, a fresh 25 year high in Asian gold prices, the prospect of more weakness in the US Dollar and a favorably postured global economy, seems to leave the bullish environment in place. The trade and the Press appears to be fixating on the next psychological chart price target of $700, but we also think that the US oil inventory data this morning, could be an extremely critical development for the market. With another aggressive upward extension overnight, the gold market appears to have thumbed its nose at the Australian rate high. As mentioned already, it would seem that the market has turned its focus on the next even number chart level of $700 an ounce and as long as the market continues to get a perfect storm of strong economic growth indications and rising oil prices, one has to think that gold is set to grind even higher. About the only negative confronting the gold market this morning, is lingering weakness in copper prices but over the last several sessions, gold has mostly tracked its own fundamentals. The up trend remains firmly entrenched, with close-in support seen early today at $669.3, and little resistance seen until the $700 level. As long as equities and oil rise together the prospect of inflation buying looms. In our opinion, the metals markets really haven't seen inflation buying yet, possibly because Central Banks have convinced the trade that inflation isn't a problem. SILVER: OUTSIDE MARKET DEVELOPMENTS: With a strong bid in gold, the ongoing weakness in copper is nearly ignored in silver. As suggested in the gold coverage this morning, the parallel rise in equities and oil prices is a very conducive combination for silver and the metals markets in general, especially with the prospect of strong ongoing physical demand being joined by soaring investment demand. With new investment continuing to flow toward silver, on a pace that many expect will dramatically change the ending stocks figures, the rally appears to have fundamental backing. On the other hand, the silver market seems to be benefited even more from rising equity prices, than it is from a falling Dollar and flight to quality issues. In other words, a positive global economic view seems to be capable of providing a positive daily impact in silver.
SILVER MARKET FUNDAMENTALS: As mentioned already this morning, the investment or paper interest in silver is thought to be chewing down physical supply levels and with prices managing to recover from the rather surprising aggressive April correction, the bull camp seems to have renewed confidence. Standard technical readings are seeing a progression toward overbought levels, but so far the technicals haven't reached extreme levels and therefore the existing fundamental tilt might not be seriously challenged today. The trade might look to the US Factory orders release for direction early today and with the expectations for that report calling for rather robust growth it is possible that the fundamentals that were driving silver up yesterday will remain in place today and possibly at a slightly enhanced level. With another 1.251 million ETF shares trading hands on Tuesday, it would seem like the investment buzz in silver continues to hum along at a level that could materially alter the ending stocks. Some might suggest that implied demand growth from the ETF action isn't that big of a deal, considering the "approximate" overall supply level in silver, but over time, day after day, we think the ending stocks will be pulled down materially. On the other hand, the trend is up, economic conditions and flight to quality are giving silver the look of good investment and that might mean that the actual ending stocks reality isn't the real driving force behind prices. Near term targeting in the July silver is the old high of $14.84 and near term support is pegged at $14.10. METALS TECHNICAL OUTLOOK 5/3/2006 COMEX SILVER (JUL) 05/03/2006: Momentum studies are rising from mid-range, which could accelerate 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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 1443.0. The next area of resistance is around 1434.0 and 1443.0, while 1st support hits today at 1408.1 and below there at 1391.1. COMEX GOLD (JUN) 05/03/2006: The rally brought the market to a new contract high. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside objective is at 675.3. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 672.0 and 675.3, while 1st support hits today at 662.8 and below there at 656.8.
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 Wednesday, 3 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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