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-- Posted Friday, 5 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +7.40, SILVER +6.50
London Gold Fix $682.00 +17.35 LME COPPER STKS 114,250 ml tns -1725 tns
GOLD stks 7.33 ml oz, Unchanged COMEX SILVER stks 123.6
ml oz, +1,119 oz OVERNIGHT ACTION: Higher gold action as the funds continued to buy aggressively overnight. GOLD: OUTSIDE MARKET DEVELOPMENTS: Surprisingly a firmer Dollar hasn't put gold off from sharply higher early action, but we suspect that the currency trade is merely "hoping" that an ultra critical US monthly payroll report will continue to "save" the Greenback. In fact, expectations for the monthly non-farm payroll once again centers around the +200,000 level and that is certainly indicative of strong ongoing growth. The question becomes will the US payroll data be so strong that the report alters what appears to be an entrenched downtrend in the Dollar? However, given the renewed strength in the US equity market yesterday and the rather upbeat economic view toward metals demand that was fueled by the almost unbelievable rally in the copper market on Thursday, it is clear that conditions are favorable to the bull camp.
GOLD MARKET FUNDAMENTALS: AngloGold confirmed a 1st quarter loss due to hedging and also suggested that their production fell by 10% in the first quarter and that countervails news early this week of increased production at Barrick. Seeing the news of an AngloGold hedging loss certainly sends a message to other gold producers that there is a penalty to selling production into such an aggressive up trend in prices and that could be an explanation for the aggressive pattern of 1st quarter de-hedging. With the supply component still thought to be responding slowly to the rapid rise in prices and consumers in India and other key demand areas still not put off by the sharp rise in prices, it would seem like physical demand will remain supportive. From the investment front, it would seem like demand remains strong, as the Press overnight has a number of stories from around the globe suggesting that the "Funds" have managed to push gold to yet another new high in the early Friday morning action. Apparently seeing sharply lower oil prices over the last two sessions isn't a major undermine to gold and even more surprising is the fact that another rise in the Dollar this morning hasn't discouraged the bull camp. However, the trade in general really isn't buying into the idea that the Dollar and oil are actually set to counter their recent trends. Therefore, unless the US payroll report is much weaker than expected (below +100,000) or so strong that it countervails the international currency diversification effort (+240,000), it is unlikely that gold will re-direct its attention from its current bull focus. While one must keep an eye on the Dollar, we seriously doubt that the Dollar is going to get a magic bullet from the Payroll data that halts the diversification pressure. On the other hand, seeing more long liquidation in the energy complex could begin to undermine gold slightly, but in general, the biggest enemy of the gold market would seem to be overdone technicals. In fact, seeing ongoing strong buying interest by the funds, solid US economic numbers and more gains in the equity market would seem to feed the gold bull and leave the technicals as a background concern. Near term critical support is seen at $678 and close-in upside targeting is seen at $692. SILVER: OUTSIDE MARKET DEVELOPMENTS: With global equity markets generally positive again and the huge run up in copper prices yesterday still ringing in the Press this morning, we have to think that the physical demand expectations for silver will remain positive. We doubt that the currency market action in the wake of the payrolls will have much of an impact on silver as silver seems to have drifted away from a tight day to day correlation with gold and the currencies. We also don't think that the ebb and flow of energy prices will have much of an impact on silver prices today. While an up tick in Canada's unemployment rate may be a minor negative to silver, it could easily be off set by a very strong US non-farm payroll reading which would be supportive to silver. However, more than likely the market won't be paying too much attention to outside forces today.
SILVER MARKET FUNDAMENTALS: Given the yesterday action in silver, it was clear that silver traders weren't that interested in the strength in gold and copper but in the end, action in those markets were generally supportive to the bull camp. It does seem like the silver trade is getting bullish influence from esoteric silver markets and it also seems like the wild forecasts for implied silver demand in the months ahead are beginning to calm down a bit. Technical traders are cheered by the fact that the silver market has been able to retain moderate buying interest after the big range action on Wednesday and perhaps even more importantly, the silver market shows some mettle by simply returning to the psychological price level of $14.00. It is possible that the pattern of rising copper prices and a mostly optimistic macro economic view will continue to favor the bull camp, but given the magnitude of the price appreciation since early March, one might suggest that this market needs a pretty solid economic condition to validate its run up. It is a little disheartening to see the silver lagging behind gold and copper, but as long as the overall investing environment remains positive, we have to think that the bull camp retains an edge. On Thursday the IShares trading volume was 1.107 million ounces and that means the vehicle is settling into a million share plus daily volume pattern. While some of the implied demand projections might be too lofty, we suspect that the outside investment flow will continue and that should leave the silver market generally supported on breaks. However, we also get the sense that the silver market needs robust gold and copper action and a strong US payroll report to lift back up toward the old highs. In fact, the silver market might also need a resurgence of oil prices and some anxiety toward the Iranian situation just to restart a hard driving rally. We would suggest that traders stay long futures but continue to hold options coverage for those positions. It would not be positive to see the July silver fail to hold above $13.74 this morning, as that could shift the control away from the bull camp. METALS TECHNICAL OUTLOOK 5/5/2006 COMEX SILVER (JUL) 05/05/2006: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 1453.0. The next area of resistance is around 1416.0 and 1453.0, while 1st support hits today at 1349.1 and below there at 1319.1. COMEX GOLD (JUN) 05/05/2006: The rally brought the market to a new contract high. Momentum studies are trending higher but have entered overbought levels. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 689.2. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 683.9 and 689.2, while 1st support hits today at 669.1 and below there at 659.7.
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 Friday, 5 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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