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-- Posted Monday, 8 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -0.40, SILVER -1.50
London Gold Fix $682.00 Unch LME COPPER STKS 115,675 ml tns +1,425 tns
GOLD stks 7.64 ml oz, +314,289 oz COMEX SILVER stks 123.6
ml oz, Unchanged OVERNIGHT ACTION: Chinese gold was higher in a catch up move, with European gold most unchanged after early strenght. GOLD: OUTSIDE MARKET DEVELOPMENTS: The sharp decline in the Dollar continues and that could serve to offset the partially negative early spin seen from the idea that US/Iranian tensions are set to soften. With talk that the Iranian President will send a letter to President Bush, US oil prices have already extended the weakness from last week, and that could provide a slightly negative tilt to gold early in the session today. However, a sharp decline in oil prices could give the stock market a huge lift and that in turn could improve the macro economic outlook, which in general is thought to be a good thing for gold and the precious metals markets.
GOLD MARKET FUNDAMENTALS: In early overnight action, gold did manage another fresh 25 year high in Europe but then seemed to settle back, possibly off the news of that Iranian letter to the US President. However, it is possible that favorable equity market tilt and a sharply lower US Dollar will serve to mitigate profit taking action that could unfold in gold this morning in the wake of the hope that geopolitical anxiety might temporarily calm down. However, RandGold Resources showed a sharp jump in profits and also showed a sharp increase in production versus year ago levels and that might be considered a fresh additional negative to gold and the precious metals. We also have to wonder if the prospect of a US interest rate hike on Wednesday isn't looming over gold. In the past, rising interest rates has been seen as a negative to gold, especially if the move manages to lift the US Dollar. After a fresh high move overnight, it would seem like the market is a bit vulnerable especially if the geopolitical angst toward Iran softens. However, the most important element to the bull camp should be the capability of the global economy and seeing even lower oil prices in the near term might undermine gold initially, but seeing the global economy re-gather pace could continue to feed inflationary expectations. In the near term, we can't rule out a temporary correction back to $675.5 basis the June contract, but we would not suggest that the up trend is set really break down. Even lower support in the June gold is seen down at $662.8. On the other hand, an actual softening tone from the Iranians might be enough to temper aggressive investment flow toward gold for at least the coming two sessions. In fact, with the May 2nd Commitment of Traders with Options report showing the Gold Non-Commercial position net long 127,465 contracts and the Non-reportable position also net long 44,225 contracts (and more importantly the gold market added nearly $20 an ounce after the COT was calculated) it is possible that the spec long in gold is already approaching 200,000 contracts. While there would appear to be a broader mix of fresh buyers moving toward gold than at anytime in history there is some reason to be concerned about an overbought status, especially with the net spec long approaching the old spec long record. SILVER: OUTSIDE MARKET DEVELOPMENTS: While the posture of the global equity market is supportive of silver early today and a sharply lower Dollar would seem to be capable of providing support to the gold market, the outside market impact on silver to start the new week might be considered somewhat negative early today. In addition to a softer copper market, the silver market is also seeing indecision in the gold market and slightly weaker energy prices. While we suspect that the direction of the equity market is a critical longer term indicator for silver prices, it is possible that the looming US rate hike is serving to dampen investment interest in silver. One also has to think that a softening of tensions between the US and Iran will be a minor negative influence for silver today.
SILVER MARKET FUNDAMENTALS: With cooling daily investment indications and a lack of definitive leadership in gold, the bear camp would seem to start the week out with a minor edge. An upwardly biased global equity market should eventually underpin the metals markets but strength in equities might not prevent some light initial profit taking action. With the July silver market carving out a $14.85 to $11.70 range since April 19th, it is clear that the market is having trouble establishing a solid value price and with the geopolitical outlook murky on one day, and then improved on the next and crude oil above $75.00 one week and then back below $70.00 just a few sessions later, there is bound to be confusion with respect to silver prices. However, the dominating bull item in the March through May run up in prices, seemed to be the uncertainty created by sharply rising oil prices and a falling Dollar and with oil prices starting the week out lower and possibly set to fail at key chart support levels, the bear camp is probably emboldened. We are concerned that the recent chart formation offers up what appears to be a consolidation top from the initial May price action. With gold showing some minor weakness and the market fearful of a softening in US and Iranian relations, we can't rule out a setback to $13.50 and perhaps even $13.00 in the event that nearby oil prices fall another $2-$3. However, seeing the July silver manage to regain the $14.14 level could alter the slightly bearish early bias. In the event that equity prices soar and the US Fed actually hints at a pause in the June FOMC meeting, that could be the factor that restarts the bull track and puts the bull camp right back in charge of the market. In fact, with the May 2nd Commitment of Traders with Options report showed the Silver Non-Commercial position to be net long 30,053 contracts and the Non-reportable position also net long 24,979 contracts, the silver market is moderately overbought at 55,000 contracts. However, with the record spec long reading of 97,635 contracts and the market basically finishing last week below the level where the COT report was measured last week, it would not seem like the silver market is technically bought out and exceptionally vulnerable. METALS TECHNICAL OUTLOOK 5/8/2006 COMEX SILVER (JUL) 05/08/2006: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1419.3. The next area of resistance is around 1405.5 and 1419.3, while 1st support hits today at 1372.5 and below there at 1353.3. COMEX GOLD (JUN) 05/08/2006: The market rallied to a new contract high. Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 692.6. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 689.1 and 692.6, while 1st support hits today at 679.5 and below there at 673.3.
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-- Posted Monday, 8 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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