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-- Posted Tuesday, 9 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +0.80, SILVER +0.00
London Gold Fix $679.75 -2.25 LME COPPER STKS 115,650 ml tns -25 tns
GOLD stks 7.625 ml oz, -23,484 oz COMEX SILVER stks 124.2
ml oz, +596,832 oz OVERNIGHT ACTION: A lack of definitive direction overnight despite suggestions from the US that the Iranian letter didn't contain a diplomatic opening for negotiation. GOLD: OUTSIDE MARKET DEVELOPMENTS: This morning the Dollar starts the session out somewhat strong but after the big wash yesterday the impact from the Dollar might remain positive until something more significant unfolds. It would seem that the outside metals market impact is starting the Tuesday session out on a much more positive track, as all of the key metals are showing minimal gains. In fact, the platinum market continues to be a bright spot with that market managing a new all time high yesterday and again in the overnight action. Apparently Shanghai copper prices also made a fresh all time high overnight, but the early US copper market action shows copper up but sill holding roughly 500 points below the old highs. Unless the Iranians make some additional move to promote diplomatic efforts, we suspect that the Iranian situation will be a little less negative to gold than was seen in the action yesterday. However, so far oil prices aren't registering any fresh geopolitical concern from the view that the letter didn't offer any negotiating points.
GOLD MARKET FUNDAMENTALS: With copper and platinum providing positive investment ideas and the ebb and flow of the Iranian situation a little more supportive overnight, it would seem like gold will begin the session today with a more positive investment interest than was seen on Monday. While investment interest in gold might improve today off new developments in the Iranian situation, it would seem like a large portion of the interest in gold has come recently in the wake of rising oil prices and in the early going this morning the oil market is not showing much in the way of strength. On the other hand, with the market seeing evidence of rising jewelry demand for platinum and talk that global demand is expected to exceed supply in copper, we have to think that the expectation for rising physical demand will continue to support gold prices at historically high levels. Many traders are concerned about the overbought technical condition of gold and with open interest reaching another new high late last week and volume tapering off since May 2nd, it is clear that some investors and traders are balking at gold prices above the $655 level. However, it is likely that the slide in oil prices from the middle of last week, is the real source of indecision in the gold market recently and that appears to have given the bear camp a periodic edge over the last 3-4 trading sessions. However, global growth continues, few doubt oil prices will stay down for long and perhaps more importantly, few think that Iran or the US will back down in the current nuke debate. The gold market has clearly indicated that the upward direction of oil prices is a key component in the bull case. It would also appear that an ongoing wave of rate hike promises has recently served to scare away some would-be buyers of gold. Therefore, traders need to watch over their shoulder for developments in the oil sector and also need to watch for any sign that higher interest rates are beginning to undermine macro economic sentiment. However, with the US equity market managing yet another new high probe late last week, it would seem that the economic condition that brought gold prices to 25 year highs, mostly remains in place. Therefore, we expect June gold to generally hold above the $675 support zone, with a range of trade today possibly defined as $673 to $689. On the other hand, traders might want to prepare to defend against the impending FOMC meeting result on Wednesday, by purchasing long puts against existing long futures positions. SILVER: OUTSIDE MARKET DEVELOPMENTS: The silver market should be emboldened by the optimistic track in the copper and platinum markets, as both those markets continue to see very favorable demand dialogue and are also registering very impressive strength in prices. With the Press suggesting that high prices have yet to discourage retail interest for metals in India and Chinese Press outlets claiming that Chinese summer platinum jewelry buying interest is strong, it would seem like the macro economic condition remains generally positive for silver. It would also seem like silver continues to see strong interest from equity market silver investment tools and therefore the bulls seem to have more arguments for their view than the bears.
SILVER MARKET FUNDAMENTALS: Traders continue to attempt to forecast much tighter ending stocks in silver and with the implied demand argument favoring a significant tightening, it would seem like the market has some fundamental reason to solidify prices around the $14.00 level. In fact, while implied or investment demand is thought to the main catalyst behind the bull market in silver, one might also argue that soaring copper and platinum prices are an indication that physical demand for silver could end up being much stronger than the trade is currently giving credit for. In short, both physical and investment demand look to remain positive for silver, but the investment theme could temporarily be challenged by the Wednesday FOMC meeting results. However, technical traders are suggesting that a decline in daily volume, during the correction off the April 19th high, suggests that the trade really isn't embracing recent price weakness. Silver IShares volume on Monday was 945,300 shares and the ounces of silver in the Trust are now 48.4 million shares and that should continue to support prices! With silver seeing volume declines on price weakness and the July silver contract managing to forge decent consolidation support around the $13.61 level, it is possible that the market has built a firmer base and will avoid significant downside adjustments through the coming Wednesday volatility window. We suggest that traders remain long silver, but look to secure some put protection through the Wednesday time frame. We also suspect that weakness in energy prices could continue through the Wednesday oil inventory report and therefore we remain bullish toward silver but recognize the vulnerabilities in the near term. METALS TECHNICAL OUTLOOK 5/9/2006 COMEX SILVER (JUL) 05/09/2006: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The close above the 9-day moving average is a positive short-term indicator for trend. It is a slightly negative indicator that the close was lower than the pivot swing number. The next upside objective is 1414.3. The next area of resistance is around 1398.5 and 1414.3, while 1st support hits today at 1355.5 and below there at 1328.3. COMEX GOLD (JUN) 05/09/2006: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside objective is at 688.3. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 684.6 and 688.3, while 1st support hits today at 675.2 and below there at 669.4.
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, 9 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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